Betting on premium chocolate lovers

Marketplace Staff Sep 5, 2008

Betting on premium chocolate lovers

Marketplace Staff Sep 5, 2008


KAI RYSSDAL: So, to sum up. We learned this morning the job market continues to be lousy. Consumer confidence is at historic lows. Food and gas are taking a bigger bite of household budgets. But one small business owner is betting that even in the face of adversity consumers won’t lose their love of chocolate. From the Marketplace’s Entrepreneurship Desk…Minnesota Public Radio’s Annie Baxter has a closer look.

ANNIE BAXTER: Colin Gasko has waited months for this delivery . . .

COLIN GASKO: Right outside would be great.

He tears open two bulky cardboard boxes, with the enthusiasm of a kid in a candy store — or in a chocolate factory, to be more precise.

At 23, Gasko owns this chocolate factory, Rogue Chocolatier. He launched it here in Minneapolis last fall. Today’s delivery: two big boxes of cocoa beans.

GASKO: These are from Madagascar.

Most chocolate companies use already processed chocolate to craft their sweets. But Gasko buys raw beans, and roasts and grinds them himself until they’re in a liquid state. Then he runs the chocolate through a big squat machine with rollers, which he jerry-rigged for his purposes.

GASKO: Most of the refining is done in here. It’s passed through here several times, until it reaches the proper consistency.

The result: specialty chocolate bars with a high cocoa content, which have been drawing a lot of attention in gourmet circles lately. They’re about the size of a Hershey bar. But where Hershey bars cost you about $1 a pop, you pay a premium for Rogue Chocolatier.

Like at this Minneapolis store…

CASHIER: $7.48 is your total.

If that gives you sticker shock, think how Gasko feels. The price of cocoa beans has shot up 44 percent in the last nine months. Gasko anticipated some of those increases when he started production last fall. But he’s still a little stunned by the price of cocoa beans today.

GASKO: I’m looking at where the prices are going. And it looks like I might have to do some price increases because of the way the market is overall going.

Charging more for his chocolate would be a gamble, says Dileep Rao, an entrepreneurship specialist at the University of Minnesota’s Carlson School of Management.

Dileep Rao: I would be very cautious if I were an entrepreneur at this time. It’s tough trying to figure out what it takes to survive. My analysis on this is it’s tough to forecast what consumers will do.

Rao says every sector of American business is coping with the rising price of raw materials. Small businesses in particular are under pressure to pass along those costs, he says.

Rogue Chocolatier bars are aimed at wealthier consumers, who might shrug off a small price hike or two. But, Rao says, in this faltering economy Gasko risks alienating them.

RAO: There is always the possibility that customers change. And once they start to change habits, it becomes tough to bring them back.

But data from the National Confectioners Association indicates the fundamentals for Gasko’s chocolate business are good. Premium chocolate sales increased about 30 percent between 2006 and 2007. Retail confectionery, on the other hand, increased less than 4 percent over the same period.

And if Gasko hits bumps in his business, he’s got a secret weapon: his dad Bill.

Colin Gasko: My mother would kill him if I let him brag about himself, but he used to be a professor of entrepreneurship. So I do have a good resource.

BILL GASKO: He may not want to admit it, but maybe he does take after his father a little bit.

BAXTER: I’m trying to read the look on your face.

Colin GASKO: I think that’s a No comment.

Bill’s not just an expert in entrepreneurship. He’s also got a PhD in theoretical physics, which will come in handy.

Gasko’s planning to increase Rogue Chocolatier’s production capacity tenfold in the next year. And father and son will work together on building the machinery.

In Minneapolis, I’m Annie Baxter for Marketplace.

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