The decision by Angus Thirlwell, co-founder and chief executive of chocolatier and cocoa-grower Hotel Chocolat, to sell 'chocolate bonds' to generate £5m illustrates the diversity of ways in which brands are attempting to engage consumers while accruing funds and bolstering their profiles.
The investment opportunity is to be marketed to the 100,000 members of Hotel Chocolat's Tasting Club, who sign up to regular home deliveries of its products; they will be paid in kind for their faith in the brand with boxes of luxury chocolates.
Participants can subscribe either to a three-year, £2000 bond, which will deliver a box worth about £18 every two months, equivalent to a gross annual return of 6.72%, or a three-year, £4000 bond with a higher-value box, equivalent to a 7.29% return, 13 times a year. At the end of the initial three-year period, the bonds can be redeemed for a full return on the investment.
The funds raised will be used for multiple purposes, all of which are intended to engender a closer relationship between Hotel Chocolat and its customers. This includes a new cocoa plantation in St Lucia, expansion of the business overseas, growing the high-street chain from 42 to 72 shops, and investment in its factory.
Thirlwell rebuffs the suggestion that issuing 'chocolate bonds' is a mere PR stunt and says the idea was born out of customer demand.
Hotel Chocolat is not the first brand to invite its customers to invest directly - last year toiletries brand King of Shaves offered 5000 customers 'shaving bonds' for £1000 each. The company pledged to use the money to fund a marketing campaign; as well as promising free products and a limited-edition mirror, it also offered investors an annual rate of interest of 6% over three years.
Romantic notions
It is clear that such ventures are not suitable for all brands and sectors. However, Praveen Vijh, co-founder of cereal-bar brand Eat Natural, believes the issuing of such 'bonds' is suffused with 'romanticism'.
'This reminds me of how financing was raised about 100 years ago,' he says. 'The King of Shaves (version) sounded a bit dull, (but) this idea works well for chocolate and anything to do with plantations, like fruit and coffee.'
Others, while applauding the venture on several fronts, believe that it can be successful only on a small scale.
'This is a clever PR tactic, but also a smart move in terms of attracting shareholders who really care,' says former Innocent marketing director Gareth Helm. 'Effectively, both Hotel Chocolat and King of Shaves are creating a core of investors who are passionate about the brand and sector. They will have a valuable point of view and may be more forgiving in tough times. The reality, however, is that these sorts of activities can only ever be small-scale. Innocent always mused about doing a public float, but you need to separate emotions from the business needs.'
Thirlwell says that Hotel Chocolat did not seek the funds it wants from the banks, but admits it could still pursue this avenue should the 'chocolate bonds' initiative fail to reach its target.
Sustained focus
Some experts advise that Hotel Chocolat should extend the idea. '(If) it does not follow this through, it would become less meaningful,' says Sam Conniff, co-founder of social enterprise company Livity and a government social enterprise ambassador. 'It should follow up with chocolate-themed AGMs and chocolate annual reports.'
He adds: 'I do like the idea. It is subtle PR innovation and gives customers a sense of ownership of the brand.'
Stunt or not, for smaller brands that trade on their size or quirky nature, the issuing of bonds is an effective marketing tool to develop deeper relationships with consumers.
Hotel Chocolat
- Founded in 1993 by Angus Thirlwell and Peter Harris as a mail-order business, the company was originally called Choc Express.
- In 1998, it launched the Chocolate Tasting Club, which now has about 100,000 members.
- In 2003, the company rebranded as Hotel Chocolat and opened its first retail store. It now has 33 across the UK
- In 2007, Hotel Chocolat launched online in the US.
- Last week, Hotel Chocolat announced plans to issue 'chocolate bonds' as a cash-raising exercise.