The Strategy Sessions: Chocolate

0:00Constraints are not a challenge. Constraints are the point. If there are no constraints, there is no opportunity. Constraints make the problem interesting. Hey, it's Seth. And this is Akimbo.

0:18I am here with a special edition, a strategy Q &A with chef and chocolate maker Andre Morero in amazingly Nantucket. probably the biggest, most important chocolate maker on the entire island. How are you, Andre? Good morning. I'm great, Seth. Thanks. How are you? Good. You have a really interesting story. So tell us how you got into this mess. What is it that you make and how did you end up making it? Well, so I am a chef by trade and I packed up my family and moved out here from New York City back in 2014 to pursue an opportunity to quite frankly spend more time with the family, which I was really missing out on in being a chef in New York.

1:09You know, the hours are the hours. And so, yeah, brutal. Yeah. So I was missing out and was looking for other opportunities that were out there where I could enhance and continue my skills and bring the quality of hospitality that I'd been trained in and that it really resonates with me to a different location that had all the other elements too, mainly spending time with the family in the off season. And that ended up being private clubs, not restaurants necessarily. And I got this opportunity to take over as executive chef and director of culinary at a private yacht club here on the island and came in with my wife and spent the first evenings away from our kids for the first time.

1:58They were at six and eight years old at the time and had my sister babysitting them while we flew out and were wined and dined and really fell in love with not only the beauty of the island, but with the people and the community. It was really, we really thought we could have a nice life here. So the day after my daughter's birthday, We packed up the big SUV and took a ferry over along with Penny, our little guinea pig. And we landed here in the middle of the summer, in the height of the busy season. And it was just, you know, proverbial drinking out of a fire hose, just trying to take it all in and adapt.

2:43Um, so through a series of missteps and fumbles and realizing that I was basically a private chef for 380 members and their families, it wasn't necessarily, they were coming to eat my food, right? They were coming to enjoy their private club. So I had to find some other ways of keeping those creative juices flowing and with the organization and the restructuring that I did, I really delved into that aspect of it really well. But I could see that the clock was ticking and there was something else on the horizon, but I wasn't quite sure what that would look like. After, you know, I was there for seven seasons and it was taking its toll for sure.

3:37But then, of course, the shock the pandemic that shook the planet really shook everybody to their core. And that's when there was really time to decide what direction do I go in? And I was eased into making that decision a little bit quicker than I expected by being laid off by the club. They were downsizing. They were looking at ways of cost cutting. And my salary was one of those that they thought, hey, you know, let's go with the cheaper option in a way. so um i was really forced to really rethink things very quickly and while we were all in the in the throes of the pandemic and trying to reconnect with one another you know i had very um i have elderly parents and family and and i wanted to i was really missing them like we all were and we're you know on an island so we're very isolated 30 miles out to sea we weren't even seeing our friends and neighbors, right?

4:40It was one of those things that we all went through and we're trying to navigate. So we all started making things with our hands and bread, you know, sourdough was the biggest, the biggest Google search was how to, how to do sourdough starter and make breads. And I, some, for some reason, I bought a small chocolate machine, a little chocolate grinder, um, melanger. The one from India? Yeah, exactly. I have one of those too. Yeah. Yeah. The premier, the, the, the, you can still see it. It's over there in the corner. Yeah. It's actually an Italy maker and they relabeled it. Oh, is that right? Yeah.

5:19Yeah. Oh, okay. So, um, they, uh, yeah, I started making chocolate and we, I made the first batch with, you know, a couple of pounds of nibs that I, that I got online. And it was one of those light bulb moments where I thought, my goodness, this is the best chocolate I've ever had. It has two ingredients and this is really fantastic. And I'm not a sweets person. I've been in the culinary field for 20 something years, 25 years. And I've worked with a ton of pastry chefs and I love the art form. I've worked with some, you know, in Michelin starred restaurants with incredible teams. So it was one of those things where I thought I knew the ingredients and I really didn't know anything about it.

6:03It's a magic thing. All right. So let's dive a little bit into strategy as we think about where you are now. So it's called Far Away Chocolate. And I've been on a chocolate fast all day, anticipating being able to taste this here with you. So forgive me. Sure. Not what to eat when you're making a podcast. Oh. So these beans are from Ecuador. Yes. There's that little bit of fruit overtone that lets you know it's from this hemisphere, not from Africa. But there's some fudge to it. The tempering is excellent. And you've done a really good job of bringing out the varietal here. I can taste Ecuador, a little bit of Peru, but mostly Ecuador.

6:51And it's a very solid product. Well done. So how much is this, 25 grams. How much does this cost? It retails for$9. And who are you trying to sell your chocolate to? I sell it to people who appreciate things that are handcrafted, that are made on the island, that are made with a chef's eye and sensibility for quality. um so it's it's primarily it's women in their 50s 60s who are signaling that they're well traveled and that they know what quality looks like and tastes like and appreciate that for themselves but also more importantly as a gift to to give to others and where would someone on the island find this that those types of products or mine where do they walk into your house do they you have a store do they yeah so i i'm online and which is what i started at primarily selling online and doing free deliveries all over the island and then shipping in the cooler months when it wouldn't melt and i didn't have to pack it with a bunch of superfluous cooling items right uh and now this year this april i opened a small 150 square foot retail shop on the wharf.

8:21So that word is getting out that I now have a retail bricks and mortar sale. So I'm hearing two things, three things so far. There's locals who began by buying it online, even though they were local, and you would drive it and throw it at their doorstep and drive away without getting sick from COVID or something. There's online people like me who bought it on your Shopify store or whatever that is. And then there's people who walk into your little store on the wharf. Is it near the Black Dog? No, that's on Main Street. It's next... Oh, the Black Dog's on Martha's Vineyard anyway. Yeah. Okay. All right.

9:02I was in Nantucket a long time ago, so forgive the confusion. And so that kind of person is a different kind of person Because that person stumbled on you geographically, whereas nobody stumbles on your website accidentally. Right. Well, they are because I'm the only chocolate shop on the island. The previous chocolatier, which is there is a difference, as you're sure you probably are, they retired after 40 years back in 2016 or 2017. So there's no other chocolate shop. There's a couple of candy stores. There's a fudge shop, but there's no other chocolate place. So when people are just looking for that little bit of chocolate, my name comes up.

9:45So they seek me out. It's hard to find. It's not one of the wharfs that's a popular tour. Right. But the rent sort of matches that. You're not paying the kind of rent that you would pay if you were in the middle of everything, I hope. It's Nantucket. That's right. Nantucket. Okay. So I feel like we're honing in on some important things here. But before we do, what would next year look like if things were going the way you were hoping? What would change? What's missing? So I am still making it on my own because I'm in my commercial cottage kitchen, which is right behind me, which is terrific. But I can't keep up with the demand.

10:31I that's a good problem to have it's a great problem to have people responded really well to all the aspects of what we're trying to do and really I've been very supportive but I I it's just me making it and my wife who's an acupuncturist is um highly sought after and is super busy but is bending over backwards to do all the wrapping and labeling at night when she comes home from so it's just us two our kids are away um at school so we are trying to make it make a go of it so in my ideal situation i'd have a full-on commercial kitchen where i could uh not only have people see the production in behind a glass partition but also there's a cafe there we are you know teaching classes people are having celebrations and get-togethers over the holidays and we're in full production and ready for shipping throughout the holidays.

11:31So that's more than a small incremental shift. That's a dramatic transformation in the scale of your operation. This is true. And it's hard to do that halfway. It's quantum. You have to go all the way to the other end. Right. So the small incremental shift would be to the plans thus far, having a successful first year on the wharf is to now hire somebody to work at the wharf in the space, in the retail space, while I focus on producing more here in the kitchen. And then figuring out how to boost my capacity within the electrical setup that I have here and all those things as I try to get bigger machinery to keep up with what I need to do.

12:19Got it. Okay. So here's where it's interesting to begin. It's interesting to begin because you have made a bunch of unstated choices that could be intuitive because your experience, your insight, or maybe we just didn't get to talk about them. But you made choices like you're not going to be distributed by the Whole Foods market in Maryland. You've made the decision that you're not going to do what some disreputable companies have done and buy blocks of chocolate from Calabo, melt them down and say that you made them. You have made the decision to be local first and to try to serve the people on the island.

12:59You've made the decision to have a form factor for your chocolate that isn't the traditional form factor for a chocolate bar. And you've made the decision to price it, I think, fairly and appropriately, but compared to most alternatives, it costs more. All of these decisions were made already. And I'm not saying you should revisit any of them, but we should acknowledge that along the way we make these decisions. Does that make sense? Yep. Okay. So now you're proposing some new decisions. Some of them, the idea of going to increase the size of your facility and costs associated with it by a factor of probably 10 is a leap.

13:41And that leap is probably not going to happen by bootstrapping it by selling more chocolate out of 150 square foot facility. You're probably going to need some sort of loan or some sort of other transaction to get you to a different scale. Does that make sense? Yep. Okay. So what I want to help people understand is that you might, you, Andre, any listener, might have come to the right answer first time out, or it might be one of many, and it's probably worth surfacing the other ones in light of what you're actually trying to do. Okay? So for example, If you do this expansion, you will now have a job working for the facility as opposed to having the facility work for you for a long time to come.

14:37Because it's going to bring in a whole different kind of overhead, a staffing thing, and a space that you're going to fill. If you have a cafe, every time you see an empty seat in the cafe, you're going to say to yourself, if I could fill that seat, that would add to my project. Right? Right. And the nature of being on an island is not infinity. It's finite nature. We know the name of every single person on the island, and there's nobody else. And so part of what brought you to Nantucket was not infinity, but this finite structure where you could go to the edges and say, I've done enough here because there is nowhere else to go.

15:17And what I hear about the Yacht Club is the edges were too close. It was too hard for you to find your joy in creativity because they just wanted the same ridiculous food five days a week, right? Exactly. So when you make a choice like this about what does more mean and what does better mean, you need to be aware of every yes carries many no's with it. And every no opens the door for a different yes. So you've already put in some no's. We're not going to compete with Scharfenberger. We're not going to compete with Askinosie. We're not going to compete even with Mass Brothers because we're first and foremost Nantucket.

15:59And that's a powerful, brave choice. And you can run with that. But now the question is, when you think about what challenges you next and what makes the business more of what you want the business to be, what is it you're trying to have more of?

16:21I want to have having, I feel like I am in service of the business currently because it does not run without me. Right. There isn't, I can't step back from it and have some things run and watch it grow. It constantly needs me to give it attention, to give it fuel. It's not going to happen unless I make it happen. So if I take a day off to go visit our kids, there is an impact there. That's a choice. And there's scrambling to fulfill orders or at least get back to people. So I feel beholden completely where I don't have that separation to be able to manage it. So a brilliant insight that almost no one comes to and you got it right out of the gate that you are basically now a freelancer with a few assistants.

17:24And if someone eats your chocolate, they're eating Andre's chocolate. And one of the reasons that happened is because the scale of chocolate making and the island means that there was really no other way to get started. And the other reason that happened is because you're a chef. and that's the mindset of the traditional chef is if I want the onions cut right, I got to cut them myself. And maybe a chef gets a sous chef and another sous and two other people online, but even eating in the kitchen at some of the fanciest restaurants in New York, you can see the chef really wants to cut the onions, right?

18:03And so you can do that, but not feel bad about it. Or you can realize that when I ate this chocolate, I didn't know you and it didn't taste better because of you because I didn't know you. All I was tasting was the chocolate. So if that's what you want the consumer to interact and feel, I can articulate right now as a novice how you could work four days a week with what you have now plus a little extra, and the business would work fine. It just might not fill you with the joy you're seeking. So if you said, for example, I'm going to find the cleanest but dankiest, cheapest space in Nantucket that has all the amps I need, and I'm going to make all the chocolate for the week on one day a week, you could do that right and now because chocolate doesn't have to be fresh it's fine a month later and you can also easily find somebody even on nantucket who for 20 an hour will wrap the chocolate and put it in the packaging so now your wife can relax at night so those two steps would then put you on the hook to sell enough chocolate to pay for what you just did but it would make it so Andre didn't touch every single thing every single time.

19:37And you wouldn't get the cafe, you wouldn't get the glass wall, you wouldn't get this new experience that you want to offer people, and you wouldn't get the ego boost of being the guy in the toque who's doing this thing. And there's nothing wrong with wanting that, but you should say it if that's what you want. Yeah. Yeah. No, I can definitely see that. There's definitely, there is that mindset of trying to sketch out what the vision is and then have others buy into that vision and take the mantle and run with it and bring their own ideas to it and their own creativity and expanded in a way that I hadn't necessarily thought of.

20:24But at the, at the moment, it feels, there's no room for that to be able to step back from that, right. To be able to even see those kind of possible connections. It's just the, if, if that bar is going to get to this person, I need to make sure it's done perfectly, that it's not bloomed, that it's wrapped properly, that it's, you know, the whole, nine yards that the spelling is correct on the rapper when you spell Ecuador with one C and not two. I feel your pain. But then now we're getting back to infinity because you don't have to say on the podcast how many bars you make, but let's say you make a thousand bars a year.

21:07You make way more than that, but let's say you make a thousand bars a year. Once you acknowledge the maximum number of bars you can make and have the life you want to have, that's a good thing. It's not a bad thing. It is a good thing for you to say sold out. There are bagel places in New York, I just passed one, there were 40 people waiting in line to get in. And they're going to be sold out at three o 'clock in the afternoon. That's a good thing. That there's no promise that we're going to have something for everyone all the time. And finding that boundary for yourself is a really essential element of building a resilient strategy.

21:49Because now you can say, well, if I'm only going to make a thousand bars this month, I got to charge more for them. Because I sold them all at nine. So now the price is 10. And if you don't want it, I get it. Someone else wants it. It's a$10 bar now. Or you can serve customers in other ways. You can say, my best customers get, we got some porcelana beans, which are super rare. Those are reserved for my best customers because I'm only going to be able to make 40 bars for them. By leaning in to your scale, you have found a strategy that makes it so that you're serving people who wouldn't imagine eating a Hershey bar who wouldn't imagine leaving the island without a whole bunch for friends.

22:32And you can then focus on the magic of the craft as opposed to grumbling because it's nine o 'clock at night and you got to make another five pounds of chocolate. Yeah. Yeah. And it's with this and with what I've seen within the industry, it's a units game. like you're only going to scale if you do a certain number of units and for me it's always been about the experience about connecting with people and seeing that light bulb moment when i walk them through the process or we have the the class on how to make chocolate and they go oh man what have i been doing my whole life why have i been eating this nonsense when i could really taste something that's really fantastic and then you know we equate it to yes it's like like fine wine or, you know, get finding your favorite coffee or whatever that thing is where you really seek it out.

23:30It has those same dynamics, but it's something that's ubiquitous. It's in all of our lives since we were little kids, we've all, you know, go through tons of chocolate. So that experience that, that bean to bar experience is, is fundamental in the business plan is, you know, having, having people go through that process and seeing how it's all made, you know, is really much like Sean does with Askenozi, where he puts the farmer, his picture or her picture, their picture on the on the bars themselves, you know, on the wrapper and gives you an in-depth story and you really feel a personal connection.

24:09So I get that when people express that to me, when they see me in the shop and they hear my story and they see that you know that i'm i'm not coming at this just to sell a bar but i'm trying to as you said many times change the culture and just make that light shift where people relate to something that's experiential about the the bar itself it's not just a chocolate bar to taste and to have a chocolate fix it's it's a whole it has a whole story behind it uh you know i'm i don't You know, is it a mythology? Is it a, I mean, it's, you build up these, all these things. No, I, and as you know, from my work, I applaud all of this, but what you're describing isn't part of the business plan.

24:56It's part of your life's plan. It's part of your personal mission. It's not making the business better to do that. And so, you know, Sean has made 54 trips to Tanzania, the Philippines, and other places. That's not part of his business plan, right? People don't buy the chocolate because he's been to Tanzania. He goes to Tanzania because he feels it's his moral obligation to do this, that it is part of the fabric of his arc of what he's building. And so having this as part of your mission is really important. But and you don't want to run out of money while you're doing it. Because if you run out of money while you're doing it, you don't get to accomplish what you're seeking to accomplish.

25:42So what's holding you back, ironically, is that there's a chocolate bar. Because you're trying to have the chocolate bar carry the cost of the education, carry the cost of the experience. So you're selling the souvenir of the experience for$9, but you're delivering$100 worth of life-altering experience to somebody who sees you making it. Right? Yeah. That's fantastic if you can do it at a scale that lets you persist. But the danger, the thing that lit bells for me when you were telling your story is everything about your business strategy is going to change once you're paying$20 ,000 a month for your facility.

26:31And so you're going to have to feed that hole in the ground until it's full every single month, including February, because the landlord doesn't lower your rent in February, even though no one's there. So we need an elegant strategy that says there are this many people who live on the island. There are this many people who visit the island. What percentage of them want to have a transformational experience and how many of them will come back again? And if we do that math, again, with the finite nature of an island that you really can't easily get to, there are no day trippers, really, then you're going to say, oh, this is going to work or this isn't going to work.

27:13And because you can't incrementally get there, because you have to take the leap to build the facility, you need to have confidence that you're not going to sacrifice your well-being to force it to work. You see what I'm getting at? Yeah. Right? Yeah. And so where we started was, who's your customer? And you did a lovely job of describing their psychographics. But if I said, how many of those customers want to subscribe to what you do? Want to say, I am going to be on his board of advisors, take two bars a week throughout the whole summer and visit with friends and hang out in the cafe. That's a much smaller number of people, right?

27:58And we need to find out how many people, because that's what keeps Danny Meyer in business, right? That if Union Square Cafe lost its regulars, the restaurant would go under. It's the people who eat lunch there three times a week that keep it going. So if your business is fascinating once a summer to people, it's going to be really hard to scale it 10x. So I'm not being a pessimist here. I'm just trying to describe to you the factors that go into the business plan that sit next to your art plan. Because your art plan is lovely and I love it, but you need a business plan that matches it.

28:40Right. Okay. So what is that? Well, I think the tools that I'm describing... I'm the only person on this board of directors call. So what I'm trying to describe to you is you can see that there are levers and wheels to turn here, right? And a lot of it is intuitive. It's intuitive that most restaurants in most parts of the country have about the same number of tables and chairs. that very few people own 5 ,000 seat restaurants or own 10 seat restaurants because it's just not, doesn't match what a chef and a team can pull off, right? Like the Hillside Steakhouse outside of Boston is a zoo and it's giant and it's a money factory, but it didn't start that way.

29:28Most restaurants start at a certain unit size and there's a reason for that. So here you are and you've made important commitments to scale in terms of who your audience is and you're succeeding there. Now you're saying, with the audience I have, what value can I create that they will happily and eagerly pay for in a way they would miss me if I were gone? And getting the scale to match the demand is where joy lies. Because if you have too many seats, your restaurant's going to fail no matter what. And if you don't have enough seats, you're going to fail because you can't afford all your overhead.

30:06Well, that same restaurant math applies to what you're seeking to do. Does that make sense? Yes, it does. It does. And there are a lot of incremental elements that I am planning on doing and would like to execute on right away in terms of, like you say, the subscription model, capitalizing on the people who are yearning for something from a newsletter, from a blog, from, you know, they want to be a part of this. And they have said, hey, you know, I've raised my hand. I want to be a part of what it is you're making and this journey that you're on. There's a lot of those elements that I, for a lot of reasons, haven't been able to do because there's only 24 hours in a day.

31:00Yes. And again, it's the chef thing, right? And so I guess what I would have you explore as we wrap this up is if you go straight down the middle of the road and get a normal lease at a normal facility in a normal location and hire normal people to do normal jobs, it's very hard for me to visualize how you get to a scale that's going to make it pay for itself. You're going to need something about it that's got a twist or unique or special in the way you structured it. Because otherwise, your overhead's just too high to support chocolate with a cafe and a window and the whole thing. So what are some of the ways that you could do this alternatively?

31:44One thing you could do is find someone on the island who already has a space but needs a reason for people to come into it. So they already have a cafe, but if they turn the back of the cafe into your facility, their cafe is going to do better. And that's one way to do it. A different way to do it is to think about what happens if you become famous, like the black dog got famous, and people from all over the world are buying your chocolate, even though they're never going to visit you, because you're doing it on camera and building a following worldwide gives you all of the energy from around the world, even though you're still on a finite island.

32:26Or maybe you build a kind of place that's only making chocolate two days a week. And there's some business model that says those two days a week, we can fill this place because it's only two days out of seven. And now you can spend five days a week being you or doing sales or structuring things, but there's two days a week, You're standing there making chocolate for tourists, for locals. But there's got to be something to do here that's not the traditional structure. Because, as I said, I don't think the scale can be supported. Yeah, you're absolutely right. I mean, with the amount of compromise I would have to do to be able to support it here on the island.

33:16Now, there are other options off island, but then you lose that huge piece that it's made on the island. And it's, you know, then it becomes, OK, well, I have to I have to be a part of that. So I've got to go and oversee things in, you know, Barnstable or wherever we are on the Cape. So, yeah. And that that has been the that's been the walls that I've run into. the obstacles that I've run into is looking at not only the physical space, but then all the support needed, the staff housing that you have to have. Exactly. And then you're looking, then it's not about chocolate at all. It's just, as you say, feeding that beast every month.

34:00Constraints are not a challenge. Constraints are the point. If there are no constraints, there is no opportunity. Constraints make the problem interesting. So what you did in the last four years is you leaned into the constraints that were offered to you and you built something that almost no one else could have built. And you are successfully doing it within these constraints. Now you are creatively restless and you see an opportunity. You can't make all the constraints go away. So you have to find out which other constraints can I lean into in a way that's interesting without me changing the fundamental economics of the space I've chosen to be in.

34:43And so as we wrap this up, let me give you an example. So Danny ran some of the most beloved restaurants in New York City, but those constraints, including landlords, mean it's almost impossible to make a good living running even very successful restaurants in New York City. But wait a minute. Here's a place he can put a little bit of a hamburger shack. And if you build a hamburger shack in Madison Square Park, the expectations are totally different. You don't need white tablecloths. You don't need this. You don't need this. You don't need this. He signed up for a different kind of constraint, which is you only have two minutes to get someone their food.

35:22You can't charge more than$15. And it's this many feet by this many feet. and now Shake Shack is a multi-billion dollar company. And that's because he picked new constraints and found a new solution for those constraints. He didn't say, insist it was going to be Union Square Cafe, but I had a hamburger shack. It's a different thing, right? And so in the book, I talk about pick your customers, pick your future. Well, you've picked your customers. You've done that beautifully. Pick your competitors, pick your future. And you've done that. So pick your distribution. You are playing with that. And pick your constraints.

36:04What are the things I'm going to lean against? What is the medium I am in where I can be the best in the world at this, but not worry about that? And it would break my heart if you burned out because you're making too much chocolate per day all by yourself. Don't burn out. Find a constraint. Figure out how many hours you're going to put into it, how much money you're going to put into it. But within that constraint, then you say, I need a business plan and I need an art plan. How do I make them work together? Got it. So I have no answers for you, just interesting questions. As always. Thank you so much, Seth.

36:42Well, thank you, Andre.