Analysis: How Greggs and Hotel Chocolat are creating new recipes for success

While outwardly very different businesses, Greggs and Hotel Chocolat share a number of key similarities. 

Most pertinently, both have built UK retail success stories by targeting consumers through strategically placed stores on thriving high streets and in bustling travel hubs up and down the country. 

As a result, the incursion of Covid-19 into the everyday habits both businesses were thriving off has meant Greggs and Hotel Chocolat have been forced to confront similar problems. 

How the two have reacted to these issues and pivoted towards the future may offer insights for the wider retail sector as it looks to balance high street stores and growing demand for online shopping.

Ecommerce explosion

Perhaps the key takeaway from both Greggs and Hotel Chocolat is how pervasive ecommerce is becoming across all different sectors of food retailing. 

Greggs chief executive Roger Whiteside says that since rolling out its delivery tie-up with Just Eat and click-and-collect offering from stores, it had generated nearly 2.6% of all its sales for its third quarter through online “from a standing start”. 

Now, he says, Greggs focus is to grow both of these services: “We’ve gone nationwide in the matter of a few months, the last eight weeks really. We’ve still got more to go. We’ve done the major cities if you like. So now we need to start filling in the catchment areas in between, but we’ve got a programme for doing that between now and Christmas.” 

Whiteside says customers online tend to spend three times as much as they would in-store, as they are buying “not for themselves as individuals, but for families or groups”.

Hotel Chocolat has also been forced to throw itself more fully into ecommerce and the results have been paying off. Founder and chief executive Angus Thirlwell says the retailer is currently seeing 150% growth in online sales, with more to come in the run-up to Christmas. 

“It’s going to get even more online. Even more than the 150%-plus growth that we’re seeing as the moment and we can deal with that,” he says of future trading trends. 

New products and innovations

Both brands have also begun looking into new products and routes to market to leverage the growth in online.

Whiteside says off the back of the success of its delivery business, the food-to-go retailer is now looking at moving into “food in the evening” offerings for customers. 

“We’re now trying to see whether we can appeal with food in the evenings through delivery, which will be the next stage in our strategic journey. To try and access more parts of the market that way,” he explains.

For Whiteside, being able to offer new products for consumers at new times will not only grow sales but also help grow customer awareness around its overall digital offer. 

“Most people still don’t realise that we do delivery. I’m sure that number will continue growing,” he adds.

Hotel Chocolat has gone a step further and is set to launch a new app later this week in a bid to capitalise on its growing database of more than 1.5 million VIP customers and move them over to a new way of thinking about shopping for its products. 

“What we’re doing is hoping to entice the nearly 1.5 million VIP customers that we’ve got to, sometimes for the first occasion, see what it’s like to send a Hotel Chocolat gift to somebody,” says Thirlwell. 

The retailer has also expanded its partnership with Rabot 1745 to bring more of its cacao-based health and beauty ranges into its overall offering. 

Future of stores

While both brands have been focusing on growing capability and product offerings online, it is clear that neither believes physical retail has no future because of the pandemic. 

Greggs has resumed its store opening schedule, having paused it at the beginning of lockdown. For Whiteside, the intervening months have given Greggs a good chance to analyse the trading data and see where customers feel safest in physical stores post-coronavirus. 

“Car-borne shoppers are the most active out of the home. In that respect, that’s given us the confidence to reopen the shop opening pipeline targeting those specific kinds of locations. Retail parks, roadside locations, supermarkets,” he says. 

“These are all places where the customer is accessing it by car and feels safe doing so. They’re out in bigger numbers than people using public transport.”

While Hotel Chocolat is yet to resume opening new stores due to the pandemic, Thirlwell says it has been using Japan as a “testbed”. In the last two weeks, it opened a larger, new-format store offering both its Rabot healthcare and coffee products as well as its own-brand, full chocolate retail offer under one roof. 

“We launched two weeks ago and we’ve set a new record in terms of sales in that period in our history. That’s happening at the end of the summer and the middle of a pandemic,” he says. 

“It’s a sign there’s still vibrancy and life in physical retailing”. 

Thirlwell also says “once the dust has settled” on the UK retail property market “there will be better opportunities than ever to hunt out long-term, brand-building, hero sites”. He reiterates that the pandemic has “in no way diminished the power of physical retailing when it’s done well”.

Investing in infrastructure

With new routes to market and growing demand coming through ecommerce channels, both Greggs and Hotel Chocolat have been pushed to invest in growing their supply chains. 

While Greggs has partnered with JustEat for its home delivery component, Whiteside says the retailer is also looking to streamline its supply chain and distribution networks in the future. 

He points in particular to the building of a new, fully automated frozen logistics hub, which will be operational by the second quarter of 2021.

As a retailer that manufactures its own products too, making warehouses and distribution centres as Covid-secure as possible is vital to protecting supply. 

The retailer has been forced to deal with two coronavirus outbreaks, one at a distribution centre in Leeds and another at a manufacturing centre in Newcastle. 

“This is now the new reality. We recognise that between now and whenever this thing ends, we’re going to have circumstances in which you’ve got to manage an outbreak of infection at a location and make adjustments and adaptations to cope with the impacts of that,” Whiteside says. 

Hotel Chocolat meanwhile has doubled its warehousing and distributing capability by taking over the other half of its existing warehouse in Cambridgeshire from Cath Kidson. 

This acquisition has given Hotel Chocolat “a very agile, muscular, well-invested distribution capability which can turn on a sixpence,” Thirlwell says. This will put the retailer in a stronger position heading into the crucial Christmas period. 

Despite their differences, it is clear that Greggs and Hotel Chocolat are handling the pivot to a Covid-transformed retail world in much the same way. While the ingredients may be different for other retailers, the wider recipe could be similar.