UK specialty chocolate firm Thorntons has decided to go into the take-away coffee market.
CEO Peter Burdon froze the Cafe Thorntons concept last year as part of a restructuring program, but the firm now seeks to double the number of cafes to at least 56 within two years. But while supplying coffee may make keep the brand ‘fresh’ in consumers’ minds, supplying other retailers is more likely to provide the fillip required to the bottom line.
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Times have been hard for Thorntons – the share price has fallen from its high of 292.5p five years ago to 80p this week, and the reasons that the firm has given for its performance have been widely criticized.
Unsurprisingly, when Peter Burdon took over as CEO last year and implemented a three-year restructuring program, the unproven Cafe Thorntons concept was put on hold.
Things have moved on however, and the plan is to expand the cafe concept again. During the freeze the firm had conducted a review of the cafes in operation, with the aim of better understanding the drivers of, and opportunities for, cafes.
Whilst the firm maintains that cafes are profitable (on a fully costed basis) in their own right, and there may be a profitable coffee business for Thorntons in the future, coffee is not likely to solve all the company’s troubles by itself.
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By GlobalDataThorntons has been working on many other projects as part of its three-year plan – most notably, growing its business through other retailers, without cannibalizing its own-store sales. Solving this problem would give access to a larger market, with grocery retailers likely to play a large role in this strategy if it gets the go ahead.
But coffee still has its role to play. If Thorntons is to succeed with third party distribution, it needs to bolster its brand, to overcome the loss of control over distribution and the retail environment. Keeping the brand and concept up to date in the minds of consumers will be a key factor in achieving this, and improving the service offering in its own stores is likely to play a crucial role.
Coffee may be a good business, as the success of Starbucks has shown, and although Thorntons is unlikely to be competing directly with the major coffee bars the major development opportunity may lie elsewhere. Coffee though, may just be the factor to make Thorntons’ brand a winner on the shelves of the grocery retailers.
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