Expanding its portfolio to include such products as ice cream, liqueurs or sauces is seen as the most likely means of generating future growth by Thorntons, the UK chocolate manufacturer and retailer.
Announcing the first improvement in annual like-for-like sales for three years, the company said that it remained nonetheless cautious about its growth prospects and that there was still much work to be done.
For the year to 29 June, Thornton's posted a 3.6 per cent rise in like-for-like sales, with overall turnover up 2.4 per cent to £163.8 million (€261.4m) and operating profit ahead 3 per cent to 10.4 million. Pre-tax profit rose 16.4 per cent to £7.1 million.
The solid growth of 2001/2 was continued in the first nine weeks of the current fiscal year, with like-for-like sales up 6.8 per cent.
"Two years ago we promised that we would restore the company to a healthy earnings growth rate, to be delivered over a three year period. We are firmly on track with that plan, with the final year of the turnaround having started strongly," said Peter Burdon, chief executive.
"We have set in motion a number of growth initiatives, that are already starting to deliver but require further work, time and some investment to realise their full potential. Whilst these initiatives form the backbone of our refreshed strategic agenda, it is also undoubtedly true that we have other attractive product and distribution opportunities to maximise the potential of the Thorntons brand."
The improvement in like-for-like store sales is particularly welcome, Burdon said, and came partially as a result of a major change in strategy and store concept. This new design was rolled out in a handful of stores in September last year, and while the results were encouraging, the company said it would not continue with the new design, instead incorporating a number of elements of the new format into its existing stores.
The new concept had also seen a sharp reduction in the company's product range, but the trial showed that this needed to go further still, Burdon said. "We will be putting even greater emphasis on product and packaging innovation in the future. The project to reduce our product range by between 10 and 20 per cent has been completed. We continue to monitor progress and recognise that we still have opportunities to reduce the range further. We know from trials and feedback that our customers really do find that their shopping experience is better by having clearer product choices," he said.
He said that there would also be developments at the Café Thorntons format, the combined cafe/chocolate shop concept which generated annual sales of almost £17 million. The company currently runs 25 outlets under this fascia, and while they have been successful, further changes are expected to improve efficiencies. The company is aiming to double the number of cafes over two to three years, and has put a dedicated management team in place to develop this format.
Expansion has been at the heart of the company's strategy for a while, and the Thorntons name can now be found on a range of sweet special foods including cakes, trifles, cheesecakes, puddings and biscuits produced under licence by third parties and sold in the multiple grocery chains. It is to this Thorntons Pure Indulgence that the ice cream, liqueur and sauces are likely to be added over the next year.
This successful organic growth has prompted change of tack at the company. "The last year has taught us that there is significant organic growth still available to us and our strategic and organisational development should have this as its focus. Therefore, we do not currently intend to initiate the third phase of the original three year plan: to seek out new sources of growth. Instead, the review of new growth opportunities will be conducted as lower key strategic initiative in the agenda. This does not rule them out, but merely postpones their implementation," said Burdon.