Hotel Chocolat looks to entice investors with sweet deal

The chocolatier hopes to raise money from customers, with a new bond that pays interest in chocolate.

Last Updated: 05 May 2016

With interest rates at record lows, most of us are in the market for tastier ways to save – but is Hotel Chocolat taking that a bit too literally? The posh confectioner is attempting to raise £5m by offering customers ‘chocolate bonds’ that pay interest in – you guessed it – chocolate. The bonds, on offer to the 100,000 members of its Chocolate Tasting Club, will see a regular ‘tasting box’ of chocolate delivered to investors’ homes, rather than cash into their bank account.

The deal, which has already been approved by the Financial Services Authority, offers customers the choice of subscribing to a £2,000 bond, which will see a box of chocolates worth £18 delivered to their homes every two months – equivalent to a 6.7% yield, the numbers people tell us. Or they can go for a £4,000 bond - that provides a box of chocolate every month, which equates to an (even tastier) 7.3% yield. Since cash ISAs yield an average of about 3% at the moment, and even bank bonds only offering about 5%, we imagine Hotel Chocolat fans might be rather excited about that. Like a kid in a candy shop, you might say.

The company's planning to use the cash to fund an additional 30 high-street stores, as well as create an extra 250 jobs in its Cambridgeshire factory and develop the eco chocolate facility at its cocoa plantation in St Lucia. Angus Thirwell, Hotel Chocolat’s co-founder, says he’d rather offer a reward to customers than borrow from a bank – although given banks’ levels of enthusiasm when it comes to lending at the moment, persuading customers might be a lot easier, too.

Hotel Chocolat’s plan to raise money directly from its customers is definitely unusual (the chilli chocolate of investment opportunities, perhaps?). But it's actually not a new idea. Last year, King of Shaves founder Will King announced his company would be issuing ‘shaving bonds’ worth £1,000 to customers (who would get, inter alia, free limited-edition products). Taking inspiration from ‘enthusiast bond schemes’ used by companies to raise money during the post-war years, King said he wanted to use the money to take on the ‘duopoly’ of Gillette and Wilkinson.

The upside for HC, of course, is that although that yield looks impressive, it won't actually be paying out anything of the sort - since the cost of making the boxes is obviously much less than the price. And if you're thinking, as we were, that this sounds like a ridiculous amount of chocolate to consume (these bonds have a three-year maturity, which means you'd get up to 36 boxes in lieu of cash), fear not: HC informs us that the customers being targeted here (i.e. its Tasting Club members) are already signed up to receive HC goodies in these quantities. So in return for stumping up their cash - which they'll get back later - they get all their choccies free for three years. Good for the bank balance, if perhaps not for the waistline.

In today's bulletin:

Business department hammered as Osborne swings the axe
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Hotel Chocolat looks to entice investors with sweet deal
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