By Tim McCollum, co-Founder
and co-CEO of Madecasse
Seven years ago, few people were talking about making chocolate in Africa – much less actually doing it. A lot has changed in the chocolate industry over the past several years, but the actual making of chocolate in Africa is still an anomaly.
We started Madécasse (www.madecasse.com) seven years ago this June. Back then, as we were dreaming of ways to improve the way people live and work in Madagascar, we came across two statistics that propelled us on a mission from which we have yet to be deterred. The first statistic, from a study on the value chain of a chocolate bar, jumped off the page: a mere 5 percent of the cost to produce a chocolate bar occurs in Africa. That even holds true for Fair Trade chocolate. That percentage is lower still for a milk chocolate bar, and if it’s mass-produced confection fit for Halloween (as opposed to high-quality dark chocolate), the percentage goes down even more. Even if it’s Fair Trade certified. This was the first inkling we had that there had to be a better model for the chocolate industry.
The second statistic was that 70 percent of the world’s cocoa comes from Africa, but less than 1 percent of the world’s chocolate is actually made there. This is a mind-numbing, heart-breaking statistic. There is plenty of data on how much cocoa Africa produces, but scant information on how much chocolate it produces. This scarcity of data, combined with our own observations and experience, has led us to conclude that Africa produces, statistically speaking, more or less zero percent of the world’s chocolate. The dots started to connect for us.
The global cocoa industry is worth roughly $5 billion a year. The global chocolate industry is worth 21 times that: around $105 billion a year. We wondered: If Africa made more chocolate instead of simply exporting cocoa, how much of that $100 billion of economic activity could Africa capture? How different could Africa look if it had a greater share of this profitable value chain?
Our mission became proving that it’s possible to produce high-quality, fair trade, ethical chocolate in Africa, and that the impacts could be astonishingly positive. But at the outset, we didn’t know how to make chocolate, and we didn’t have any money. Which is good: even if we were flush with funds then, we wouldn’t have known what to do with it. We still had volumes to learn about manufacturing and distribution – we probably didn’t even know there was such a thing as a distributor back then – and we certainly hadn’t yet learned all the reasons why most companies don’t even think about making chocolate in Africa.
But we did know Madagascar. As former Peace Corps Volunteers on the island, we loved it. And we knew that if we could figure out how to make chocolate in Madagascar, our per-bar social impact would be far greater than that of the average fair trade bar.
Rather than change the entire chocolate industry at once, we started with a small corner of Madagascar. We scraped together the money we could – credit cards, business plan competition prizes, loans from friends and family – and scraped together what favors we could – graphic design, legal advice, industry advice. Then filled our backpacks with chocolate, threw them over our backs and walked the streets of Manhattan and Brooklyn, approaching retailer after retailer, in our new lives as door-to-door chocolate salesmen. Before long, we imported our first batch of chocolate to the U.S., a shipment containing 2,000 chocolate bars. It took us about five months to sell out. Years later we would laugh at the freight cost of importing 2,000 chocolate bars; at the time, we felt as if we’d summited the highest peak.
That was 2008. Today, our chocolate and vanilla products are sold in over 3,000 points of sale around the world. That includes national distribution through Whole Foods Market and Kroger in the U.S., and some of the most prestigious retailers in Europe. We’ve built a brand most chocolate consumers know – even if many can’t pronounce the name (We’re working on that.) And, importantly, we have extraordinary investors.
Back in Madagascar, where the dream began, we work with more than 200 cocoa farmers who earn 60 percent more income than other farmers on the island. We’ve trained a team of Malagasy chocolate makers. Every one of our wrappers is hand-made by a team of women. And we support hundreds more families through other value-added materials we source on the island – like vanilla, spices, salt, coffee and coconut.
Our most recent shipment of chocolate contained 130,000 chocolate bars. It should take about one month to sell through it.
It’s probably clear by now that this success did not come easily at first: we seldom got it “right” the first time, most every step of the way. But that’s changing. For one easy example: as we grow, we are able to hire people who are just as passionate as we are about our cause, while also bringing experience to the team – a luxury we didn’t have early on, when each person on our small team wore several hats and learned on the go.
But we’ve learned about building a successful business. It’s an iterative process rather than a linear one, one that requires rigidity in mission and motivation but flexibility in method. Different phases of the business, we learned, have required different areas of focus. At one point, we focused 99 percent of our time on sales and marketing: The more revenue we earned the more chocolate we could make in Madagascar, and the more chocolate we made the more social impact we could generate there.
But after we built our sales and marketing to a decent level, we shifted focus to our financial model: after all, one of the many things we’re trying to demonstrate with our business model is that brands don’t need to choose between high social impact and high financial return. And last year, we began to tackle our operations. Nothing, we thought, was more important than nailing the sustainability and efficiency of our supply chain in Madagascar.
The point is, we knew we had to address each of these aspects of our business to succeed in the long-term – including getting our investors right. Over the years, we’ve seen well-intentioned brands with great profit models take money from sources that are not aligned with the values and vision of the business. Of all of the hazards that can afflict a business, we knew the wrong investor could be a deathblow.
People tend to fear what they don’t know, and since Madagascar was the one thing we always knew, we never feared it. We saw potential where the average investor (or entrepreneur) saw peril. On the spectrum of risk and return, we know our business provides a healthy dose of both. The word “Africa” closes the door for many investors; Madagascar’s “country risk” and “political risk” add to the distaste. If an investor sticks around long enough to hear the words “recent political coup,” the conversation probably won’t last long beyond them.
We’ve never had a problem with ambition or vision, but we’ve intentionally taken it slow with investors and capital. And, so far, the strategy has paid off. In year five, we found an investor that “gets” our brand and what we’re doing in the world. The investor keeps us on our toes, but also understands that trailblazing takes time and is not for the faint of heart. In year six, we began working with RSF Social Finance: investors that operate on the same philosophy that we do, that real, lasting social impact and profitable returns can exist hand-in-hand. Their loan enabled us to increase our distribution by 30 percent in the span of three months. Now In year seven, we’re in the final phases of securing investment funds from the International Finance Corporation, the private sector arm of the World Bank Group. In each instance we’ve found investors that understand that if you’re not in a hurry, and have a long-term view of ethical, equitable value creation, then anything is possible.
Over the long-term, we’re certain that returns will stand toe-to-toe with comparable returns in the traditional chocolate industry. It started with a small corner of Madagascar.
Article by Tim McCollum, co-Founder & co-CEO of Madécasse.
Tim was a Peace Corps Volunteer in Madagascar. It was the first time he was exposed to extreme poverty and the experience motivated him to do more. In 2008 he co-Founded Madécasse Chocolate, with the aim of introducing Americans to great chocolate and changing a small corner of Madagascar in the process.
Madécasse is made with one of the world’s original strains of cocoa, and it’s made from scratch, start-to-finish in Madagascar. It’s one of the only chocolate bars in the world made entirely in Africa, despite the fact that 70% of the world’s cocoa comes from Africa.
Madécasse has been critically acclaimed for the quality of its chocolate and its social impact model by The New York Times, Wall Street Journal, Food & Wine Magazine and other leading media outlets. In 2012, Madécasse was named one of the World’s 50 Most Innovative Companies by Fast Company Magazine.
