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High-Tech Batches Bring Sweet Success

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By STEVENSON JACOBS

The Associated Press

Published: September 2, 2008

NEW YORK - As a software developer who worked with NASA, Timothy Childs built vision-tracking systems for the space shuttle. Now he has a new venture that he says is out of this world: chocolate.

As demand for premium chocolate soars, a crop of confectioners are changing the industry with Silicon Valley-style innovation, antique German equipment and an obsession with the cocoa bean.

"The bean totally seduced me," said Childs, co-founder and "chief chocolate officer" of TCHO, a San Francisco-based start-up seeking to improve the quality of chocolate through scientific experimentation with flavors.

TCHO, pronounced "choh," isn't your ordinary chocolate factory. Based on San Francisco's waterfront, the company sells its chocolate online in brown packets labeled "beta," solicits feedback and reaches out to customers through social media outlets such as YouTube. It plans to sell its chocolate to food companies and through high-end retail outlets.

TCHO shuns the usual practice of classifying bars by cacao content or origin, relying instead on a "flavor wheel" that emphasizes taste above all: chocolatey, fruity and nutty are out now, with earthy, floral and citrus on the way.

"Saying a bar is '70 percent cacao' doesn't equate," said Childs, referring to the standard for premium chocolate. "People should pick chocolate the same way they buy wine and food - by flavor."

A similar philosophy drives Amano Chocolate, a company in Utah's Wasatch Mountain range whose goal is to offer in the United States the premium, artisan chocolate once found mainly in Europe.

Founder Art Pollard, another software developer who studied physics, fell in love with chocolate-making during a honeymoon trip to Hawaii and whipped up his first batch using science lab equipment intended to grind chemicals.

"Eventually, I started fashioning my own equipment and began churning out some fine-quality chocolate," said Pollard, who studied confectionary in Europe and buys his beans in far-flung villages in Venezuela and Ecuador.

Neither TCHO nor Amano would provide sales figures, but both say they have aggressive growth plans in the future.

U.S. sales of dark chocolate keep booming, lifted higher by studies touting the confection's purported health benefits and growing consumer interest in organic and fair-trade products.

Total U.S. chocolate sales are expected to soar to $18 billion annually by 2011, up from $16 billion in 2006, with organic and dark chocolate representing the fastest-growing segment.

"Chocolate is an affordable indulgence. No matter how difficult economic times get, we'll always want to treat ourselves," said Joan Steuer, president of Chocolate Marketing, which studies trends and new products in the industry.

Although sales are growing, so is the competition, crowding shelves of grocery stores with brands such as Ghirardelli, Godiva, Dagoba and Scharffen Berger.

Although there's only around a dozen U.S. "bean-to-bar" manufacturers that make their chocolate from scratch, smaller players who buy their chocolate wholesale and melt it into bars are entering the market at a rate of about one a month, Steuer said.

Bulging input costs and thin profit margins have squeezed traditional chocolate manufacturers and make it extremely difficult for new players to break in.

A commodities boom has pushed the price of cocoa, the chief ingredient in chocolate, above $3,000 per metric ton - the highest in 22 years and double the price from a year ago.

Still, most new chocolatiers say passion - not profits - is what motivates them.

Many have learned the craft on the Internet, launched one-person chocolate factories from their kitchens and put up Web sites to sell their products.

Some niche chocolate makers have dreams of being bought out by a major candy manufacturer for a sweet payday. That's what happened to Dagoba, an organic chocolate maker acquired by Hershey's two years ago for an undisclosed sum believed to be $10 million to $15 million.

But Childs, co-founder of TCHO, said his priority is building up the company - not cashing out. The company shuns venture capital and raised all its start-up funds through family and friends, who received equity in the company.

"For right now, I'm very happy just making chocolate that fills my factory," he said.

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