How this chocolatier deals with an unexpected spike in cocoa prices (Video)

When chocolatier Michiko Marron-Kibbey opened Deux Cranes, a small business selling Japanese and French-inspired artisanal chocolates and confections, she was already facing tough odds.

As many as 90% of new foods fail, according to Columbia Business School professor and consultant Steve Zagor. “More food products fail than restaurants,” Zagor says.

Marron-Kibbey’s company defied all expectations and became profitable four years after launching in 2022. However, an unexpected increase in costs meant that Marron-Kibbey had to adapt to continue growing her business.

Earlier this year, cocoa prices spiked due to climate change and other factors, presenting a new hurdle for the Los Gatos, California-based company. Costs increased “35% to 45% for an ingredient we use in 99% of our product line,” Marron-Kibbey said.

Deux Cranes was not the only one to face these hardships: 77% of small businesses claim that the rising costs of goods, services and wages have created financial challenges for their operations.

The company responded to this rise in cocoa prices by diversifying its product offering. It increased production of non-chocolate and lower-chocolate items such as cookies, caramel and jelly. These items currently make up 3% to 4% of Deux Cranes’ products, although the company has a goal of bringing that number closer to 10%.

Marron-Kibbey also strives to improve efficiency by adding new machines to the production process. The company currently makes approximately 300 of its best-known chocolate bars per day and expects that this number can increase to 500 bars per hour with additional systematization.

Deux Cranes has also resorted to raising prices for customers. It raised the price of its permanent collection of chocolate bars from $13 to $14 and increased the price of its chocolates by 7%-8%.

“Pricing is both an art and a science,” says Zagor. “You raise prices carefully, understand what the competition is doing and understand the circumstances.”

It is fair to say that Deux Cranes has successfully navigated uncertainty before. The company graduated from the ‘concept’ phase And phases of the ‘start-up phase’ from the small business cycle and entered the ‘growth phase’ by building stable profits, loyal customers and established businesses.

In 2023, Deux Cranes generated $800,000 in sales, and hopes to break the $1 million sales mark in 2024 with wholesale, corporate, e-commerce and in-store sales.

Marron-Kibbey hopes to weather the recent cocoa-related challenge and continue to grow her business. Her ultimate goal is to have a retail location in Japan.

“I would love to bring the brand back and be able to show everyone what I’ve done,” she said.

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