The people of Belper just can’t get enough chocolate. It is three years since independent artisan chocolatier I Should Cocoa opened its doors – and it has not seen a quiet day since.
“We sell pots of hot chocolate, the real stuff, made from chocolate and hot milk, not from cocoa powder,” says enthusiastic founder Lisa Juster. “We add essential oils to add extra flavours and smells, and we can make them healthier by using soya milk, or skimmed milk. Chocolate really is popular.”
I Should Cocoa’s 40 covers are occupied from dawn until dusk as the discerning folk of Derbyshire explore their sense of taste.
They are not alone. The coming year is expected to see another 50-100 cocoa houses open in the UK, most from expanding chains, and most of them selling frothy cups of hot chocolate alongside confectionery and ice creams.
Of course, the British are famous cocoa-heads. Who can deny that life feels better with a dusting of chocolate on top? And, according to the experts who watch the world of chocolate, the recession has done chocolate a massive favour. They say a slump in GDP has encouraged us to seek solace in the endorphin rush provided by a slurp of choccy.
Yvonne Court is cross-border retail partner at Cushman & Wakefield and a woman who knows her fondant from her cocoa solids. “Two things are coming together here,” she says. “First, chocolate is perceived as an affordable luxury, something people can buy to treat themselves without being expensive. Second, I think a cup of hot chocolate can be seen as healthier than a cup of frothy coffee. Less caffeine, and it can be made from low-fat or no-fat milks.”
Customers looking for a change, or simply a treat, account for the demand-pull that is stimulating the growth of chocolate shops. But there is also a supply-push, says Court.
“Chocolate producers are interested in expanding into retail because it means they can control their brand and give it more exposure,” she says.
Cadbury is the most conspicuous example of this trend. Last year, the chocolate maker opened the first of its café concept stores at the Bluewater shopping centre, Dartford.
The group has won backing from its new owner Kraft for a chain of up to 60 outlets over the next three to five years.
Like Hotel Chocolat, which is adding up to 60 stores to its 56-strong chain, the preference is for popular shopping centres with strong mass-market appeal. Typically, they look for 1,200 sq ft or less – for instance, Hotel Chocolat has 720 sq ft at Meadowhall.
Shopping centre landlords are delighted to have the chocolatiers. According to Bluewater’s management team, it smells alluring, adds to the homely leisure mix and increases dwell-time.
So, is the cocoa house set to join the coffee bar as a ubiquitous feature of high streets and malls?
According to some retail industry sceptics, maybe not.
The first problem is that chocolate is a seasonal business. Valentine’s Day, Easter, Mother’s Day and Christmas mark the four high points.
Business can be poor in the aftermath of these events because, as Juster explains, “customers are totally chocolated-out”. The rest of the year can see thin trading, especially over the summer.
This means that, if a cocoa house is to pay prime shopping centre rents, it needs to find ways to boost year-round earnings. Ice creams can – and sometimes do – fill the summer lull, but it may not be wise to rely on ice cream sales in a British summer.
The alternative is to supplement income with gift or novelty sales, a route which is far from secure and takes up a lot of floorspace. Whittard of Chelsea, the collapsed tea chain, provides a salutary warning of how this can go wrong.
Daryll Bunce is chief brand-hunter for DTZ and an adviser on new brands for the Westfield shopping centre, west London, where Butlers, the Irish chocolatier that runs 14 stores in the Republic, has opened the first UK outlet of its Chocolate Café franchise.
Bunce thinks the hot chocolate business model may not be everyone’s cup of tea. “Butlers, like Max Brenner, the New York-based chocolatier, is looking closely at the UK, and there is scope for horizontal integration in the chocolate business, especially if it goes for the aspirational mid-market,” says Bunce.
“Shopping centre landlords like the chocolatiers. It is an important part of their leisure offer, and customers like to smell and buy and taste it. There will always be a market at the luxury end, too.”
Even so, Bunce does not, as he puts it, think the Cadbury’s Cocoa House idea has legs. “Cadbury is not a brand that is aligned in people’s minds with eating out,” he says, adding: “In a sense, chocolate is a private pleasure, which is why we are not seeing any big European plans for chocolate retailing.”
Bunce also believes there is a problem with cross-selling. He says: “OK, you can sell ice cream and cakes with chocolate, but nobody is ever going to want a tuna salad sandwich and a cup of cocoa. This is going to limit the kind of catering on offer, and because of that, the kind of users who visit cocoa houses.”
Both café and chocolate needed
I Should Cocoa’s Juster offers some support for this theory. “We run a café alongside the chocolate business, and there are times in the year when the café subsidies the chocolate. You need both, really,” she says.
Mark Harvey, director in Jones Lang LaSalle’s retail agency team, is also cautious. He says: “Looking ahead into 2011, the cost of raw materials, such as cocoa and sugar, is rising. This will affect the market and most operators will be cautious in terms of expansion, and those with a large number of shops will continue to use the opportunity to review their portfolios.”
Thorntons, the chocolate-coated favourite of high street cocoa retailing, is just such a case. Last year, the chain’s owner, Numis Securities, was understood to be planning changes to the 377-strong Thorntons chain in an effort to cut costs. It has also experimented with ice-cream sales and new shop-fit designs – Grenada, Ruby, and So Cocoa among them – in an effort to keep their appeal fresh, and turnover up.
Harvey says: “With new entrants coming to the market, such as Hotel Chocolat, and competition from products being sold via the internet and supermarkets, existing chocolate retailers are under constant pressure to improve their offer and product.”
Everyone likes chocolate. Of course they do. But whether the UK is ready for a massive expansion in chocolate retailing is more than a matter of taste.
Chococo
Chocolate maker Cadbury is hoping for vertical integration by opening its own chain of cocoa houses. It could learn an encouraging lesson from Dorset, where the Purbeck Chocolate Company has been doing it for eight years.
As well as a 1,700 sq ft Chococo café and kitchen in Swanage, it has a 5,000 sq ft Chocolate Shed, for manufacturing and wholesale, in nearby Wareham.
Owner Claire Burnet says: “We relocated our production space at the end of last year as, due to the growth of the business, we had outgrown our existing space in Swanage.”
“More people enjoy a coffee or a tea but, as a treat, we’ve found that customers who come into our café love a steaming warm cup of hot chocolate and dwell on it.
“As well as having the hot chocolate, they’ll order a treat for themselves like a piece of chocolate cake or a chocolate cookie – so there’s a trading up proposition here with the customer treating themselves a little bit.”
Customer dwell time is long – unlike coffee bars – and the customer profile includes men as well as women. Says Burnet: “I would say that men’s love of chocolate, especially dark chocolate, has been underestimated.”
