One Tuesday in four, starting today, this publication takes a real company and one decision it made. No heroes and no tidy lessons. Just what happened, what it cost and what it is worth knowing if you run something smaller.
On the morning of 19 July 2022 Hotel Chocolat told the stock market it was closing every shop it had in America.
Five shops, all in New York, opened just before a pandemic emptied the city. A joint venture in Japan that had reached more than 30 shops and needed loans the company would now write off, £23 million of them. A statutory loss for the year, on sales that had grown 37 per cent.
The shares fell 45 per cent during the morning, to 128 pence, below the price the company had floated at six years earlier and a long way below the 540 pence they had touched the previous October.
Angus Thirlwell, who had started the business with Peter Harris in 1990 selling mints, said the company was going to find a different way of growing, one that did not burn through cash. The City heard retreat. The share price said so.
Here is what had actually happened, as far as the public record shows it.
Hotel Chocolat was a British success story with a British model. It made its own chocolate, owned its own shops, grew its own cocoa on an estate in Saint Lucia and controlled everything from bean to counter. That control was the brand. When the company took the model abroad, it took the cost of the control with it: shops, stock, staff and a supply chain that had to work at a distance it had never worked at before. Thirlwell put it plainly the following year. The brand resonated overseas. The operations behind it had not been ready.
So the choice in July 2022 was not between growth and no growth. It was between carrying on spending money in two countries where the model did not yet work and saying so.
Saying so is the expensive option.
Any founder can stop quietly. You let the overseas office wind down, you stop mentioning it in the board pack, you call it a pause. Stopping in public is different. It means the market, your staff, your competitors and your own family hear you say that the plan was wrong and that the money is gone. Hotel Chocolat lost nearly half its value in a day for saying it. Nobody would blame a chief executive for finding a slower, quieter way.
And the quieter way is what kills companies. Not the mistake. The eighteen months spent not admitting it, while the cash that could have funded the next thing goes on keeping the last thing alive.
What happened next is the reason the story is worth telling. The year to July 2023 came in at a small loss, £800,000 on the company’s own underlying measure, against a profit of £22 million the year before, which is roughly what a clean-up year looks like. The UK business kept going. Then, in November 2023, Mars offered 375 pence a share in cash, £534 million for the company, a premium of 170 per cent on the previous close. The two founders held 27 per cent each.
I want to be careful about the lesson here because it is easy to overstate. Mars did not pay a premium because Hotel Chocolat retreated. It paid for a brand that was intact, a UK business that worked and a company whose problems were now known rather than hidden. And 375 pence was not a return to the peak. It was where the shares had stood in April 2022, before the announcement. The retreat did not make the company worth more than it had ever been. It made it worth buying. Nobody in July 2022 knew Mars was coming. The decision had to be worth making without it.
That distinction matters for anyone running something smaller. The overseas push, the second site, the new division, the thing you added when standing still felt like failing. If it is not working, the value of stopping is not that you get back to where you were. It is that you become a business somebody can look at and understand, with the losses on the table rather than under it, and cash going to the part that works. Buyers pay for that. So do banks. So, in a smaller way, do the people who work for you.
I did this. At CTI we followed customers into new countries and kept invoicing their UK companies, and that part worked. Then we opened offices of our own in Belgium, Portugal, France and South Africa because they looked good in the brochure. They never made money. What they did was prop up our egos, and the map on the wall never told us what the flags cost.
Field Note
A mistake admitted in public is a fixed cost. A mistake carried in private compounds.
Try This
Name the one thing in your business that you would not start today if you had the choice again.
Write down what it cost last month, including your own time.
Then ask who would need to hear you say it is stopping. Write down what you are afraid they would think.