Chocolate maker Thorntons counters cocoa rise

8 September 2011

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8 September 2011 | Adam Leach

Confectioner Thorntons expects to cut costs by £2 million in 2012/2013 as a result of changes to procurement.

The savings will be delivered as a result of the company's move to outsource its warehousing and distribution activities and the overall restructuring of costs at its head office. The company renegotiated its IT outsourcing contract in 2010.

According to company results for the year ending 25 June 2011 published yesterday, the chocolate retailer said by implementing a forward purchasing strategy, where it bought cocoa in bulk in advance, it was able to avoid being hit by additional costs when political instability in the Ivory Coast led to a spike in prices.

Jonathan Hart, chief executive, Thorntons, said in a statement: “This is one of a number of strategies that we have deployed to mitigate these price increases. Improvements in our procurement approach combined with product and ingredient re-engineering have also continued to help us reduce some, though not all, of these effects.”

While its forward purchasing approach was successful in avoiding harm from escalating cocoa prices, the retailer has suffered from increases in the price of both sugar and dairy products. During the past year, dairy increased by more than 20 per cent and sugar – which hit a 30-year high in February – increased by more than 50 per cent.

Thorntons also invested £4.5 million in its supply chain and IT operations last year. The majority of the money was used to complete a new production line and purchase new manufacturing tools, the remainder was spent on improvements to the supply chain and IT.

But overall, the company reported a loss of £1.1 million before tax for the trading year, despite increasing revenues from £214.6 million to £218.3 million.

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