Finding our Place in the Global Chocolate Market

A GDC group visiting Ecuador

“Why do you do this?” asks Julia, a fun-loving, well-traveled woman from North Carolina who joined us on our most recent chocolate delegation to Ecuador. She was referring to the group trip itself - why do we lead these group tours when it’s obviously not a money-making endeavor? She jokes that she quickly did the math in her head and it wasn’t adding up. We could just as easily visit our partners in Ecuador without a group in tow, which would eliminate the fear of not meeting everyone’s expectations, give us time to delve deeper into our chocolate business and reduce the logistics/costs of travel. So what is the motivation to bring a random group of chocolate-enthusiasts along with us?

In short, it’s the same thing that drives us as owners of Grocer’s Daughter Chocolate. It’s about finding our place within the huge and complex global chocolate market, a small place that we can feel good about, and then sharing it with people. It’s about serving as good stewards of really great chocolate and ingredients, grown and made by people we know, at our shop and in our classes and on our trips to Ecuador. To spark curiosity about chocolate and to create and deepen friendships to this end, this is why we do it and why we continue to love it. 

If you’re paying attention to the chocolate industry, you know the craft chocolate movement is growing at warp speed. It’s very similar to what the specialty coffee industry experienced 15 years ago with the added booster of improved technology/social media. It’s exhilarating to be in the industry right now because there are no limits to experimentation, especially with technique and recipe formulations. And, for the most part, the chocolate community is a collaborative one, so it only takes a phone call to connect with another chocolate maker/confectioner and share ideas. These are great times for chocolate lovers and we have much to celebrate as our options for indulging chocolate cravings continue to grow exponentially. You can find a chocolate to suit almost any mood or occasion. 

And while working in chocolate has lots of rewards, it’s important to be honest about the hardships of the industry. Anyone working in craft chocolate can tell you that it’s difficult to make a living while trying to run a chocolate business with ethics. This is especially true when there’s a commitment to sourcing only great quality chocolate and ingredients, and even more so when recipes are chocolate-heavy with little to no added sugar.

Our chocolate shop - a tiny craft confection business in Northern Michigan - is in good financial shape now but we’ve had a couple of hard-learned lessons (and I’m sure we’re not the only ones). Here’s a few of those humbling endeavors:

The busy Spring/Summer/Fall season in our quaint tourist town nestled in the Sleeping Bear Dunes National Lakeshore has always been fantastic. However, the winters aren't so busy. We were spending any profit we made during high season trying to remain open through the sleepy winter months. Indeed most of the retail businesses in our area close from January thru April so the slowdown wasn't unique to us. Two years ago, we made the decision  to close for winter and it’s been the best decision we’ve made. Now we reserve some of our cash for planning and development of new products, we have great quality time off with our two baby boys and we’re excited and inspired to re-open each new season.

We’ve experienced failure with a couple of small expansion efforts too, including a planned scale-up into wholesale with our most popular bars and bark. This move was particularly painful because we were picked up by Meijer, Whole Foods and several regional independent grocery stores chains. We made an investment of approximately $10,000 in new Michigan-sourced and -printed packaging for bars and bark. We even won a ‘Best New Product’ competition at a Michigan products expo featuring over 100 brands vying for shelf space in a variety of Michigan grocery stores. Yet we discovered that unless we invested heavily in new equipment, wholesale simply meant low margins, more work and zero net profit gain. Sure, we could have opted for cheaper packaging, cheaper chocolate and hired staff at lower wages but that would mean compromising our values. We’re not willing to do that. So last year we scaled back our wholesale business from 40+ customers to fewer than 5, which include long-time wholesale partners Oryana Food Co-op, a few local wineries and Zingerman’s. On the financial side, our net profit margin increased to 10% (basically from break-even) and we get to focus on creating new recipes and providing better service in our retail shop.

Our other unsuccessful endeavor was an attempted second location in a city two hours south, which we closed after 20 months of working very hard to make it work. It wasn’t a good fit for a lot of reasons. By law we’re not allowed to defame the entity that housed our second location and we admit that it was an extremely risky endeavor from the get-go. The market we elected to join was brand new with a really fantastic concept: to feature retail/maker tenants that were the best of Michigan’s handcrafted food businesses. The building was cutting edge with Gold LEED certification, a green roof and plenty of multi-use space with both a children’s and incubation kitchen. The rent was expensive and the anchor of the market, a highly regarded brewery, never came to fruition. The market became less of a showcase of Michigan artisan goods and more of a high-end food court. We - the owners- couldn’t be physically present very often because we live two hours north and we also happened to be pregnant with our first child. The failure of the location certainly wasn’t for lack of effort by our fantastic staff. Had we been owner-operators present at the shop, and had we developed a viable local delivery business, things may have been different. But, again, we chalk it up to an expensive learning experience and, if we choose to pursue another retail outlet in the future, we would surely be better positioned to succeed because of what we learned from this experience.  

A GDC visit to Ecuador

So it goes with failure, there is always a valuable lesson to be learned. Though we don’t have gnawing ambition to grow our business simply for the sake of expansion, we do hope to support our partner farmers, our primary chocolate maker (Jenny Samaniego of Conexion) and our local vendors via sustained smart growth. For us it’s about furthering our impact and doing our part to create a greater chocolate community that values transparency, collaboration, curiosity and creativity. We hope that by sharing our experiences we’ll help other chocolatiers and makers.

And now on to the motivation for writing this piece. Last week I returned from a visit with our partners and friends in Ecuador. I was co-leading a coffee and cacao trip with my dear friend and primary chocolate supplier, Jenny Samaniego, plus her business partner, Pablo Torres. This is the fifth time Jenny and I have lead this trip together and it always serves to reinvigorate my love for our business and excite me about the trajectory of the industry. Joining us on the trip were two people from our chocolate family, Molly Flerlage and Brady Dotson. Both Molly and Brady work at our chocolate shop during summer break. In fact, Molly is the longest-standing employee at Grocer’s Daughter Chocolate having worked there for 10 years (since she was 11 yrs old under previous owner Mimi Wheeler). Now a junior at Macalester in St. Paul, this was Molly’s first visit to cacao farms and, as she puts it, it was a long time coming and we were overjoyed to have her along. Brady happens to be my super hilarious nephew who’ll be graduating high school this year. This type of travel is entirely new to Brady and, just as my eyes were opened when I first visited small-scale coffee farmers in Latin America over 15 years, I wished for him to have this experience. Having these two on the trip made it one of the most meaningful for me. There is nothing more fulfilling than connecting people you care about to causes you care about. 

Our trip was rounded out by a gregarious, warm-hearted chocolatier from Carmel, Indiana (Joann from X’Chocolart), and two sets of fantastic women-friends whose joyfulness and spirit for adventure made the trip one of non-stop laughs.

Visits to Ecuador always serve as a perspective check. No matter how challenging it can be to run a viable craft chocolate business in the States, our trials and tribulations pail in comparison to those of the cacao farmers and their families. Though Ecuador has a healthy minimum wage compared to most cacao-growing countries (meaning most people make $10 - $15/day minimum as day laborers in Ecuador vs. $.91 in Ivory Coast), world chocolate prices took a nose dive this winter and this drives overall pricing in chocolate throughout the world.

Farmer-members of the Fortaleza Del Valle cooperative are fortunate to have an astute, savvy director, Berto Zambrano, working on their behalf. Berto knows his cooperative produces some of the highest quality cocoa in Ecuador and he’s led a movement to completely disengage from commodity pricing. On the buyers end, Berto has created an agreement with three other Ecuadorian cooperatives to sell at an agreed upon price that is both fair to the cooperative and to the buyer (although a higher price than what most buyers are accustomed). On the farmers side, Fortaleza Del Valle purchases a quintale of wet beans for $45 while the local intermediaries are buying for $30. This is a huge incentive to a farmer living in a very rural area where small change adds up quickly.

Along with financial unknowns, climate change wreaks havoc on rain and sun patterns from year to year. Harvests are becoming more unpredictable and seasons are often plagued by extremes of rain one year and sun the next. Buyers are demanding better quality all the time and, more and more, to succeed in the specialty cacao trade one must be literate in international business/finance and technology/social media. Most farmers have barely enough time to tend to their fields and their crops, much less become experts in all of these other things. 

This is why cooperatives play a vital role for small-scale rural farmers and why consumers must be made aware of the change that they can affect simply by using their purchasing power. It’s the driving force behind our trips - the more informed we are, the better tools we have to make buying choices and to educate friends and families about the realities of chocolate trading. The trips we lead to Ecuador facilitate this education and create enduring bonds between producers and consumers.

This is the beginning of a new solidarity cocoa economy that benefits everyone along the value chain and we’re happy to be a small part of it! Entrepreneurs like Jenny Samaniego provide the vital link - offering high quality, direct trade chocolate to makers and chocolatiers, along with the opportunity to build relationships with the farmers. We commend Jenny for her outstanding, tireless efforts and we’re proud to work with her exceptional chocolate.

We’re excited for another great season in the chocolate shop and we’re grateful to have had some time off to experiment with recipes, to dream up new classes and packaging ideas, to salivate over lots of great photos on social media, to cheer on our compadres in chocolate and, most importantly, to spend lots of time cuddling our two little boys - Charlie and Arlo.

We invite you to stop in the shop after May 1st to try our newest harvest of chocolate. It’s super yummy! We can’t wait to share it with you.

Check in at the shop (or via our website or social media) for this summer’s tasting schedule, new classes and the announcement of next year’s trip to Ecuador.