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A Crafty Future

There is a revolution going on in America.  It exists as almost a counter to the industrial revolution that drove this country forward a hundred years before it.  Craft artisans are taking over in the wake of a society that has been built by mass production.  As this revolution moves across foodstuffs, it is of no surprise that craft chocolate is currently on the rise.  However, it is important to understand why this revolution is taking place now, and some of the hurdles it must overcome to continue its success.

The Lay of the Land

Currently two chocolate companies, Hershey’s and Mars, account for over 50% of chocolate sales in the U.S. (Euromonitor, 2017). It should be of no surprise that these two particular companies own so much of the market share. They were both founded on the idea of bringing chocolate, which was previously a luxury treat, to the masses.  Milton Hershey was a pioneer in mass production, revolutionizing and streamlining much of the industrial process.  Hershey’s team discovered that by using condensed sweetened skim milk they could create a product with longer shelf life and that blended easily with cocoa powder.  This meant that not only could he ship his chocolate bars further, but lasting longer on the shelf meant less profit losses due to spoilage.  Hershey also looked at supply chain optimizations, investing in his own dairy farms and even building a sugar mill operation in Cuba, complete with its own railroad.  This allowed Hershey to control both the costs of commodities for his chocolate bar and the quality.  Mars, on the other hand, was more successful due to marketing than anything else.  His Milky Way bar (which originally sourced chocolate from Hershey) was more nougat than chocolate, making it larger on shelf and seem a comparatively good value to the Hershey bar. That said, both had the same result, taking an indulgence that was once almost exclusive to the wealthy and middle classes and democratizing it for every day enjoyment.

chocolate sizingMass production allowed for chocolate to be produced cheaper, allowing those savings to be passed on to the consumer – or more importantly, from a marketing sense, for them to outprice their competitors.  But while price is important, so are the products themselves.  While it may have taken a while for consumers to acclimate to the flavor of Hershey’s and Mars bars when they first came on the market, the particular blend of milk, sugar and other ingredients insured that they were universally palatable and they now exist as the template for what we expect chocolate to taste like.  Similarly, both companies have hero products that are specifically designed for easy consumption.  Both Hershey’s Kisses and M&Ms were made for portability (individually wrapped/ melts in your mouth, not in your hand) and their small, poppable size makes it easy for consumers to lose track of mindfulness and eat large quantities in one sitting. These products have other advantages, as they are easily adaptable to innovation.  As consumers are desiring more variety and novelty across the board, these products have proven to be the most flexible in introducing new flavors – and easily acceptable to consumers who are familiar with their form and have built brand trust.  These companies have leveraged seasonality, larger cultural trends, and limited time offers to drive new product news and sales.

pumpkin(wait.  Is she wearing an infinity scarf and hipster glasses?)

So, if big chocolate is designed for palatability and companies are responding to consumers desires for more interesting, topical flavors, why are we seeing a proliferation of craft chocolate providers? When we look at the numbers, the story becomes more telling.   When looking at sales growth, mass chocolate has remained flat year over year (CSP daily news, 2016).  This despite their innovation and the fact that chocolate consumption overall is growing.  Instead, the growth seems to be predominantly driven by premium and craft chocolates, suggesting not just changing tastes, but a changing attitude about where our food is actually coming from.

Big Food Backlash

There is growing negativity towards giant corporations and conglomerates, particularly when it comes to food. From an economic standpoint, consumers have watched as these corporations get massive tax breaks which have translated into bonuses for the executive suite, while the working class continues to struggle.  While this issue impacts most major corporations, it is of particular concern when it comes to the chocolate industry and growing awareness around fair labor practices, forced labor, child labor and the ethical price people pay for their chocolate.  There is a lot of skepticism that these companies will make ethical choices when given the opportunity, particularly when people see so many examples in the news of them pursuing profits over people, such as Nestle bottling drinkable water in the middle of the Flint, Michigan water crisis (the guardian, 2017).  More and more often, buying in to big brands feels like an investment against your own interests.

The Big Middle creates more space for differentiation

The sheer nature of big brands as they fold in to one another may be working against them. “When you have increasing concentration of producers in the center, you leave room on the periphery for specialization,” says Elizabeth G. Pontikes, associate professor at the University of Chicago’s Booth School of Business. (Shanker, 2017) In other words, these multinational conglomerates are creating their own sea of sameness.  In a society that is increasingly valuing individuality, particularly when it comes to the millennial and younger generations, brands and products that lack differentiation also lack appeal.  We can see this even in the most famous of branding cases, Coke vs. Pepsi with beverage drinkers now migrating to new choices like LaCroix and energy drinks.

The obvious choice might be for these mass chocolate brands to create verticals that touch these periphery spaces, but they have struggled breaking in.  Hershey’s introduced their Cacao Reserve premium line in 2006.  The brand lasted three years, suffered several price drops and the need for mass market advertising support, before they dropped it from store shelves. (Thompson, 2007) Their next move was to build their premium line using borrowed equity.  At the same time they launched Cacao Reserve, they purchased Scharfeen Berger, a premium line of chocolates out of California. As they pushed to mass market the brand, they switched suppliers, using cheaper beans from West Africa.  The result was severed relationships with brands like Whole Foods, who were concerned that Hershey’s could not guarantee that the beans weren’t sourced through child labor (Bloomberg, 2017).  The brand has somewhat rebounded, but the initial loss is still being recovered, and leaves the question as to whether or not big brands can ever play credibly in the premium/ craft space.

A wake up call for food

The obesity crisis in America was a wake up call about the food we consume and how it is being produced.  A series of films, articles and exposes, while at times misleading and ignores the true labor of food, caused people to rethink what they are getting out of processed food.  The consumer take-away was that mass produced food lacks quality and nutritional value, is predominantly artificial fillers, and is potentially detrimental to your overall health. Quality, whole ingredients, and care has become increasingly synonymous with healthfulness, regardless of traditional markers like fat and calories.

While all of these things make craft chocolate more appealing, it still has hurdles to overcome to convince people to pay the enormous price tag that comes along with it.

As noted, industrial chocolate is the baseline for people’s orientation to what chocolate should look and taste like, as well as what it should cost.  For Craft chocolate to succeed, they don’t just need to overcome the shift to premium pricing, they need to overcome expectations set by mass market chocolate.  There is a need to educate people on to the true value of the chocolate they are consuming and the difference that craft chocolate provides. There are four key ways in which craft offers a point of difference that both provides a difference that supports craft’s value proposition and requires consumer education: process, taste, ingredients and sourcing and ethics.

Understanding the process

Over time, manufactures have swapped out real ingredients for cheaper artificial substitutes such as vanillin instead of vanilla.  (Martin-Sampeck, 2016). This has impact on the flavor, consistency and mouthfeel of the chocolate itself. Craft chocolate’s smaller production model in of itself creates a different end product, but some companies have gone further, focusing on minimizing the process.

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Taza chocolate, a bean to bar company located in Somerville, MA, takes great pains to educate consumers as to their process.  They describe their bars as “chocolate with true grit.” Their mission is to return chocolate to its pre-industrial roots.  They believe that less processing allows for more complexity in flavors. Their chocolate is stone ground on hand carved molinos (mill stones) with little refinement between that and the end product.  The result is, to their description, a chocolate bar that lacks the smoothness that consumers have come to expect, but with a stronger chocolate flavor and more complexity in experience overall.

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Expanding your palate

“When most people eat a piece of chocolate we want that pleasure immediately: boom!  That’s the music of mass-market chocolate.” (Williams, 2012)

Historians have theorized (incorrectly) that when chocolate came to the old world, that it was appropriated to suit Europeans’ tastes (Norton, 2016).  In fact, chocolate’s evolution from its new world form to the substance we know today was a process that took over a century of innovation.  The chocolate that Europeans first enjoyed was a fairly close recreation of how it was consumed in Mesoamerica.  The Europeans had just acquired a taste for it.  That said, they had a lot of motivation to do so – chocolate was seen as exotic, a luxury (due to both its scarcity and use as currency), and had potential new health benefits.  Additionally, unlike today, there was no basis for comparison.  For today’s consumers, their palates have been educated in the world of mass produced chocolate – and what they have come to expect is a very sweet, creamy, almost single note experience.  Craft chocolate, on the other hand, leans in to chocolate’s bitter notes, and offers way more complexity.  Not only do consumers need to adjust to the new flavor profile, but they need help recognizing the flavor notes to truly appreciate the difference they are getting from craft.

Dick Taylor chocolates started in a small factory in Eureka, California by Adam Dick and Dustin Taylor.  They started their factory out of a love of craftsmanship and making things with their hands (both worked in woodworking and boat building).  In addition to educating consumers on the sourcing of their beans, they seek to educate consumers on how craft processing changes the flavor and experience of their chocolate.  From their website “by not cutting corners or taking shortcuts in our process we are able to leave out vanilla, additional cocoa butter or other emulsifiers, in hopes of capturing and highlighting the subtle flavor nuances in the cacao we source from around the world.”

In this they set expectations that their chocolate will be less sweet and have more complexity of flavors.  To further support that, their packaging calls out the specific flavor notes that the chocolate bar offers, much in the way that wine and craft beers call out tasting notes.

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XOCOLATL, a “micro-factory” chocolatier out of Atlanta similarly looks to highlight chocolate’s natural flavors.  Their bars are blended with spices and other elements that call out chocolate’s flavor components.  For example, their Americana bar contains no apples, but uses familiar pie spices to highlight that quality within the chocolate.

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Origin/ localization

While mass chocolate uses the blending of not only several different types of beans, but beans from multiple locations, there is a rising trend in single origin chocolate.  This has arisen both out of an increased interest in food provenance and small chocolate purveyors interest in highlighting the different unique flavor profiles of the beans.  (Norton, 2013) By doing so, they are able to not only show off the different flavor varietals, but capitalize on the exotic locales to add a sense of rarity and uniqueness to their product lines.

Amedei Chocolates, a craft company out of Tuscany, Italy, builds their sourcing education in to their product offerings.  Each of their bar product lines serves as an exploration in the difference that cacao content, origin and the beans themselves can make.  Their Toscano Black line offers three different (though relatively close) percentages of dark chocolate – 63%, 66%, and 70%.  Their cru product line is all single origin dark chocolate – allowing consumers to taste the subtle differences between each region.  But where they go one step further than many bars is to focus and educate consumers on the strains of cacao available.  They offer both a Blanco de Criollo and a Porcelana bar.  The external packaging on each features a botanical drawing of the bean.  The inside explains the history, origin and flavor notes.  For the Porcelana bar, it notes the Venuzuela plantation, it’s small production of only 3,000 kilos of beans, and the rarity of this particular strain. Tasting notes are described as “toasted almonds that alternates with pressed olives.” This reinforces the specialness of the bar and the unique experience that it offers, while simultaneously pushing the consumer’s palate to recognize more subtleties in flavor.

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Ethical Sourcing

One of the major challenges in the chocolate industry overall is the issue of labor practices and sourcing.  Even setting aside the more dire problems of forced and child labor, very little of the profits made from chocolate sales actually makes its way back to the farmers that grow it.  While there are a variety of certification schemes (i.e. Fair Trade, UTZ Certified, IMO Fair for Life), the cost of participating is high, and consumer demand has yet to drive a higher price in goods that can be translated back to the farmer. (Martin-Sampeck, 2016)  Additionally, there are those who don’t think that programs like Fair Trade go far enough, and result in a minimal profit increase for the farmer.

Companies like Taza and Askinosie chocolates instead have focused on direct trade, which cuts out middlemen and insures that more profits go back to the hands of the farmers.  Askinosie notes on their website “we hold the craft and quality of our chocolate in almost equal balance with doing as much good as we can in the world.”  As part of educating consumers at to the importance of direct trade, their bars feature the actual farmers that they work with on the front.  The back label tells that person’s story, how they became acquainted with Askinosie chocolate, and how their contribution insured the quality of the product you are holding.  It also features the following guarantee:  A stake in the Outcome. We guarantee to our farmers more than fair prices, open books and a share in our success.   In the way that they tell the story of their trade relationships, Askinosie doesn’t just insure the consumer of the ethics of their bar, they humanize it and translate that in to a real value to the consumer in the quality and craft of the final product itself.

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The future of craft

Craft still has some educational and orientation challenges to overcome, but as more and more people migrate away from big food and big chocolate, the opportunity to create a wider variety of chocolates leveraging ethical sourcing and quality ingredients remains as promising and sweet as the product itself.

Sources used:

Brenner, Joel. 2000. The Emperors of Chocolate: Inside the Secret World of Hershey and Mars.

Coe, Sophie D., and Michael D. Coe. 2007 (1996) The True History of Chocolate.

CPS News (September 15, 2016) Premium Chocolate Driving US Sales Growth.  CPS Daily News. Retrieved from:http://www.cspdailynews.com/category-news/snacks-candy/articles/premium-chocolate-driving-us-sales-growth

D’Antonio, Michael D. 2006. Milton S. Hershey’s Extraordinary Life of Wealth, Empire, and Utopian Dreams.

Glenza, Jessica. (September 29, 2017) Nestle Pays $200 a Year to Bottle Water Near Flint Michigan.  The Guardian. Retrieved from https://www.theguardian.com/us-news/2017/sep/29/nestle-pays-200-a-year-to-bottle-water-near-flint-where-water-is-undrinkable

Laudan, Rachel (May 5, 2015) A Plea for Culinary Modernism. Jacobin Magazine Retrieved from https://www.jacobinmag.com/2015/05/slow-food-artisanal-natural-preservatives/

Leissle, Kristy. (2013) Invisible West Africa: the Politics of Single Origin Chocolate. Gastronmics: The Journal of Food and Culture, Vol. 13. No. 3 (Fall 2013)pp.22-31

Martin, Carla and Sampeck, Kathryn. 2016. “The Bitter and Sweet of Chocolate in Europe.” pp. 37-60.

Norton, Marcy. 2006. “Tasting Empire: Chocolate and the European Internalization of Mesoamerican Aesthetics.”The American Historical Review 111 (3): 660-691

Shanker, Deena (February 7, 2017) The Rise of Craft Chocolate. Bloomberg News. Retrieved from https://www.bloomberg.com/news/features/2017-02-07/the-rise-of-craft-chocolate

Terrio, Susan J. 2000. Crafting the Culture and History of French Chocolate. pp. 1-65

Thompson, Stephanie. (March 6, 2007) Reservations about Reserve Haunt Hershey. Adage Magazine. Retrieved from: http://adage.com/article/news/reservations-reserve-haunt-hershey/115326/

Trout, Jack. Differientate or Die: Survival in our Era of Killer Competition. New York. Wiley, Second Edition 2008

Williams, Pam and Jim Beer. 2012. Raising the Bar: The Future of Fine Chocolate. pp.141-209

Yu, Douglas. (March 29, 2018) Lindt Will Most Certainly Come Back to Growth in US. Confectionary News. Retrieved from https://www.confectionerynews.com/Article/2018/03/29/Lindt-will-most-certainly-come-back-to-growth-in-US-says-Vontobel