The chocolate space across the U.S. is increasingly competitive with scores of different brands jockeying for position on retail shelves.
One of the recent standouts is Divine Chocolate. The company, which is 44% owned by the 85,000 Ghanaian farmers who supply its cocoa, was started in 1998 as the first fair trade chocolate bar aimed at the mass market, focusing its attention on the U.K. first before coming to the U.S. in 2007. Today, the premium candy maker — whose products include milk chocolate with toffee and sea salt and 70% dark chocolate with mint — is currently growing its sales in the U.S. by 20% annually.
Sales in 2016 rose to $10 million, more than double the number from just five years ago. Its products are now available at Whole Foods, Walgreens, Safeway, some Publix stores and dozens of other retailers. Sophi Tranchell, Divine Chocolate's CEO, and Troy Pearley, the company's director of sales, spoke with Food Dive about the challenges the company overcame to grab market share in the U.S. and how being a premium chocolate maker owned by farmers helped it grow.
Food Dive: People were skeptical that a business like this could succeed in the U.S. Why?
Sophi: People thought that the idea of a company that was significantly owned by cocoa farmers was a lovely idea, but that you would never make it work. In an American context, I think that they particularly said that it would be very difficult, if not impossible, to make something get to a break-even position while you maintained your independence, so that in order to get the scale that you needed, you wouldn't be able to do that while remaining independent.
"[People paying more to shop at Whole Foods] demonstrates that people are prepared to pay more for something that they think is better for them and better for the planet."
CEO, Divine Chocolate
The special thing about the company is that it's 44% owned by a cooperative of cocoa farmers in Ghana. There has been a real appetite for doing business differently. There's been a real appetite to support people in developing countries by helping them do business. I think that really has a resonance in an American context where this isn't aid — this is actually if you can give people channels to market and you can pay them properly, then they can sort themselves out. That I do think is fundamental to the American dream, isn't it really? You've got a significant amount of people who are going out of their way to buy products from Whole Foods. [This] demonstrates that people are prepared to pay more for something that they think is better for them and better for the planet.
Food Dive: Were you surprised by the acceptance you've had in the U.S., and the fact that it's happened relatively quickly?
Troy: Here at Divine, we were able to jump on the wave of the growth in premium chocolate. So while it's great with our business model, we really have great taste in chocolate, and that's propelled our success. We are able to get on the shelf and compete against the more mainstream brands along with the brands within our space.
Sophi: We've always had great products. We started in the U.K. with a milk chocolate bar, but we quite quickly realized that we needed a whole range of products and we developed a very good dark chocolate bar that very quickly became our best-selling product and still is to this day. Then we've put flavors through that not everybody has put through, but we've put it through a 40% or 70% dark chocolate bar, which people have responded very well to. They're becoming more interested in products from different countries. They're becoming more interested in premium products, but they're also interested in things which have less sugar, which obviously if you've got higher cocoa, you have less sugar and so the product is less sweet. And so it's better for you.
Food Dive: What are some of the biggest obstacles you have faced entering the U.S. market?
Sophi: I think the biggest challenge was, how would you break into the retail market? And so I think that one of the things we did very wisely was to recruit some sales people who were commercial.
"[O]ne of the biggest challenges for a British company coming into America is your route to market is so much more complicated."
CEO, Divine Chocolate
The fact that Troy had 15 years in premium chocolate has undoubtedly been an asset to us, because the sort of way of not learning from scratch — how does this sector work? — and having to get to know every buyer and who knows who, and what's the route to market. Because one of the biggest challenges for a British company coming into America is your route to market is so much more complicated.
Food Dive: How do you go about making consumers more familiar with your product in a crowded space?
Troy: We're a small, nimble group, and we're working closely with the global marketing team to build brand awareness. We're going to launch a new package ... that we think will be more appealing to the consumer's eye at the shelf level, but there's a lot of white space. You've got to realize chocolate is a highly impulsive category, so it can be sold in many very different places, so there's always room for growth. Then there's some national customers that we don't have every day distribution with that we'd like to be doing business with.
Food Dive: Do you foresee your current growth rate continuing? You've doubled sales from about $5 million five years ago to $10 million now.
Troy: Well, the premium chocolate category is still experiencing double-digit growth, so if we stay on pace with the category or exceed the category, we're still gonna experience double-digit growth. Ideally, you'd always like to double every five years. That'd be great, but we just want to continue to maintain our base business and our current business with more focus on meeting the requirements of our current customers and fully developing them in various categories, whether it's seasonal and every day, and in different categories. So, our focus — yes, we foresee significant growth in upcoming years, but we're more concerned with developing our current customers and maximizing our opportunities with them.
Food Dive: Do you attribute your success to the fact that you're a maker of premium chocolates or is it more tied to the fact that your cocoa farmers own nearly half of the company?
Sophi: I don't think you can take the two things apart. We clearly wouldn't be a success if we didn't have really good chocolate, because nobody will buy it again if it's no good. So, clearly, making really good chocolate is absolutely essential. But in a very crowded marketplace, and if you take chocolate generally, rather than just premium chocolate, with people with very deep pockets to spend money, then the farmers owning us makes us quite distinct. ...
"We clearly wouldn't be a success if we didn't have really good chocolate, because nobody will buy it again if it's no good."
CEO, Divine Chocolate
We did a big event at Whole Foods headquarters down in Austin, Texas, which was videoed for the whole organization so that they could all see it. But we also did events with policy offices here [in Washington, D.C.], with the Department of Labor, and with other NGOs. If we were just a normal chocolate company that wasn't owned by cocoa farmers, how would we have had any of that access? It would have been less likely, wouldn't it really?
Food Dive: So, you've benefited from being partially owned by farmers and the fact that you produce a premium chocolate?
Sophi: Yes, and I think that when you are setting up a business, your ability to recruit and retain staff is interesting, 'cause they're having to take a gamble, too, because they could go and join a big corporation where they had a secure job. Or they could join something that was going to be like this, and the fact that you can really see the benefit because you get to meet the farmers, so all the people here had to take this farmer around, they really have a sense of who she was and that she's really having a different experience from the average cocoa farmer because she is part of a cooperative that owns Divine. That's actually a motivation to join the company and to work hard and ... to go the extra mile.
Troy: Yeah, the farmers are definitely a true asset, but our product attributes really gives us the ability to be in different places. Being an all-natural brand gives me the ability to speak to global buyers at Whole Foods. Being an all-natural premium brand gives me the ability to speak to the Target buyer. So the product attributes definitely helps us, it gives us wings, so to speak, where that we're not just pigeonholed in one particular category. Yeah, so offline, Sophi and I joke, we say, "Different horses for different courses."
So the dialogue that I'm holding with Whole Foods may be primarily based on farmer ownership, and the co-op, and literacy programs, and some of the things that we're doing in West Africa. The dialogue that I might be holding with the Harris Teeter buyers is about how many times per week average we go through the shelf on this SKU versus this SKU, and how our growth has been consistent. And our growth is not just all new business, it's a lot of repeat business. So it's depending on the audience that I have the opportunity to speak to that dictates the conversation.
Food Dive: Have you been approached by a bigger chocolate company interested in buying you?
Sophi: We haven't really, actually, no. I think they've approached us to talk about how we have managed things in our supply chain, so they've been interested in the fact that we work with a co-op and whether that's part of the solution to making sure there is cocoa, enough cocoa for every, for the potential market opportunity. But they haven't approached us with a view to purchase us.
Food Dive: Does that surprise you?
Sophi: Not really. I mean, it wasn't what we set out to do. But I'm thinking it's interesting, 'cause my observation of startups, not particularly in chocolate, but in food generally, is that they are looking to sell. And the cycle's getting shorter and shorter.
"We deliver four income streams for cocoa farmers, which hopefully will deliver long-term improvements in their communities. Selling to a big corporation ... isn't necessarily the way to secure that future."
CEO, Divine Chocolate
That is not the model we've put together, because you said, "Who are the owners?" Well, they're institutions. They wanted to deliver something for the long run. We deliver four income streams for cocoa farmers, which hopefully will deliver long-term improvements in their communities. Selling to a big corporation ... isn't necessarily the way to secure that future.
Food Dive: Describe the chocolate industry in the U.S. Are we progressing toward more premium chocolates, or are people shopping more based on price?
Troy: I mean, premium chocolate is definitely ... on a positive slope and has shown growth over the past five to seven years, so I foresee it continuing to grow because it's an affordable pleasure. You've got to also realize, we're talking about an impulse category — we're not talking about a category where someone has to go sit down with a banker and take out a loan to purchase a house or a car, something of that nature. We're talking about an impulse category.
"We're not talking about a category where someone has to go sit down with a banker and take out a loan to purchase a house or a car, something of that nature. We're talking about an impulse category."
Director of sales, Divine Chocolate
So if we position properly on the shelf, we'll get an opportunity to continue to sell our product. To your point, is it price sensitive? To a degree, absolutely, but everything's price sensitive. That's just the lay of the land across the various categories. ... And when you come full circle back to your initial question, in terms of dialogue of how we speak to the buyers, with consumers becoming more conscious of what they're putting into their bodies, our product attributes will just speak to the things that they're looking for. You know, no artificial ingredients, all natural, none GMO, fairly traded product — you know all these things are very important. The socially conscious people and the environment we are now in the U.S., with just people wanting to have a voice and being more conscious of the things around them and the things that they participate in buy and sell, so to speak — I think that's just an added benefit of who we are. And I think that will have a halo effect on success with us ... down the road.