Gourmet confectioner Hotel Chocolat built a luxury brand over two decades before deciding the time was right for an IPO on AIM. Co-founder and CEO Angus Thirlwell explains how a managed approach to growth has paid off.

Crafting a gourmet business

Surprisingly, when entrepreneurs Angus Thirlwell and Peter Harris first went into business together in 1987, chocolate was not on the agenda. “We had the most niche business you could imagine: company-branded peppermints for corporates,” Thirlwell recalls. “After a while, we realised that chocolates were good for creativity and had an emotional relationship that mints didn’t have.”

They were early adopters of e-commerce, with a website that delivered chocolates. For years they built a small business that grew organically. The pair ploughed the profits back into the business and kept it as lightly indebted as they could.

The big breakthrough came in 2005, when the business decided it was in a position to take on the luxury chocolate market head-on. “Creating the brand name Hotel Chocolat gave us a turbocharge,” says Thirlwell. “Fundamentally, we are in the business of making people happy through escapism.”

By then, the company had become interesting to private equity houses. “We had lots of cups of cocoa with people who liked the strength of the brand,” says Thirlwell. “It was interesting, but it didn’t fit our vision of what we wanted to do. We have always been long-term about our thinking and we like to keep adapting and innovating. With private equity, there was a two-to-five-year timeframe and then all bets were off. We wanted more.”

Angus Thirlwell

Hotel Chocolat
raised by Hotel Chocolat in 2016 IPO on AIM

Crystallising the fruits of success

Thirlwell continues: “My father [Prontaprint founder Edwin Thirlwell] is in his eighties and is still working on business ideas every day. On that basis, I have 30 more years of business ahead. We didn’t want to squeeze the pips out of the company to achieve someone’s short-term goal.”

There was a wish to change things, however. “We wanted a period of crystallising some of the value in the business to offset all those decades of ploughing back the profits,” says Thirlwell. “We thought it would be nice to enjoy the fruits of what we have grown before we got too old. But we also wanted to access development capital, on a repeat basis if required, and to reward our team who have helped build the company.”

By 2016, an IPO on AIM was the obvious answer. “We plotted our path, took advice and made a campaign to attack it,” says Thirlwell. Early feedback from the Nominated Adviser was good, and the view seemed to be that Hotel Chocolat’s track record and strategic vision would garner support from investors. The business had already been run professionally for many years, so big changes weren’t needed.

“In the British psyche, achieving a listing is seen as a success, and people like winners. It has helped raise our profile as a British success story”

Time well invested

When it came to meeting investors, the management team found unexpected benefits. “With few exceptions, we felt the time we spent with potential investors was good for us on several levels,” says Thirlwell. “The questions people asked gave us some insight into how we were perceived. And these people get a lot of big brands presenting to them, so some of the things they said gave us pause for thought. We are now more attuned to soaking up that aggregate wisdom.”

Our 2016 IPO on AIM raised £50m in total: £10m went to the company and the remainder to Thirlwell, Harris and their families. In total, they sold a third of the equity. While they were always clear that they wanted to bank some capital during the float, the company’s expansion plans were a key motivation. These included international expansion, growing the UK retail base, improving the company’s digital platform and its manufacturing capabilities, and making acquisitions to bring in new capacities and techniques.

Bean-counting the benefits

So far, the company’s approach has paid off. The company’s share value more than doubled over the first year on AIM. “Some people have said, ‘you must regret selling out at the lower price,’” says Thirlwell. “The answer is no, we’re delighted, because we still have a third of the company.”

The expected benefits from becoming a public company have duly arrived. Thirlwell also notes some unexpected upsides: “It has made a big difference to our staff – we have 1,000 in the UK and 120 in St Lucia on our cocoa estate. The degree of financial literacy and interest in financial matters has increased a lot. That has led to better discussions and, consequently, better decision-making about many facets of running the business.” A Sharesave scheme has enabled all employees, even the junior members, to become shareholders.

“Being a PLC has also helped us with suppliers,” Thirlwell adds. “In the British psyche, achieving a listing is seen as a success, and people like winners. It has helped raise our profile as a British success story.”

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