Can Hotel Chocolat be big in Japan on second attempt?
Under the deal the luxury UK high street chocolatier will hold a 20% stake in the joint venture and will receive brand royalty revenues.
In a press statement it said Eat Creator will provide “growth capital, new supply-side know-how and proven expertise in food brand development for the Japanese consumer”.
Hotel Chocolat’s previous attempt at gaining a foothold in Japan ended with the company writing off approximately £22m after a launch in 2018, which was hampered by the Covid-19 pandemic.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: 'Investors gave Hotel Chocolat's latest foray into international expansion an initial cautious welcome, mindful of the effort and expenditure it takes to crack big overseas nuts like the Japanese and US markets.
'The company is clearly hoping that the way its tie-up deal with Eat Creator Corporation is structured will give it more protection in a downturn. It will hold 20% equity in the newly established vehicle, and it will earn brand royalty revenues as part of the deal.
'Overseas expansion is clearly viewed as the recipe for growth, but it has come at a significant cost, so the company is now pinning its hopes on lower risk strategy deals.'
The new agreement with Eat Creator would see Hotel Chocolat apply the “key business learnings from the first four years of trading in Japan,” it said in a statement.
“Our new partner is well equipped to optimise the brand’s potential for Japan, bringing proven expertise, new capital and a natural alignment on brand values,” said Angus Thirlwell Hotel Chocolat co-founder and CEO.
“We are looking forward to combining the ingredients of Eat Creator with the ingredients of Hotel Chocolat into a powerful recipe for our next chapter in Japan.”
At the end of financial year (June) 2022, Hotel Chocolat posted a £9.4 million loss from a £3.7 million profit the previous year.
The luxury chocolatier, with more than 100 stores across the UK, was forced to cut back on Christmas discounts and attributed the slump to one-off charges due to US outlet closures and the restructuring of its Japanese joint venture.
In its report the business said without the Japanese impairments, and other one-off charges, its pre-tax profit reached £21.7 million.
Eat Creator’s chief executive, Satoshi Nagasuna, said he had watched the “positive impact that the Hotel Chocolat brand has made in our market over the last four challenging years.
“When the opportunity presented itself to become directly involved with the business, we realised that our skills would be a good match with what was needed to take Hotel Chocolat Japan to the next level. We are excited to get started.”