UK consumers may be cutting back on their spending habits but if the financial results at Thorntons are anything to go by, the chocolate business is one area that is not suffering the effects of the credit crunch.
Having just revealed its results for 2008 (Year end 1 August 2008), Thorntons - which is ranked at number 18 in the consumer poll of the UK's top 500 superbrands (Google is number one) and number one in the confectionery category, one place ahead of Cadbury - has recorded an increase in profit before tax of 19.8 per cent to £8.5m, on a turnover of more than £200m.
During the past 12 months, Thorntons, which was established by Joseph Thornton in 1911, has opened a number of new stores, including units at The Fort in Edinburgh and Westfield Derby; produced new ranges in store, including the brand-new Fusion range, which combines different flavours of chocolate, and the launch of Thorntons Moments in February; and trialled a new experiential store concept that includes an in-store chocolatier, chocolate fountain, chocolate deli and a new layout and design.
The first of these new stores was opened in Kingston-upon-Thames in Surrey in the summer, while the others have since opened at the Oracle in Reading, Bluewater, Kent, Nottingham and in Edinburgh. Chief executive Mike Davies says the company will review the success of these new stores after Christmas, with a view to rolling out further concept stores in the New Year.
Davies says: "It's fair to say that for some time, particularly during the years when Thorntons was a target for failed takeover attempts, investment was a priority in terms of store innovations and brand.
"The essence of the strategy is to make the brand more relevant with product innovation, modernisation of the store environment, and continued growth of the commercial and direct business. How can we make Thorntons more relevant for a younger market and give it a broader appeal? Our loyal customers who tend to be older are really important to us and we look after them, but we want to appeal to a broader range of people through product innovation. Product innovation is absolutely key to making sure the customer has something new when they go into the store and something that keeps them coming back."
In-store environment is also important - and not just with the new concept stores. "It's not only the five concept stores, it's all the other stores as well," says Davies. "It's making sure they look clean and attractive and to do that the personnel in the store are critical. We've spent a lot of money on training and developing staff to provide good customer service. We've developed the notion of the chocolatier in-store as it's not just about the boxes on the shelf, as you can go to the supermarket for that. Come to Thorntons and it's got to be more special."
In 2008 Thorntons' commercial business increased by 33.8 per cent to £49.5m, and according to the AC Nielsen audit, it is the number one branded manufacturer of inlaid boxed chocolates, with a market share of 22 per cent. Its various ranges are available in all the major multiples and convenience stores and it has plans to increase its distribution still further.
"The direct (online) business also continues to thrive," says Davies, who says there are plans to grow that aspect of the brand also. The franchise business will also continue to grow, having increased by 14.5 per cent to £14.9m with a net increase of 32 stores this past year. "We have 250 franchises," says Davies. "The franchises are good for us because they operate in an area where we can't necessarily justify a store of our own but they sell products that are complementary to the range."
A longer-term goal is to grow internationally, but Davies says Thorntons has to get the UK sorted out first. "We have to get the business onto a sound footing because performance in the UK hasn't been brilliant," he explains. "That's why we have a new chairman and why I came on board.
"The business rather lost its way, so we'll tackle the international market at a later stage."
With so many plans for the coming year, it's clear that Thorntons will continue to play an important role in the high street.
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=== Statistics ===
thorntons
Total number of company-owned stores: 379 (14 new stores opened this year and 3 closed)
Acquisition agent: Jones Lang LaSalle
Number of franchise stores: 250
Turnover (Year end 1 August 2008): £200m-plus
Profit before tax: £8.5m
Chairman: John von Spreckelsen
CEO: Mike Davies
Average store size: 400-500 sq ft
Ultimate number of stores: 400
Website: [http://www.thorntons.co.uk]
