It was not a gathering that Jonathan Hart, newly hired chief executive for Thorntons, recalls looking forward to. He had just joined the company in January 2011. In the meeting hall, anxiously awaiting to hear what the new head of UK’s largest independent confectionery company had to say, were more than 350 managers of Thorntons’ retail shops.

Alfreton, UK-based Thorntons, in existence since 1911 and a British icon on nearly every “High Street” (Main Street to Americans) with a retail shop serving up chocolates, toffees, fudge and other confections, had built its business on the backs of these shop managers.

“And here I was, getting ready to tell them that one of two shops was going to be closed during the next six years,” Hart says. Amazingly, after outlining his plans for the company, including that very painful detail about reducing the number of shops by at least 120 in three years (from 364 in 2011), everyone stood up and applauded. The message was powerful, painful and prescient.

Unlike many ceos, Hart wasn’t approached by a headhunter for the job; he actually applied for the position.  The former managing director of Caffe Nero, Britain’s third largest coffee chain, emphasized his love for brands drove him to throw his hat in the copper kettle.

“I love working with brands, and I saw Thorntons as a brilliant brand, plenty of opportunities,” he says. Indeed, the 104-year-old company had tremendous brand recognition. The bulk of its nearly ?214 million in 2010 sales came from its retail operations, (?130 million or 60 percent), with 36 percent (?79 million) generated by commercial sales, that is sales from supermarket chains.

The problem, however, was that retail shop sales were declining, a 9 percent drop. Moreover, several High Street locations had seen a dropoff in foot traffic, thanks in part to changing demographics as well as the emergence of malls outside city centers. Then there was the issue of leases; 179 of them were set to expire during the coming three-year period. Renewal most certainly meant higher operating costs.

Commercial sales, on the other hand, had continued to expand, growing by 26 percent. Clearly the handwriting was on the storefront window. Even the retail shop managers realized it. Hence, the applause.

So, the company, under Hart’s direction, set about to “rebalance, revitalize and restore” the Thorntons legacy. In doing so, the company would further enhance commercial sales, develop an international business, while simultaneously strengthening its iconic retail shop business as it transformed itself into a Fast-Moving Consumer Goods (FMCG) operation.

Given its position in the marketplace — the Thorntons brand is regarded as the No. 1 premium chocolate brand in the UK — retailers were more than happy to accept products from Britain’s chocolate maker.

During the next three years, commercial sales grew to the point where they represented half of the company’s revenues in 2014, ?111 million.  The closing of badly performing retail shops reduced the number from 364 to 260.

Thorntons was well on its way. Almost. As Hart explains, transforming the company into a FMCG powerhouse proved to be easier externally than internally. The company had operated as a truly integrated retail business; the commercial side was viewed somewhat with a reluctance, he adds.

Thus, in addition to gradually weaning out weak retail shop operations, the company started shifting its new product development efforts, a move that emphasized fewer, but stronger product launches. That, coupled with increased brand communications aimed at driving loyalty and frequency, reflected the revitalization aspect of the company’s strategy.

Last November, at a meeting with investors and analysts, Hart staked out Thorntons’ positioning, which focused on the premium category. Noting that the boxed chocolate segment in the UK represented a ?752-million segment, of which inlaid boxed chocolates accounted for nearly 30 percent or ?220 million, the ceo pointed out that the company retained the leading share in that subcategory with a 34.3 percent ranking.

It also had upped its share of the Easter and Christmas seasonal business, capturing 4.9 and 6.3 percent, respectively. Consumer awareness of the Thorntons brand remained high at 58 percent compared to other competitive brands such as Green & Blacks (24 percent), Lindt (21 percent), Hotel Chocolat (9 percent) and Ferrero Rocher (6 percent).

Even in brand advocacy, Thorntons topped Cadbury with a 52 percent ranking versus Cadbury’s 50 percent. And, in the critical gifting marketplace, a ?38-billion category, when consumers were asked about key brand values and gifting consideration, Thorntons was the leader in excellence, creativity and consideration categories.

Hart’s plan to grow the company involved six key strategic drivers: 1) continued growth of the UK commercial business; 2) creation of a platform for international growth; 3) ongoing right sizing of the retail segment; 4) further investments in world class manufacturing; 5) broadening brand investment; and 6) the continued transformation of Thorntons into a FMCG company.

Still, the new ceo didn’t have any illusions about the journey ahead for Thorntons; it wasn’t going to be easy.

“It’s been a challenging three years for the company,” Hart says. “But the next three years will even be more challenging.”

As expected, there’s been a few bumps in the road. This past Christmas, the company ran into two key issues: First, two of the company’s major grocery customers reduced their indicated orders; second, a new centralized warehouse run by DHL experienced delivery issues.

The setbacks came, of course, at the worst possible time. As Hart explained, the company could have dealt with one of the issues one at a time, but both coming simultaneously hit it hard.  Thus, sales for the last 14 weeks to January 10 dipped 10.3 percent to ?41.9 million.

The setbacks with the grocers came about as a result of an “overreliance on high volume, highly traded big boxed items,” which were further complicated by late orders and warehouse setbacks, Hart explains.  As a result, “our relationships with those customers suffered,” he adds.

That said, the company is redoubling its efforts to put into place structural changes that will ensure shopper-driven and shopper-pulled product lines. It’s also looking to expand its distribution beyond the UK’s six major grocery chains, targeting the convenience sector with twist-wrap items, single-flavor standup pouch offerings and chocolate bars.

In January, the company, upon acknowledging the Christmas-time setback, affirmed its intent to stay the course regarding its strategic plan. Indeed, the teething pains involving the warehouse had been resolved; the depot was now working normally, thus providing improved capacity and operating efficiencies.

In addition, Hart revealed that sales at Thorntons’ retail stores had increased by 7.8 percent during the Christmas period. Here, the company was capitalizing on its strength, seasonal sales.

“We’re famous for the seasonal items in our stores,” he says. It’s a competency that not only appeals to consumers at the shops, but in other sectors as well, ranging from grocery and convenience store outlets to international markets.

Currently, the company does about ?6.4 million in global sales. Today’s focus involves expanding its presence in North America and Australia, which both account for ?1 million each. Projections during the next three years call for growth to ?8 and ?3 million in the two markets, respectively, with total international sales, which encompass other global markets, duty-free sales and global accounts such as Walmart, Carrefour and Rewe, to reach between ?15 to ?20 million in 2017.

“In the past, international sales was a mere bolting on to the retail business,” says Jonathan Cockroft, director of international sales. “We have a more strategic objective now. It’s easy to get distracted with sales here and there. But we’re taking a disciplined approach, focusing on our seasonal lines and our inlaid boxed chocolates.

“But first, we have to crawl enough so we can start to walk,” he adds. That approach seems to be working as Throntons looks to do more business in the United States this Christmas.

“The plan is to leverage that relationship into where we can begin to include our everyday items, such as boxed chocolates,” Cockroft says.

The company’s also looking to leverage its relationship with consumers, adds Simon Foster, marketing directors.

“We have a strategic advantage through the consumer touch points we have, be it through our retail shops as well as our online sales,” he says. “Historically, our range of products have been optimized for the retail environment, and not selling direct to the consumer. Hence, we’re early in our evolution in marketing our products in the commerce side of the business.”

Foster, however, sees significant changes coming down the pike regarding both product development as well as consumer communications.

“We’re not currently investing in classic consumer advertising, but we will be increasing our investment in communicating to consumers directly,” Foster says. Those investments will manifest themselves in social media as well as “pac-tervising,” that is messaging through packaging.

The monies spent on reaching consumers directly dovetails with the company’s ongoing investments in manufacturing, investments that emphasize enhanced efficiency as well as flexibility.

Currently, 900 permanent employees, supplemented by 1,100 temporary or “flex” workers man five enrobing lines, three decorating lines, two “wet shell” moulding lines, a small starch moulding line, a toffee production area and several automated as well as hand-packing lines.

Nathan Worth, operations - technical and services manager, first started working at Thorntons hand packaging ice cream when he was 16. Having made his way through the ranks, the 26-year veteran is familiar with every single production process at the factory.

Today, Worth oversees unprecedented investments in the plant, totaling ?7.5 million in 2014. Last year the company installed a new AWEMA decorating line, one that features four robotic decorators capable of producing large Easter eggs, large and small Santas and various shaped bunnies.

This coming May, a new Buhler Bindler ChocoStar moulding line will replace one of the company’s older Carle-Montanari wet moulding lines, enhancing output nearly seven times while simultaneously reducing the line’s footprint.

“It will also allow us to keep one of the Carle-Montanari moulding lines whenever we have small, specialty runs,” says Worth.

Moreover, the company continues to evaluate what makes sense and what doesn’t regarding manufacturing. With more than 800 SKUs, it’s important to drill down r egarding product volume, efficiencies and demand.

However, there will be no compromise on quality, Worth asserts.

Thus, all cream centers are produced onsite following cherished recipes. Personalization of boxed chocolates — sold via the Internet —remains an ongoing Thorntons touch.

As Hart explains, “Before I came onboard, many at the company thought that our consumers only purchased our products in retail shops; that they wouldn’t buy them elsewhere. We realize that our loyal customers will purchase Thorntons products wherever they are available, be it in the retail shops, grocery stores or convenience marts.”


At-a-Glance Thorntons

Headquarters: Alfreton, UK

Sales: £222 million (to June 2014)

Plant: 320,000 sq. ft.

Products: Pralines, truffles, chocolate bars, toffee, fudge, decorated chocolate moulded items, panned items, and jellies.

Employees (at Alfreton): 900 permanent; 1,100 temporary workers

Output:18 million kilos chocolate annually (56 percent milk, 28 percent white, and 16 percent dark)

 Management Team: Jonathan Hart, ceo; Barry Bloomer, managing director – FMCG division; Mike Killick, finance director; Jonathan Cockroft, director – international sales; Simon Foster – marketing director.