Hotel Chocolat pays £4 for beauty firm Rabot 1745

Luxury confectioner Hotel Chocolat has just concluded a sweet deal - by gobbling up a cosmetics business that specialises in "cacao-powered beauty".

The firm paid just £4 to take full control of Rabot 1745, which it set up five years ago in partnership with businessman Andrew Gerrie.

The amount is less than Hotel Chocolat's cheapest selection box, which costs £5.

Rabot lost £400,000 last year but Hotel Chocolat says it can turn it around.

The beauty business, founded in 2016, is described as having a range of products "inspired by the wild beauty of the group's St Lucian cacao farm and rainforest spa".

Its range includes a variety of chocolate-themed products, from Almond Chocolat lip balm to Cacao, Almond and Coconut Three Shell Scrub.

It calls itself a "responsible, engaged business" and pledges that by the end of this year, 100% of its packaging will be compostable, reusable or recyclable.

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Hotel Chocolat chief executive and co-founder Angus Thirlwell told the BBC that Rabot was "Hotel Chocolat's best-kept secret", since not many buyers of its chocolates knew about it as yet.

"We've been incubating a beauty business," he said. "We're not interested in quick wins, we like to build things up from a solid foundation."

He said Hotel Chocolat had always intended to make Rabot a part of its main business, but the catalyst had been the opening two weeks ago of a massive 5,000-sq-ft Hotel Chocolat outlet in the Japanese city of Oita, with a large dedicated space given over to beauty products.

"Sales have been very encouraging," he said. "Japanese consumers love our take on the natural power of cacao."

Mr Thirlwell said Japan was a great market to experiment in, because Japanese consumers were "very demanding".

"If we can meet those demands in Japan, we stand a great chance of being successful in other markets," he added.

It's all about the power of cacao, says Angus Thirlwell

Other chocolate makers are unlikely to follow him into the beauty market any time soon, but that doesn't worry Mr Thirlwell.

"We've always been a contemporary version of luxury chocolate and the companies we compete against are more heritage European brands," he said.

"We're younger in our outlook."

Hotel Chocolat owns several cacao plantations on the island of St Lucia and a luxury hotel, where it started using cacao-based beauty products at the spa. They expanded the range and it's been in store and online for the last three years. Despite the losses, the products are said to have been selling well as we treated ourselves during lockdown.

Hotel Chocolat has branched out into selling all sorts of cacao-based products, from cacao gin and salted caramel vodka to posh chocolate ice cream and hot drinks. Diversifying your product offering can be a risky distraction for any business, but it's also a way to boost sales and profits. Hotel Chocolat thinks it's a recipe for success and will hopefully lure new customers, as well as add value to the brand.

The Hotel Chocolat group already owns 47% of Rabot, while Mr Gerrie, who is also the group's non-executive chairman, owns 40.5%.

Mr Gerrie will receive £3 in exchange for his stake, while the remaining investors will share the other £1 between them.

After it buys his stake in Rabot, Hotel Chocolat will pay back a £744,000 loan that Mr Gerrie provided to the beauty business.

It will give him more than 200,000 newly issued Hotel Chocolat shares, increasing his stake in the group by about 40%.

Wayne Brown, an analyst at Liberum, said the deal would help Hotel Chocolat to differentiate itself from other chocolate brands.

He also added that it would allow operations to be integrated, which should eventually "see Rabot begin to turn a profit versus the current slight loss".