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SIphotography / Deposit Photos Hotel Chocolat Group PLC (LON:HOTC) has signed a partnership agreement with Tokyo based Eat Creator Corporation. Hotel Chocolat will hold 20% equity in the newly established vehicle. Brand royalty revenues will go to Hotel Chocolat
Hotel Chocolat's International Expansion
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. Shares lost their early lustre after worries surfaced about the risks ahead.
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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.
Hotel Chocolat needs a whiff of sweet success, following its failed previous venture into the market, which crumbled partly due to the effects of the pandemic. The Covid crisis hit the chocalatier hard, eating into profits and pushing the company into steep losses. Other expansion efforts into the American market have also disappointed, with the company pulling its direct-to-consumer offering, by closing its US website.
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. Its UK store sales have snapped back to a higher level than pre-pandemic times, showing the product is popular, with ranges like 'the velvetiser' and vegan products offering growth opportunities, but another international mis-step would be poorly-received by investors.''
Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown
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