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Thorntons threatens chocolate price rises

By This Is Money
Updated: 09:58 EDT, 6 October 2010

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Chocolate lovers should be worried after retailer Thorntons threatened price rises because of the impact of soaring cocoa costs.

Dark chocolate: Prices may rise because the raw ingredient - cocoa - is more expensive

Confectionery giants Cadbury and Nestle were this week reported to have increased prices by up to 7% across some of their most popular products - including Dairy Milk, Kit Kat and Yorkie - due to rocketing cocoa prices.

Thorntons said the cost of cocoa hit 38-year highs after surging by 25% in recent months due to a combination of poor harvests and an increasing global appetite for chocolate.

It has not yet been forced to pass on costs to consumers, but cautioned its price tags could rise if cocoa prices continue to increase.

Mark Robson, finance director and interim chief executive of Thorntons, said: 'We do try to hedge this as far as possible and to buy forward in the market to mitigate against rising input costs.

'But if prices continue to go up and up, it could come to a point where we do pass it on.'

Thorntons also updated on its first quarter trading today, revealing that its retail stores continued to come under pressure on the high street.

Like-for-like sales fell 4.1% across its 377 own stores, while the group's 222 franchise outlets saw a 4.8% decline.

But the company is hoping its recently-launched Christmas range will deliver a much-needed boost over the busy festive period.

It has revamped existing continental selections and is also introducing new Christmas lines, such as cuddly toys for children with chocolates, reindeer and Santa lollies and a range of advent calendars.

Better performances across its Thorntons Direct online arm and commercial business are also helping to offset the retail weakness.

Total sales rose 7.4% in the three months to October 2, thanks to a 29% hike in sales across its commercial division and 19% rise in online turnover.

The group - currently recruiting for a successor to replace Mike Davies, who retired at the end of last month - has had a tough time in recent years.

Alongside difficult retail conditions, its franchise stores were impacted when greetings card firm Birthdays went into administration in May 2009, as it had a number of concessions within the group's outlets.

But shares rose 4% today as Thorntons chairman John von Spreckelsen said trading had been 'satisfactory' so far this financial year.

Sales comparatives are also expected to get easier for the group from the second quarter, according to Investec Securities analysts.

They said in a note: 'This is a better than expected start to the year and sets a positive tone for the peak trading period.'

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