Laser-Focused on Profitability

Brian: [00:01:53] Hello and welcome to Future Commerce, the podcast about next generation commerce. I'm Brian.

Phillip: [00:01:58] I'm Phillip. And today, it only took us three and a half months to actually make this podcast happen, so no pressure or expectation whatsoever. We have the Co-Founder of online retailer Bar & Cocoa with us today. Welcome to the show Pashmina Lalchandani.

Pashmina: [00:02:15] Thank you.

Phillip: [00:02:16] Wow. No pressure or expectation, but we connected with you some many months ago around... And this is the kind of connection I love is to have such incredible expertise as someone who knows a particular industry so very well. You had connected with us because we had another chocolate founder. We had a chocolate manufacturer founder that was on the show. And you had some opinions about chocolate. And I said, oh, my gosh, how often do we get this kind of expertise on the show? And the more that we connected, the more I felt like our listeners and our audience really need to learn from you, but...

Brian: [00:03:00] Also chocolate.

Phillip: [00:03:02] Yeah. For real. Tell us a little bit about yourself and Bar & Cocoa.

Pashmina: [00:03:06] Sure. So I started Bar & Cocoa with another Co-Founder five years ago, almost six now, and we kind of just threw spaghetti on the wall just to see if it would stick. Like subscriptions were really kind of growing as a concept. And I got really into chocolate. So I had never really made a connection to chocolate in the way that I made a connection to other types of food. And you go to the grocery store and you're like, oh, this olive oil is so amazing. And yes, I'm going to, I'm willing to spend three times the average cost of this other bottle because it's just so good. And this pasta, or this sauce, or whatever the ingredients are like, you know, I was starting to buy nicer, finer ingredients with, you know, that were more sustainable and tastier. I mean, it's just like a whole host of benefits that come out of buying craft ingredients. And it just never made that connection with chocolate. I'm like, why is this bar eight dollars or nine dollars? And, you know, I would gloss by it in the aisles and never pick it up. And then one fine day I finally did and I ate it. And it was actually a bar made by Ritual Chocolate that's now based out of Utah. And it was 85 percent dark with beans from Ecuador. And I was stunned. I was like, what is this and how is this so good? Like what is he doing that's different? And I could have sworn that he had added some ingredients or something to the chocolate and I turned it around. It was like cacao, sugar, and that was it. And I was like, this is amazing. And I started to dig into it a little bit and I learned all this stuff about chocolate that it has, you know, all these different flavonoids. And it's kind of like wine or coffee in that way that the beans and the harvests and the terroir can really affect the flavor of the chocolate. And it gets even more complicated and more complex because the chocolate... Chocolate is a fermented product. So the beans come from places like Ecuador. The makers then have to winnow it, roast it, conch it, temper it to make a bar of chocolate. And depending on what you do with the beans and how you roast it, it can really bring out different flavor profiles in that same source of beans. And the other half of it is that I learned about the ethics of chocolate, and I learned that most of the chocolate that we see in grocery stores are all kind of made with like the same single profile, same beans, same kind of taste. And 70 percent of the world's cocoa comes from the Ivory Coast. And those beans are grown for yields, not for flavor. And so it has this flat tasting kind of bitter note. And then they cover it with, you know, extra ingredients, like a lot of sugar or soy fillers to make the chocolate taste a certain way. So that's how I got into it. And we started the subscription club because I couldn't find a really good source of chocolate locally, and I couldn't find anything online that really catered to my taste either. So I called Chris up and we have a marketing company together. And I like, "Hey, Chris, I think we should start this subscription club and use our marketing skills to see if we can make it work." And that's how the company was born.

Phillip: [00:06:26] Oh, it's like the classic founders story of you built it for yourself.

Pashmina: [00:06:31] Yes. Yeah, exactly. {laughter}

Phillip: [00:06:34] So as a retailer, do you have partnerships with brands and they ship direct or do you hold inventory? What's the model of of Bar & Coco.

Pashmina: [00:06:44] So we do hold inventory. Chocolate is a tricky thing to ship because it melts, you know, four to five months out of the year. We ship with insulation and ice, and we have to be, you know, more careful these days with how we ship because of delays in transit with USPS and things like that. And, you know, we actually tried to use like a drop shipping model or even just a 3PL to do our fulfillment, but very few places are able to do it in an efficient manner because we have all these variables. We have over a thousand SKUs at this point.

Brian: [00:07:22] Wow.

Pashmina: [00:07:22] They require a certain temperature control and storage. So we have four different HVAC units in our warehouse and our ceiling grid is set like really low. And we have dry storage for most of our goods. And then in terms of shipping and packaging, we're very careful with how we wrap our bars and ship them because we don't want to break in transit. We don't want them to melt in transit. So we do everything in-house and we store all of our inventory.

Brian: [00:07:55] I would imagine that shipping has gotten more expensive just with the rise in online grocery purchases. Have you seen any impact from that and other pandemic impacts? How has the pandemic sort of impacted the chocolate industry?

Pashmina: [00:08:17] I think this is true for everyone in food and beverage. Yes, shipping is a big challenge. It's affected not only our bottom line and our cost to ship chocolate, but also the inbound costs of importing chocolate has gone up dramatically. And one of the painful things with shipping is that we really have no control over that. Once it leaves our warehouse, we have no control over how the package is handled. You know, we can just work with different companies like FedEx and UPS and USPS and hope for the best possible outcome. But a lot of our, I feel like a lot of our negative reviews, like even on Google, had to do with the fact that people were not receiving their shipments in a timely manner, especially during Christmas with the rush. You know, we were seeing a lot of the orders were delayed by two weeks, three weeks, and sometimes people weren't receiving them for a month. And it's just, you know, we really want to create a good experience for everyone, and that's like the unfortunate downside of what COVID has done and what the growth of eCommerce has done for shipping. And I think very, very recently it was Stitch Fix when they announced their earnings, one of the issues they had was this issue with shipping and products not getting returned in a timely manner and that affecting their revenue and their basis.

Phillip: [00:09:43] Yeah, what's interesting to note about that is, and I've sort of set a reminder for myself a year from now, their business has changed dramatically to sort of hedge against that ever happening again, which might have this really interesting impact in the way that they build going forward in that like they're asking their customers now rather than being surprised and opening a box and not knowing what's in it, it's like maybe we need more certainty around what's in that box before it gets to the door. Because we don't want to risk this long cycle where it used to be three weeks. You know, now it's eight weeks before someone actually buys what we ship to them. That's a... What a risk. I can't even imagine what happens to chocolate in the box when it takes a month to get there? Does it even survive the trip?

Pashmina: [00:10:31] Yeah, it depends. For the first time this year, because of the long transit time, I actually noticed there was some sugar bloom on some bars from a picture that a customer sent to us. I was like, how did that happen? And, you know, because we shipped it during the winter and usually with winter, like, we're not so concerned about melt and fat bloom, where basically what happens is a chocolate bar melts and the fat kind of comes up to the surface and creates this, like, whitish texture. It's still safe to eat. It just isn't obviously in the most optimal format that it should be in terms of taste and presentation. And it's not something that we want to see happen to our chocolate, especially, you know, we want to take care of the craft that our makers have put into their products. In this case, it sat for a month, and it was in transit for a month, and we had that ridiculous freeze where I think, you know, temperatures kind of dropped to like negative.

Brian: [00:11:30] Oh, yeah.

Pashmina: [00:11:31] In the negative territory. And yeah. So that's what happened. So I think, you know, that really very, very cold temperature is also bad for chocolate. And we saw some bloom from that happened from that extreme temperature. And, you know, in those cases, like the best we can do is either we refund it or we reship the order. We always try and make it right, you know. Somebody says like, "Oh, the chocolate got lost and now it's all damaged or melted or bloomed," or whatever it might, whatever the issue is, we always try and make things right by either reshipping or refunding or whatever we can do to make the customer happy.

Brian: [00:12:07] There's probably a fair amount of cost you have to build into your model just around that happening. Given that I'm sure it happens, you know, not necessarily regularly, but enough where it's something you have to account for.

Pashmina: [00:12:21] Yeah. I mean, you know, even with COVID, I will say I am surprised that it's as bad as I thought it would be. Like last year, I think our failure rate on shipments was still under 1.5 percent in terms of like melt or bloom or something getting completely destroyed.

Brian: [00:12:39] That's good.

Pashmina: [00:12:40] Yeah. So but I think part of it is that we just changed the way we ship. We used to exclusively rely on USPS for all of our shipments year round, and right around Mother's Day last year when we started to see things get delayed, we started to ship things FedEx two day express. So we ate the costs of the higher shipping costs because we wanted to make sure to continually create that good experience for our customers.

Brian: [00:13:09] Probably didn't taste as good as chocolate does. You ate the cost, but...

Phillip: [00:13:15] {laughter} There's the dad joke. Eleven minutes and forty nine seconds. That's all it took.

Brian: [00:13:21] That's so bad. But ok, what about the flip side? Everybody benefits, you know, during pandemic times. I mean, I would imagine that people are just like eating chocolate by the bucketful right now. {laughter}

Pashmina: [00:13:33] Yes. I mean, definitely it's a comfort food. Yeah. Yeah, it has been. Yes. In that sense, yes. We did grow pretty dramatically last year. Right when the pandemic hit, it was like what's going to happen? And we had just moved into a new warehouse. We moved in March 16th to Denver, Colorado. We moved from Charleston to Denver and we're in this new warehouse. And then everything shut down, and we're like, Ok, what's going to happen? And I didn't hire anyone because I was really concerned. There was a lot of anxiety, like when it first started. I didn't want some unknown person in our space. And I didn't, you know, it was like the element of trust and also the element of like, I don't want to get sick if somebody is just being irresponsible. And so the first three, four months, it was just me and another friend of mine who I had hired to help me because I trusted her and known her for over a decade. And we were packing and shipping all of the orders ourselves. And then I was like, Ok, now I'm exhausted. I need to hire someone before the Christmas rush. So I hired two employees in August and September of last year.

Phillip: [00:14:48] Wow. And so you're growing. Tell us a little bit just about the transition from you said you are a digital marketing company now you're a retailer.

Pashmina: [00:15:02] Yeah.

Phillip: [00:15:05] I feel like every, and I say this, I'm allowed to say this because I work in the agency world for so long. Agencies seem to think they know everything because they hear everyone talk about the things you should do. How much of that shored up with your experience and sort of working in digital marketing? How much of that aided you as a retailer in making that transition? And how much of that do you look back and say, "Wow, I really thought I understood this kind of business and I really didn't?"

Pashmina: [00:15:33] You know, I think one of the things that surprises everyone I talk to when it comes to our business, they think, "Oh, well, you know, you're doing over, you know, doing X in revenue, like you must be so rich or you must be so profitable or things are going so great for you." But food and beverage and a lot of eCommerce marketplaces or goods in general where we have a lot of moving parts, at the end of the day, it's actually a very low net margin business. And I knew when I started this that this was going to be a marathon. This was not going to be like some get rich quick company for us. Its very mission driven, which is what keeps me going. But to date, I haven't paid myself from this company. The marketing company is still what keeps my lights on and my day to day life. And this is a business of scale, like you have to scale to a certain size before you really see the fruits of your labor in terms of profit. Because there's just so much in terms of overhead costs and holding inventory and all of these factors that come in play. Like I always I think from when we were just on the marketing side and we were delivering these results in like a ROAS of four to one or five to one, we're like, oh, we're doing great. But really a ROAS of four to one, five to one does not mean that the company is profitable. And I would venture to say that until you're at like six to one, you're really doing that company a disservice. If you're just spending money to spend money on advertising and you're like, Ok, we're just trying to scale. And they're not a startup and they're not well funded and they're just like a mom and pop company, that's like maybe you got a nice eCom business going then you're doing them a disservice. You're actually losing the money on a day to day basis.

Phillip: [00:17:22] Wow. So in which case you could kind of become a victim of your own early success or some sort of... There's like these really large break points and big hurdles to sort of get over as you hit certain stages of growth. Do you think that being missional, you mentioned that before and I'd love to tug at that a little bit. Do you think that that helps you connect with the customer or does it hinder you in your growth? And does being principled know cause you to have to make decisions and maybe grow a little slower than others may in your space?

Pashmina: [00:18:00] I don't think the mission makes us grow slower, but I think my focus and like laser focus on becoming a profitable company, you know, kind of meters our growth. And because we're not funded, because it's like something that has been bootstrapped, we don't have the luxury of throwing thousands of dollars into ads or marketing and having that long cycle of seeing a return on our investment with like customer acquisition. So I could probably push the ads and scale it up a little more to where every order we receive from a new customer would break even. But then it would be like six months before I saw any profitability from that customer. But we just can't. We don't have that luxury. Where I feel like some other companies who are well funded have that luxury and they're still not profitable. I mean, it's actually amazing to me how many companies that are startups now that are doing billions of dollars in revenue, but they're still not profitable. They're still losing money quarter after quarter, like take Uber, for example, and they're like, "Oh, we had our smallest loss in ever." But you're still losing money. Like, how is this still a thing? Like how are you not profitable being Uber and seeing billions of dollars in revenue every year?

Brian: [00:19:23] So, you know, as you're being thoughtful about how you become profitable, I'm assuming that you're looking for opportunities to grow. And so what are the types of things that you're looking to tap into right now? You know, are there specific psychographic opportunities that are on your mind or are targets of yours? We've talked a lot about something that we coined. CARLYs, you know, Can't Afford Real Life Yet. You know, are they going out and spending 12 dollars on a bar of chocolate because it's ethically produced? What are you seeing in the market right now?

Pashmina: [00:20:04] Yeah, I think yes. I think we definitely cater to that audience. We see our audience tends to skew younger. Our largest demographic of purchasing behavior is between 24 and 35. And then 35 to 44 is our next biggest segment. And yeah, I think they connect with the stories about ethics and the craft and it being from places of different origins and people of color. That is definitely part of the story that makes it an attractive product to them. And yeah, I think, you know, I think in general, like the there's like this whole movement towards craft in general that hasn't hit chocolate and is now starting to hit chocolate. So it's already happened with beer and coffee. And so now we'll see it happen in other food segments as well. And chocolate being one of them.

Phillip: [00:21:07] Quality certainly being part of it. You mentioned when I first met you, you had told me that there's something around, something that you've noticed around the way that people approach chocolate. They have a preconceived notion because most people ate chocolate younger than they could even remember it. Like they kind of grow up with this notion of what chocolate is.

Pashmina: [00:21:34] Yeah.

Phillip: [00:21:34] And you mentioned craft sort of redefining what we believe chocolate to be. Could you talk a little bit about that and how that sort of relates back to a much younger demographic? I found that to be quite interesting.

Pashmina: [00:21:48] Yeah, I think, you know, this also explains, like, why I had this hesitancy before I tried my first bar of craft chocolate. It's like [00:21:57] we form our habits and our relationship with chocolate as kids. You know, we've eaten a Hershey's bar or had some hot cocoa or what have you as very young kids. And we form a bond with chocolate. We have a memory around chocolate as kids, whereas something like coffee and beer, we don't form those habits until we're adults. So there's not this long memory of that flavor and relationship to it. And so I think that's why beer and coffee were able to grow up very quickly and move towards craft and people are open to it and adapted to it very quickly. Whereas chocolate, it's going to take a lot more time because people have these notions about what chocolate is, and they've had them since childhood. So to make that shift from spending two dollars on a bar of chocolate to ten is a big leap. [00:22:50] And it's a big leap of faith in some ways. And that's why there's like that challenge of like educating people on it and saying "Well ok. Yes. All the stuff that you ate, like we don't necessarily want to make you feel bad about it." It's kind of like it always reminds me of this skit that, like Amy, who's a comedian, she does a skit with like The Cosby Show. And, you know, everyone's eating these like chocolate pops. And no one wants to feel bad about watching The Cosby Show. And yet here we are, you know, finding out the truth about him. And you have this, like, guilt, you know, like this guilty feeling of having enjoyed those shows and reconciling it with, you know, who he is as a person. And the same thing is happening with chocolate, right?  [00:23:36]Seventy percent of the world's chocolate is grown on the Ivory Coast and it's not grown in the most sustainable way. It's using child labor, slave labor. These people are not making enough money to live. It's not a livable wage. And it's really sad that, like two million children, almost two million children are in slave labor, in chocolate. And it's something that these large companies have committed to getting rid of. And then they just keep kicking the can down the road in terms of when they think they'll be able to get away from those practices. [00:24:09]

Brian: [00:24:11] This is heartbreaking. It's just makes me not want to buy chocolate from large manufacturers now. It is something that I think most of America, Americans do still buy chocolate from large manufacturers. The connection to childhood, just your thought process around that, sort of just blew my mind a little bit. I was thinking about coffee and like I used to know older people who they said, "I have to have Folgers. I will only drink Folgers." And they couldn't get away from like a specific coffee brand that CPG owned. But I think the connection to when people come to like something, making them more open to trying new things with chocolate versus coffee, that's a really, really interesting connection.

Phillip: [00:25:13] There's an interesting thing there, too, around vice categories.

Brian: [00:25:17] Right.

Pashmina: [00:25:17] You're not really exposed to them until much, much later on in life where you sort of form preferences for things like maybe even coffee before you can drink alcohol, at least here in the United States. So you're exposed to it so much sooner. You form preferences around it quicker. And I think, Pashmina, to your point there, it's sort of a late comer to the craft crowd probably. Maybe due directly to that.

Pashmina: [00:25:46] Mm hmm. Yeah. Yeah. I don't think it's going to escalate as quickly as wine did in California or as coffee and beer have. I think it's going to be a much slower incline. It's not going to hockey puck all of a sudden, craft chocolate. I mean, I'm sure a lot of craft chocolate makers here, especially in the US, would like to see that being different, but I don't think so. I think this is going to be a lot of hard work before we see craft chocolate become like the primary category in chocolate as a whole.

Brian: [00:26:21] It's also connected to so many other things. Chocolate gets used in other things, like baking or s'mores or whatever. And so there are connections. It's an ingredient, and probably more so than coffee or wine. Those are stand alone sort of experiences. And so [00:26:44] you have recipes and a whole ecosystem built around chocolate and the brands with those, you know, that we're talking about here that mass-produce chocolate, have actually worked their way into cookbooks and into our psyche around s'mores. And like all these other things. Chocolate is used in desserts. And so you're not just unseating like a single experience, you're unseating experiences across multiple food ecosystems, which is like another challenge and also an opportunity. [00:27:26] So we talk about sort of the grind it out sort of slow play that's going to be required to sort of change mindset, because people are you know, they're experiencing these things as children and they're experiencing them in multiple categories. What are some opportunities you see to sort of help educate and help change taste and become a tastemaker in an ecosystem as large as chocolate is?

Pashmina: [00:28:00] Yeah, you're correct in making that observation about the industry as a whole. And the challenges there, too, are really about scale and manufacturing. So, you know, you look at something like, I don't know, a Twix bar or a Snickers bar or even a Reese's cup, they dominate that category. And yeah, there are a few competitors now that have come out that are healthier or made with slightly better ingredients, but the issue is, is like it's really hard to make those products, like to find the right manufacturing equipment and the right equipment to put all those ingredients together and make it in that format and package it a certain way is very, very difficult. And because of that, there's still this big gap between what craft can do with fine ingredients and fine chocolate and what these bigger manufacturers are doing. Like tomorrow from like, "Hey, Dandelion, why don't you make a Reese's cup?" It's not something they can just do overnight. Right? It's not like, "Oh, let me just buy this off the shelf piece of equipment. And yeah, sure, we'll start making Reese's peanut butter cups." And because of that there is still so much opportunity. So one of the things I try to encourage some of our makers to do is almost everyone's making chocolate bars, and 80 percent of our SKUs are chocolate bars. There's this whole other category of SKUs that we haven't even touched yet. We have whether it's confections, whether it's enrobed products, whether it's coated nuts, whether it's cakes, desserts, baking items. And so we're starting to see some of those SKUs from some of our makers, and we're really happy about carrying them. But we just don't have enough in those categories to make it something that people would shop for. So if you're like a baker and like, "Ok, let me see what other gourmet chocolate ingredients there are." And you come to a website and there's only seven options, you're probably not going to convert. So until we see more of our maker's kind of getting into those SKUs and getting the right equipment to produce those items, we won't see those categories grow. And that is like where I see the biggest opportunity for the consumer market. And then, yes, beyond that, it's also scaling to where they can make the chocolate cheap enough that chefs and bakers and ice cream makers will consider using that as a replacement to what they use now, because there's just too much of a gap in pricing between what they're using now and what craft makers are offering.

Brian: [00:34:31] I'm thinking about like chocolate chips, like premium chocolate chips. Think about the DIY community and what they would be able to do with something that is as simple as a chip versus going for like the straight to the peanut butter cup. That's interesting. I actually I think back so are our Creative Director, Jesse Tyler, lives in Springfield, Missouri. And there's an interesting chocolate brand in there called Askinosie, who I'm sure you're familiar with.

Pashmina: [00:35:02] Yes. Yeah.

Brian: [00:35:03] They actually did some local collabs with famous custard places where they did a blended like custard and chip experience. And actually Askinosie, I think has done really well in sort of like understanding the opportunity, that chocolate's not just the thing to be experienced unto itself. Of course it is. It is. But the opportunity to see yourself as an ingredient brand and like to build towards that end, I think that's... I think you're absolutely right. That is the opportunity to change mindsets and get into places where maybe craft chocolate hasn't been able to go before. But I'm unaware of manufacturing processes. So maybe manufacturing chips is a little bit harder than I think it is. {laughter}

Pashmina: [00:35:49] Yeah, manufacturing chips is actually not so bad. We have a few makers that we carry chips from and Dandelion did something really interesting with their chips. They actually worked with an architect or something, some expert to redesign the shape of the chip. There was a really interesting article about that that I read recently where they reshaped what the chip looks like because it made it more optimal for baking and like the surface area of it and how it's shaped. It's very unique.

Brian: [00:36:23] That's so cool. Yeah, that is like innovation in chocolate right there.

Phillip: [00:36:28] You're turning the geek key in Brian. Be careful. I think the craft movement also changes a lot of the way that we think about things that consumers typically care about, which is pricing. Sort of this irrationality of pricing. We talk about this a lot, at least in pandemic times around a mask or hand sanitizer, like how much should it cost? No one knows. You can get a box of 100 for ten bucks, you could get a quart of hand sanitizer for three dollars for a little spray bottle. I don't know. It's kind of all over the map. And I don't know that most people have an idea of how much chocolate should cost. So I'm wondering, does that help or hinder? And is there a sense of like the way manufacturers and retailers like yourself are testing price elasticity to see what a consumers willing to pay for chocolate and how much is too much?

Pashmina: [00:37:30] I think it's gone up a lot. So I think when we started, you know, the average bar was around anywhere from 7 to 8.50, 7-9. And it's gone up. And I think consumers are ok with it. And I mean, I think everything in the last 12 months has gone up. Like inflation has increased the cost of pretty much everything. And everyone is just getting used to it. Like, you know, from cars to milk to orange juice. And yeah, I think the average bar now, where before I would be hesitant to price anything over 10, just like, oh no one's going to buy that once you hit ten dollars. It's just too expensive now. It's like, ok, you know, if the maker's are really good at what he does and he's producing something very unique and award winning, then paying 12 to 14 dollars is not out of the realm of something that people would think is okay. So, yeah, I mean, it's definitely gone up and on average. And then shipping costs and everything like that also make everything more expensive. And now the dollar is weakening. So I feel like a lot of our European imported brands will also get more expensive as a result.

Phillip: [00:38:44] So buy now, as a hedge against inflation. Chocolate, as an alternative asset class, you heard it first on Future Commerce.

Brian: [00:38:53] NFT chocolate. Anyone?

Phillip: [00:38:53] Yeah. {laughter} Digital chocolate. That's so interesting to kind of hear your perspective there in sort of the ability to test that. The other area where I think consumers sense of what the costs of fast moving consumer goods is is well maybe channel matters a whole lot? Like when I'm in the grocery store, I'm willing to pay X price, but if there's a convenience factor of it being delivered to me via, say, Instacart, I'm more flexible on the price.

Pashmina: [00:39:33] Yeah.

Phillip: [00:39:33] And so because I'm paying for a more convenient experience or maybe, you know, I don't want to say a luxury experience, but it's an experience that doesn't require you to have to get out of your PJs and your Lululemon and go to the store. So but is there, do you think that Instacart and others are having an effect on what this idea, this fuzziness of what something should cost? Does that come into play?

Pashmina: [00:39:58] Absolutely. Yeah, yeah, I think so. I think you're right on that account. And we've noticed, too, like I used to be very price sensitive, just like comparing how we're priced to another retailer. Now, not so much. Like now I really just need to focus on how we ship it and the experience of it. And that comes with a certain cost. And so I'm okay being slightly more than a certain retailer. I don't feel like we're losing customers because of that. I think we're creating a brand, we're establishing trust. We're creating experience where people know that they can rely on us to ship things in a manner that keeps their chocolate safe and keep it from melting and not breaking. And they're willing to pay for that. And just the experience of we're very good about our selection. I said early on that I couldn't really find anyone that was catering to what I wanted in terms of chocolate. And early on, like, you know, when I was spending this money on chocolate, I would shop on a website and not knowing what these different brands were, I would just buy random bars. And some would be amazing and some would be just awful, in terms of what I think is good quality chocolate. And yet they were priced the same. So we're really careful about which brands we carry. We do carry a lot of brands, but we get a lot of chocolate samples. And I'd say we reject a good number of them because we don't think their chocolate is up to par with the brands that we carry. And I would not feel comfortable selling it to a consumer and saying, "Yeah, this is great chocolate, pay me eight dollars for it," or whatever it is. So I think that curation is something that our customers trust us to do for them.

Brian: [00:41:48] I love that. Curation as a brand value, I think, is huge when it comes to retail. You know, we talk about building brands a lot on the show, and we typically talk about that in terms of being, you know, a vertically integrated like your products are your brand. When we talk about building a brand as a retailer these days, being able to provide your customers with an experience they know they're going to enjoy, at any price point or whatever or at the price points you have available, like they know when they step in and they know what they're getting and they know what the experience is going to be as a result of buying from you. That, to me, is a really powerful way to connect with your customers, because this is what you're doing. You're saying to your customers, "You can trust me. The relationship that we have that we're building is something that you want to come back to because you know you're going to step away with an experience that we've represented it to be." And that's huge.

Pashmina: [00:43:03] Yeah. And speaking of that, you know, like we're going through the process of trying to qualify for B Corp status.

Brian: [00:43:11] Amazing.

Pashmina: [00:43:11] And one of the things we need to do is put together like a guide for our suppliers and that is mission and ethics driven and make sure that our suppliers are officially abiding by that. But like, yeah, all of the chocolate we feature is ethically sourced, ethically made, you know, made with fine ingredients and promotes agroforestry, good practices in agroforestry. And we stand by that. Like we don't want to feature chocolate makers that we don't think meet those standards.

Phillip: [00:43:44] There's a category on the website at BarandCocoa.com for BIPOC Chocolate. And I don't know why it really challenged me and sort of shocked me at my own reaction, which was there's six pages of bar after bar after bar of BIPOC representation of people that own or found or manufacture these products. And it really speaks to the fact that so much of this happens in other parts of the world. So much of this creation of these products happened in other parts of the world. I don't know why that surprised me so much. It's obvious when I think about it. But it you know, I think just in my mind, I sense that maybe a representation would be quite small. And in fact, [00:44:38] this is one way that I think a company like yours does very well to feature that there is an incredible amount of diversity and representation of people of indigenous, black, and other backgrounds. This is one area of consumer packaged goods where there's an amazing amount of representation. You could vote with your dollars and support other people and support these founders, [00:45:07] which I think is something that's so unique to you or so unique to your industry. I'm not sure if you have any thoughts on that.

Pashmina: [00:45:17] So I think that there's two areas where they kind of overlap. The BIPOC is is one. And actually we were actually recently certified by the MBE as a minority owned business too. So Bar & Cocoa is also BIPOC, and BIPOC also overlaps with something we're really proud of, which is Made at Origin. So [00:45:42] we have a lot of chocolate makers that we feature, where the chocolate is Made at Origin. And my goal this year is to actually double the size of our Made at Origin brands. And the reason I'm so bullish on this and why I'm so excited about Made at Origin chocolate is because it really speaks to our mission about creating more opportunities and better outcome for the people who are growing cacao and people at the source. [00:46:17] So rather than just for these countries importing beans, the chocolate is staying there and being sourced locally, made locally by local manufacturers, whether they own the farms, whether they're working directly with the farms there. There's a variety of different models. But that, to me, is more exciting. And chocolate I mean, cocoa is a heavy product and shipping that is, it's very heavy. And 30 percent of that is waste. And then we're shipping it to Europe and the US, and there's some fantastic makers here in the US and Europe and Canada and all over the world that are doing fantastic things with craft chocolate. But I think the the Made at Origin brands are more exciting to me because it's a larger impact on that country and on the people on the ground there. So we have a few that we feature pretty prominently like Definite Chocolate out of Dominican Republic, Belvie from Vietnam, Auro from the Philippines, Cacao Hunters from Colombia... And I think what they're doing is really interesting. And that's the way forward for chocolate is to really promote these Made at Origin brands.

Phillip: [00:47:28] That's something I see that you're doing as well, which is again, as something only you could do is the way that are fueling discovery is by creating bundles that represent these sorts of values. And so you mentioned Definite and there's I think Marana?

Pashmina: [00:47:49] Yeah, Marana in Peru. They are a really a great one, too. And both Definite and Marana are both organic certified as well. They use all organic ingredients. And they're working locally with farms in their countries to produce the chocolate that they do. And they're a really good representation of the terroir of that country, of the beans that come from that country.

Pashmina: [00:48:16] You can't see it, you can't see what I'm looking at, but you're looking at the website, I highly encourage it. These are works of art. And I mean, it's not just the product inside. I think that's another thing that sort of strikes me about the chocolate space. Is that how much is really actually represented in the way that the product is presented from an art perspective. There's nothing like maximalist about this. This is truly, like, really beautiful and elegant across... Every single bar looks like it's a luxury experience to some degree. It's kind of amazing.

Pashmina: [00:48:56] Yeah.

Brian: [00:48:58] It's amazing. I'm looking at this, too. I'm just absorbed in your site right now. Beautiful, beautiful bars of chocolate.

Phillip: [00:49:07] Brian, are you looking at the slabs?

Brian: [00:49:09] Oh my gosh. No.

Pashmina: [00:49:11] The slabs. Yeah. I wish we had more traction around that. I think it'd be such a cool party trick. Like, you know, instead of showing up with a bottle of wine, you just show up with a slab of chocolate, like a one kilo slab of chocolate for everyone to enjoy.

Phillip: [00:49:24] And yeah, a chisel. Where do you keep your chisels? I've got a slab that I brought. That would be such a flex. Oh my gosh.

Brian: [00:49:34] Oh my gosh. These look incredible.

Phillip: [00:49:36] So what is next for and cocoa. You've said some really amazing goals I think for yourself as a business. You're on the track for B Corp. How does the future of, I guess, chocolate as a category, but for Bar & Cocoa in particular, how does that shape up?

Pashmina: [00:49:55] I think a lot of our goals have changed because of the pandemic. Before the pandemic, I was very gung ho on reopening a retail experience because there's nothing like just tasting it right? Like there's only so much we can do with a website. You can't lick the screen. Unfortunately, like, "Oh, yeah, ok, let me buy that chocolate." It's all based on packaging.

Phillip: [00:50:15] Not with that attitude you can't.

Pashmina: [00:50:16] And we used to have a retail store in Charleston, in Mount Pleasant in the area of Charleston. And I miss having that because that way, you know, somebody walks in your store, you can get them to try different things and really open their eyes to what craft chocolate is all about. And we used to have tasting events that were in-person, and people would just get so absorbed in the information we would present about chocolate. Like most people don't know that chocolate comes from a fruit and you know that in and of itself can be stunning to people. And so I miss that. And I still think maybe in the future retail might be in our future, but it just doesn't make any economic sense right now, especially with the pandemic still kind of, you know, kind of keeping things very hard for retailers. And our online business is growing. So one of the things we're thinking we've been doing is we've kind of dove into distribution a little bit. So speaking of those Made at Origin brands, we started to distribute some of those brands. So we have about seven in our portfolio. We have a focus on Made it Origin brands for our distribution efforts. And the other thing that we want to get into is we're thinking about making our own branded product, something that would be complementary to what our makers are doing. And, you know, drinking chocolate is a concept has come up. And the reason I want to do drinking chocolate is because it's actually more efficient and more sustainable for me to just source the ingredients and make it here locally, then to ship a bunch of drinking chocolate products because they take up so much dimensional space, and it's actually more expensive to ship those from some of the countries that we work with. So I'd rather just source the ingredients from our makers and then make it here locally. And I have some interesting ideas around drinking chocolate that I want to try. I won't talk about them now, but hopefully we'll see something in Q4 of this year.

Phillip: [00:52:27] You're going to have to rename to Cup & Cocoa. {laughter} Don't take any of my advice. That was terrible.

Pashmina: [00:52:39] {laughter} So those are two areas, and then I think as far as like our growth, like there's still so much opportunity in eCom and our marketplace. So we're going to continue growing that. [00:52:50] I did have somebody suggest a radical idea to me that I've been tossing around. I don't know if this is good content for this podcast, but you can share it with you and you can decide to cut this as as needed. [00:53:02]

Speaker3: [00:53:02]  [00:53:02]Yeah. Yeah. Oh, yeah. Brian loves this. This is everything. Yeah. And I don't [00:53:06]

Speaker4: [00:53:06]  [00:53:06]Know if this is something I should share. And I feel like I don't want to scare our suppliers and our vendors. But you know, these made it origin brands. I'm like, we should just. Raise a bunch of money and buy them and, you know, just rebrand everything under one brand or or at least have some cool branding or white labeling. [00:53:24]

Speaker3: [00:53:25]  [00:53:25]See, that's just that's the kind of thinking that I think actually starts to propel a category forward is when you start to see the larger players emerge that can be more successful together because divided your efforts are can only have so much. Yeah. Impact. Right. [00:53:43]

Speaker4: [00:53:43]  [00:53:43]And just so much replication of effort between like marketing and, you know, supply chain and branding and all the stuff. And I'm like, let's just like I was I'm actually trying to figure out like a new legal structure for how I can make the middle part owners of Barn Coco somehow from promoting all these different brands. It would be so much easier to just promote one brand. And it's like, OK, we have chocolate made at the source in Vietnam and Dominican Republic and Peru and whatnot. [00:54:09]

Speaker2: [00:54:09]  [00:54:09]Yet I think it's better for someone like you to do this than for them to get snapped up by the larger players who are operating in unethical ways. And you see this happen a lot where let's say one of these brands does break out a little bit and all of a sudden they've got, you know, CPG jumping on them immediately to go in so that they can have their premium version. And then inevitably it becomes about, you know, cutting costs and, you know, maximizing profit. And so having someone like you come alongside and say, let's let's see, shared success to me. It's not a scary idea, that's a that's a beautiful idea because, yeah, it actually you're going to be the kind of person that cares about that one, seeing them successful to keeping keeping, you know, that the chocolate at the core of what you do and making sure that the product is not compromised as a result of the of this consolidation. [00:55:12]

Speaker4: [00:55:13]  [00:55:13]You know, this is what happened to schaffen burger. So I'm [00:55:17]

Speaker3: [00:55:17]  [00:55:17]Going to pretend like I know what that [00:55:18]

Speaker4: [00:55:19]  [00:55:19]Burger was actually one of the first ever, like Kraft being the chocolate makers. And they were based there. They started it. They were in California. I think they're still in California. And they were bought out by Hershey's, I think. Well, check my facts on that, but, yeah, I believe they were brought by Hershey's in 2005 and so this is like way early days and like the world of Kraft, chocolate and their chocolate changed. And a lot of people were very upset by this, the shift in the quality that Shafron Burger was producing. And it actually inspired some of our earliest craft makers on the scene to start making their own chocolate that. [00:56:05]

Speaker3: [00:56:05]  [00:56:05]But I think that's where you start to see the maturation of a category, which I think we've we've seen that tremendously in craft beer in particular, where the yeah. The the larger big global CPG beverage brands have had failures and successes alike in the way that they've done M&A. But the category itself and the dominance of craft beer as a category is really owed to the efforts of the bundling under big CPG. So really couldn't be as pervasive as it is and as as culture defining as it is if that hadn't happened. So you kind of get the good with the bad. But wouldn't it be amazing to see, you know, a brand who has someone like yourself who is looking to consolidate it with employee equity in mind? That's that's such a, you know, in the equity of the workers and the personhood of the people who actually produce the product in mind. Well, that's what we root for every day of the week here at Future Commerce. [00:57:07]

Pashmina: [00:57:08]  [00:57:08]But is that the only way, like is vertical integration still the model for success? Like, is there you know, I struggle with this because when you look at, like the actual cost and the of the raw ingredients in a ten dollar bar of chocolate, it's like 60 cents. 90 cents if that. So how much of this is actually going to the farmer? Right. How much of this is actually going to the maker? And I struggle with this every day in our business. And I think one of the things that we haven't talked about that I don't know that relates to the the specific topic around chocolate, but I am investing heavily into automation and know code tools to to make us more efficient so that we can stay lean and mean. So I don't have to put more bodies towards doing rote work, because when I struggle with with this company, as opposed to like owning an agency which an agency had, none of this overhead is like I don't know how to become a profitable company without at least having a 60 percent margin on everything we sell. Yep. And that is a tough pill for me to swallow because I'm like, really like there's no way to be more efficient so that I can sell people chocolate cheaper a and so we can get it in more hands and be so I can maybe even pay our suppliers more and not have to like constantly negotiate. You know, to stay in business like this sucks in some way. Like I'm like this, this part of the business really sucks that that's [00:58:35] The reality of owning a business in the US is that you have to have so much margin on gross value to stay profitable.

Phillip: [00:58:46] Well, there's so much here to digest. There's another Brian dad joke pun for you. {laughter} So much really just to to chew on, Pashmina. It's been amazing to have you here. I think there are big, hairy questions that I don't think anyone really has the answer to. I mean, maybe the answer is you just need to create the first crypto chocolate coin and then we'll...

Pashmina: [00:59:13] All invest.

Phillip: [00:59:14] Yeah. There's another way. Make it a meme and have Elon Musk get in on it and it would be successful. But it's just been such a pleasure for you to share your passion and your expertise around this particular space. And we love that you have taken some sort of notice of the content that we create at Future Commerce. And I love having merchants like you come alongside us and help us educate not just us, but others, too, about your particular industry. So thank you

Pashmina: [00:59:43] Thank you.

Brian: [00:59:44] Thank you very much.

Phillip: [00:59:45] It's been amazing. Thank you for listening to Future Commerce. And hey, you can find other episodes of this podcast at FutureCommerce.fm. And we've got a new quarterly study that's coming out. It's called Service is the New Storefront. And hey, surprise. It turns out people like when humans take accountability for things. So if you want to find out how your brand can create a better human connection through better CX, you can get that. How do you get it? Go over to FutureCommerce.fm/Subscribe, and you'll get the latest on our new quarterly report. Thank you for listening to Future Commerce. And we'll see you next time.

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