Homogeneity & Heterogeneity in the Chocolate Market: “Authenticity” and Pricing

Over the past decade, artisanal chocolate manufacturers have introduced bean-to-bar, single-source products in an industry controlled by a few large profit-maximizing players that produce low-price, commodity-like products. The established big chocolate players have sought to maintain the status quo of their manufacturing model, which for several decades has centered on delivering consumers mass-produced homogeneity in all aspects of the chocolate creation process from flavor to production to corporate responsibility to the final pricing of the product. While this model has proved successful for the long-standing big chocolate manufacturers, new entrants seek to distract from this model by providing a heterogeneous product that is homogenous only its location of sourcing. These new entrants attempt to confront the big chocolate model by appealing to consumers’ appetite for “authenticity” in terms of sourcing, manufacturing, social impact and taste. This new paradigm offers a means to preserve bean diversity, traditional production techniques, and wellbeing of bean environments, thereby generating sustainability, while nudging large manufacturers to adopt similar values lest they lose consumers that care about these aspects.

Differences in flavor priorities for big chocolate manufacturers and smaller, single-source producers influence the homogeneity and heterogeneity of taste in the final chocolate product sold to consumers. Single-source chocolate manufacturers seek to emphasize the native taste of the bean and the environment in which it is grown. Just like for high-end wine producers, the Terroir, or series of environmental and biological characteristics that impact the growth and characteristics of the plant itself and thereby the fruit’s taste, represents the most important priority for these bean-to-bar, artisanal manufacturers. In a random sample of 30 single-source chocolate manufacturers, one sees an emphasis on the local flavor of the bean itself and the bean’s area of origin. For example, LA Burdick states that its Single Source Dark Chocolate Bars, “allow a sampling of distinctive regional beans. From the fruity acidic notes of Madagascar, the earthly finish of Ecuador…Single Source Bars provide a world tour of regional chocolate individuality.” Furthermore, LA Burdick even mentions the word “terroir” in its description of chocolate sourcing. It writes, “When turned into chocolate, it is hard to overstate the effect of the ecosystem on the chocolate flavor (terroir). The flavors of these chocolates are deep, complex, long lasting and taste of everything surrounding the cacao trees.” Additionally, Ocelot Chocolate states its Single Origin Peruvian Bar is “Made with the ultra-rare Peruvian white cacao Piura Porcelana, which has been nurtured back from the brink of extinction.” Each of the 30 randomly selected single-source chocolate manufacturers emphasizes the nativity of the plant and bean’s surroundings. Bill Nesto, in highlighting the ability of single-source chocolate to bring out the bean and essence of the chocolate product itself, writes, “The smaller and more precisely delimited a chocolate’s origin is, the more opportunity there is for a producer to express its identity (135).” According to Nesto, the variability in cacao terroir and natural flavors represents heterogeneity that manufacturers should emphasize, not neglect or remove.

While single-source chocolate producers emphasize flavor diversity, big chocolate manufacturers perceive the importance and nature of flavor itself very differently. For example, nowhere on its bars or website does Hershey’s state the origin of the beans in its bar. When advertising its Milk Chocolate Bar, it simply writes, “Pure and simple. Nothing can take place of this classic.” It is ironic the company uses the words pure and simple since nowhere does the company describe the flavor of the bean itself, the core ingredient of traditional chocolate. Big chocolate manufacturers have centered their business model on developing manufactured flavors, which in many cases may veer far from the flavor of the cacao bean itself. In a marketing gesture, Hershey’s has led consumers to believe that the taste it manufactured in the lab is indeed the true taste of chocolate by using worlds like “pure” to describe it. Manufactured flavor represents a core product design decision on part of the big chocolate manufacturers. Joel Glenn Brenner in examining the history of Mars and Hershey’s writes that for Mars, “the process of manufacturing chocolate was gradually shifting form improvisation to exact science.” Later he writes, “Each [company’s] process produced its own unique chocolate flavor… (63).” He acknowledges that challenges exist in manufacturing chocolate taste since it is by nature a genetically complex plant. Brenner writes, “Chocolate is one of nature’s most complex flavors. So numerous are its properties that chemists have been unable to synthesize it despite decades of research (63-64).” When compared to apple flavor for example, he claims there are six times as many chemical components. This aspect of re-creating and synthesizing a taste is one woven into the very history of big chocolate manufacturers, such that created flavors become associated with brands. In addressing the flavor priority of big chocolate manufacturers, Kristy Leissle writes that these manufacturers were “more interested in selling flavor than lineage (22),” clearly the opposite of single-source producers’ priorities. Furthermore, Leissle writes how big chocolate marketing emphasized the site of manufacturing versus the site of where plant itself is grown. The plant enters into the process for big manufacturers just in the capacity of recreating several of its aspects, not in bringing out the true nature of the bean itself. Big chocolate manufacturers thus strive to develop a “perfect” homogenous flavor that they then market as “pure” versus bringing out the very heterogeneity and diversity of the beans themselves, an approach used by artisanal chocolate manufacturers.

The difference in heterogeneity and homogeneity of flavor represents one key way in which artisanal chocolate manufacturers seek to differentiate themselves to attract a segment of the chocolate-eating market that cares about the final product’s “authenticity.” The homogeneity-heterogeneity dichotomy however extends to the process and style of manufacturing as well. While big chocolate manufacturers emphasize standardization at every step of their process, artisanal chocolate manufacturers emphasize the diversity of production methods, as influenced by the source of the cocoa. For example, Taza Chocolate writes that its Mexicano Chocolate Disc is “stone ground chocolate inspired by Mexican chocolate making traditions, giving the chocolate a rustic, gritty texture.” The image below shows the back of a wrapper of a Taza disc product, with text highlighting the stone-ground methodology. Garibaldi Goods’ writes about its Palos Blanos, Bolivian Single Origin Chocolate Bar, “…the beans are then handsorted, roasted, crushed, sorted again, winnowed, conched and refined, aged, tempered, molded and hand-wrapped.” The methodology of manufacturing varies greatly for single-source chocolate manufacturers depending on the source of the chocolate bean and early traditions of chocolate creation in the areas. In this sense, even the chocolate manufacturing process exhibits elements of an “expanded terroir,” which would include the local styles of production.

Taza Chocolate Wrapper

Hershey’s and other big chocolate makers on the other hand rely on standardized, one-size-fits all processes that are designed to emphasize the sameness of each product created by factories versus heterogeneity in methodology as pursued by single-source manufacturers. Compared to the Taza wrapper seen above, the back of the Kit-Kat bar seen below, tells nothing of the production process of the chocolate bar. Michael D’Antonio writes that even in the early history of Mars and Hershey’s, standardization and mass production represented a priority. In the early years of these companies, the recipe of chocolate itself was altered based on its versatility in the production process. D’Antonio writes, “They would also discover that the method and recipe devised at the homestead could be adapted for mass production…Schmalbach’s mixture was easier to move through various processes—it could be pumped, channeled, and poured—and it required less time for smoothing and grinding. Hershey would be able to make milk chocolate faster, and therefore cheaper, than the Europeans (108).” In emphasizing the companies’ priority for mass production, D’Antonio further writes, “Instead of making hundreds of items at varying prices, Milton would produce huge quantities of a few varieties (121).” In this way, big chocolate manufacturers’ emphasis on mass production has led to more homogeneity in product lines and less tolerance for any type of variability in production, whether in speed of production, variety of distinct products generated or standardization of a given product itself. On the contrary, artisanal chocolate manufacturers today seek to emphasize heterogeneities in production process to provide consumers with a more “authentic” and genuine product. In expressing his desire to see more authenticity from production heterogeneity, Bill Nesto emphasizes the importance of the production process’ structure. He writes, “The more control man has over the entire chain of production from plant to product, the better man can preserve terroir (135).” In this way, he stresses the importance of genuine, uncorrupted bean-to-bar manufacturing processes in bringing out authenticity in the final product.

Kit-Kat Bar Wrapper

While product flavor and production process represent two ways in which homogeneity-heterogeneity dichotomies exist between large chocolate manufacturers and small single-source ones, the different approach the two segments have towards social impact is critical as well. Showing social cause can influence sales, Leissle writes, “West Africa bars can be successfully sold in the U.S.—provided the maker has already inspired trust with a clear statement of its social mission (29).” In examining the social missions of single-source chocolate manufacturers one sees great variability, influenced again by the environment where the cacao is grown. Single-origin chocolate producer Original Beans, which sources its beans from Eastern Congo directs part of its revenue towards preservation of habitats and projects its sourcing environment cares about. It writes, “Original beans have established nurseries, created training programmes and replanted forests in this war-torn area to help farmers rebuild their livelihoods. They are helping to protect Virunga National Park, Africa’s oldest nature and reserve and home of the last Mountain Gorillas on earth.” In this way Original Beans supports the local environment from where its chosen beans originate. Furthermore several single-source chocolate producers, such as Taza Chocolate and Mast Brothers Chocolate, have partnered with organizations, such as Maya Mountain Cacao Ltd, which teaches small farmers in Belize improved farming methods, provides them with microloans through Kiva to invest in their microbusinesses, and pays them higher rates for their products. Maya Mountain Cacao’s website states that it “connects smallholder farmers with the ultra-premium chocolate industry,” allowing buyers to connect with farmers growing the cacao. In this way, single-source chocolate manufacturers individually and collectively participate in a wide variety of diverse social impact pursuits, consequently offering heterogeneity in how chocolate revenues are utilized in protecting the local environments where farmers grow their cacao.

While single-source cacao takes this diverse approach to protecting local environments, big chocolate manufacturers invest in projects that help the farmers’ local communities but with the end-goal of maximizing their own profits and thus shareholder value. Hershey’s announced programs like CocoaLink, a mobile messaging service used to “deliver practical agricultural and social information to rural cocoa farmers in West Africa.” Though it may provide communication and information advantages to the farmers, it seems to serve Hershey’s interests to a greater extent, since Hershey’s would own a messaging platform connecting its cacao farmers and suppliers. Hershey’s does invest in projects such as the Mexico Cocoa Project designed to supply disease-tolerant cocoa trees to farms in Chiapas regions of Southern Mexico, but by nature of its business model, investments must be in the interest of providing returns to shareholders, who own the firm. In this way, the business model creates different incentives in social responsibility with big chocolate manufacturers utilizing projects towards the specific goal of helping societies benefit shareholders and with single-source manufacturers undertaking their various projects to provide social sustainability for all stakeholders’ benefit, including farmers and local wildlife. Crucially, while big chocolate manufacturers pool money from chocolate sales coming from all types of cocoa beans in the aggregate and then redistribute money to few large projects, single-source chocolate manufacturers individually invest in a large variety of small-scale, heterogeneous, social causes that are native to where each cacao bean and production process originates. They invest the sales from beans of a given location to the location itself. In this sense, single-source chocolate manufacturers social impact strategy offers more heterogeneity in social impact tied to the growing location whereas big chocolate manufacturer’s social investing strategy pools all in one fund then distributes to project with the homogenous goal of maximizing shareholder value.

The differences in homogeneity and heterogeneity between big chocolate manufacturers and single-source manufacturers across three areas of flavor, production technique, and social investing all necessarily lead to differences in prices consumer pay at the store. One can see this by examining pricing difference between a random sample of 30 chocolate bars that contain the worlds “single-origin” or “single-source” in their marketing and a random sample of 30 chocolate bars produced by the big chocolate companies and shelved at CVS as shown in the image below. The data I compiled on single-source bars, represented in the light-pink table below, shows a mean price of $10.87 and a median of $10.54 for single-source chocolate bars (normalized for 100g). The data I compiled on big chocolate mass-produced bars, represented by the light-purple table below, shows a mean of $2.75 and a median of $2.80 for mass-produced chocolate bars (normalized for 100g). The pricing differential is clearly visible with the mean price for single origin bars four times the mean price for big chocolate manufactured chocolate bars. Just as significant is the dispersion of pricing between the two samples. Single-source chocolate shows greater variability in pricing than mass-produced samples. Mass-produced samples are almost entirely concentrated between $2 and $4, or lower, whereas the single-source sample shows greater variability between $4 and $19, implying greater homogeneity in pricing for products created by big chocolate manufacturers and greater heterogeneity in pricing for products created by single-source chocolate producers.

Chocolate on Shelves at CVS

In assessing the difference in mean pricing between the two groups, the wedge represents the premium consumers pay for heterogeneity and “authenticity” over the homogeneity created by big chocolate producers. This wedge represents the three differences in flavor, production, and social impact methodologies, but also more, such as differences in labor practices and treatment of workers as indicated by Fair Trade and Direct Trade, a large topic, which due to special limitations here I have put aside. The pricing wedge is significant and very likely turns away those who have lower willingness to pay. However, if single-source chocolate manufacturers become successful in their marketing and awareness efforts, consumers may begin caring more about authenticity, such that they may pay more for it. In order to effectively transcend the current segmented market, momentum is needed on part of the single-source chocolate manufacturers to ensure that consumers’ appetite for their products grows, such that single-source producers can eventually reach a tipping point. Such momentum many even nudge big chocolate manufacturers to adopt similar practices. Reaching this point would challenge the existing big chocolate industry into becoming more “authentic,” emphasizing sustainable, heterogeneous differences in the product, its flavor, process, and its social impact versus emphasizing homogeneity in product creation.

Chocolate Pricing Density Chart

Single-Source Sample

Mass-Produced Chocolate Sample

Works Cited

Secondary Sources:

Brenner, Joel Glenn. (2000). The Emperors of Chocolate. New York, NY: Broadway Books.

D’Antonio, Michael. (2006). Hershey: Milton S. Hershey’s Extraordinary Life of Wealth, Empire, and Utopian Dreams. New York, NY: Simon & Schuster.

Leissle, Kristy. (2013). “Invisible West Africa: The Politics of Single Origin Chocolate” in Gastronomica: The Journal or Food and Culture. Vol. 13, No. 3. Berkeley, CA: University of California Press.

Nesto, Bill. (2010). “Discovering Terroir in the World of Chocolate” in Gastronomica: The Journal of Food and Culture. Vol. 10, No. 1. Berkeley, CA: University of California Press.

Primary Sources: 

Garibali Goods. (2015). Online Store: Palos Blancos, Bolivian Single Origin Chocolate Bar. Santa Monica, CA.

The Hershey Company. (2015). Hershey’s Milk Chocolate Bar. Hershey, PA.

< http://www.hersheys.com/pure-products/details.aspx?id=3480&gt;.

L.A. Burdick Chocolate. (2015). Single Source Dark Chocolate Bars. Walpole, NH. <http://www.burdickchocolate.com/BurdickBars/single-source-dark-chocolate-bars.aspx&gt;.

Maya Mountain Cacao, Ltd. (2015). Impact. Toledo District, Belize. <http://www.mayamountaincacao.com/index.php?page=impact&gt;.

Ocelot Chocolate. (2015). Online Store: Single Origin Peruvian 75% Bar. Edinburgh, UK. < http://www.ocelotchocolate.com/shop-online/single-origin-peruvian-75&gt;.

Original Beans. (2015). Original Beans: Conservation. Amsterdam, The Netherlands. <http://originalbeans.com/conservation/&gt;.

Taza Chocolate. (2015). Online Store: Cacao Puro Chocolate Mexicano. Sommerville, MA. < http://www.tazachocolate.com/store/Products/CacaoPuroDisc&gt;.

World Cocoa Foundation. (2015). CocoaLink – Connecting Cocoa Communities. Washington D.C., USA. <http://worldcocoafoundation.org/about-wcf/contact/&gt;.

Image and Data Credit: All images used and primary data collected are my own.

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