‘Thorntons’ plight lays bare risks of chasing revenue over relevance’

Many headlines painted the picture of another coronavirus casualty, but the cold, hard truth is that Thorntons only has itself to blame. 

Once a strong brand with a good customer base, the business lost its way spectacularly either side of its £112m acquisition by Ferrero in August 2015, supplying its ranges to almost any bidder it seemed, let alone the highest.

Thorntons chased revenues over relevance – and ended up squandering both – unwittingly becoming a corporate case study in how to destroy brand equity.

In its latest available figures, covering the year to 31 August, 2019, Thorntons booked a pre-tax loss of £35m, almost identical to the previous year.

Its top line melted from £135.1m to £122.3m, suggesting its appetite for wholesale deals over direct-to-consumer sales wasn’t reaping many rewards.

“While Ferrero has attempted to maintain perceptions and price points around its core products, the ambassador wouldn’t be seen dead serving up Thorntons chocolates”

Of course, supplying the supermarkets can be a lucrative business. Ferrero itself has become one of the largest chocolate companies in the world by striking supply deals with top grocers the world over.

But while the Italian confectioner has attempted to maintain perceptions and price points around core products such as Ferrero Rocher and Nutella, putting a degree of distance between them and cheaper alternatives, the ambassador wouldn’t be seen dead serving up Thorntons chocolates at his receptions.

It wasn’t always that way. Not so long ago, Thorntons was held in similar regard to brands such as Hotel Chocolat and Godiva. Yet it allowed its products to become commoditised, flogging its wares to all who came knocking: Tesco, Sainsbury’s, B&M, Poundland.

As soon as Thorntons appeared at similar price points on the same shelves as Mars bars, Curly Wurlys and Freddos, the writing was on the wall.

Rival Hotel Chocolat’s journey has taken a contrasting trajectory, as founders Angus Thirlwell and Peter Harris focused on protecting their brand “at all costs”.

Those words of Thirlwell’s stick in my memory. They epitomise the reverence in which he holds the brand, its purpose, values and customers. All business decisions he takes are made through the lens of those four crucial elements.

It is why Hotel Chocolat has always been so selective about the third parties it supplies – John Lewis, Ocado and Next are among the names on a short and carefully chosen list.

It is why Hotel Chocolat places such importance on its stores, creating an exclusive, experiential environment, staffed by employees who ooze product knowledge.

And it is why Hotel Chocolat has earned the authority to play in other verticals and product categories, diversifying into alcoholic drinks and beauty products, and opening cafes and restaurants.

None of that can happen without a strong and relevant brand at its heart. That’s why, like Thirlwell, even the biggest and best brands in the world must protect their positioning “at all costs”.

Take sportswear giants Nike and Adidas, for example. Both have supplied retailers right around the globe for decades, but a desire to enhance rather than erode the power of their brands has sparked a selective approach to wholesaling.

Retailers such as Sports Direct in the UK face a reducing pool of available product as the US goliaths seek greater control over the way their best lines are merchandised and sold to customers.

Just last week, Adidas unveiled its new ‘Own the Game’ strategy, built on the core pillars of “brand credibility, customer experience and sustainability” as it shifts to a model led by direct-to-consumer sales, rather than wholesale.

By 2025, Adidas aims to make at least 50% of all sales directly to its customers through its own shops and ecommerce platforms – the same target already identified by fierce rival Nike.

“Pret, like Costa and Starbucks before it, is being selective about the ranges it offers to third parties and insistent about the prices at which they are sold”

That is not to dismiss the merits of the wholesaling channel completely. Pret a Manger has dipped its toe into that arena this week, supplying its first FMCG food range of frozen croissants to Tesco, having already started selling a number of retail coffee lines through Amazon and Waitrose this year.

But Pret, like Costa and Starbucks before it, is being selective about the ranges it offers to third parties and insistent about the prices at which they are sold.

Pret chief executive Pano Christou told Retail Week it was working closely with the supermarkets to identify and develop products that would fill gaps in the existing Tesco range, allowing Pret to retain a point of difference among the plethora of other products available.

In doing so, Christou is ensuring the Pret brand is improved, rather than impaired, in the eyes of consumers, striking the right balance between revenue and relevance.

As an executive at one US retailer put it to me this week: “You have to know where a brand sits and what it stands for. Without a purpose and a reason for being, any communication with customers will be tone-deaf – and you very quickly become irrelevant.”

That is the hole Thorntons is now scrambling to claw its way out of. Its failure to tackle the relevance agenda should offer lessons for all.