Western chocolate startups have spent the past decade trying to find a way to survive

Ms. Nguyen Ngoc Diem and Mr. Nguyen Hai Yen, the two co-founders of Xuan Rong To Gao Coco Company (Tien Giang), used to work as middle-level managers in multinational companies.

Ms. Dip grew up under the shade of cocoa trees. His father is a teacher named Xuan Ron, who was a member of the government’s Western Sustainable Cocoa Farming and Development Project Committee. The family has also been growing cocoa since 2005, but only sells raw cocoa. With her father’s support, she founded Xuan Ron Cho Gau in 2013, initially producing cocoa powder. In 2015, she quit her job to focus on the start-up and chocolate production.

Her husband, Mr. Nguyen Hai Yen, a manager of a car company, also has a deep affection for chocolate. In 2016, he quit his job to lead the business with his wife.

There are two production lines of chocolate: industrial chocolate and artisan chocolate. In particular, industrial chocolate is made from raw chocolate blocks from many different sources. Big brands buy them to melt and then mix them according to their own recipes to make the finished product.

The artisan chocolate is made on site, from the cocoa bean to the finished product, from the same source, thus preserving the unique flavor of the cocoa beans from that region. This is how Ms. Diep and Mr. Yen’s Alluvia is made.

Ms. Nguyen Ngoc Diep named her chocolate brand Alluvia (meaning alluvial deposits) because it uses cocoa beans from the West, one of Vietnam’s 15 cocoa-growing regions.

Many “troubles” in the past decade

The couple gradually worked on the recipe and invested in machinery from Europe. When they had finished the product, they would find a way to distribute it to the supermarket system.

It will take several years to deliver the goods to shopping malls and supermarkets. But according to Ms. Diep, Vietnamese people do not have many habits of consuming cocoa and chocolate. She found that handmade chocolate is relatively unfamiliar to ordinary consumers, expensive, and not as sweet as industrial chocolate.

Having learned their lesson about distribution channels, the couple decided to do retail themselves. Between 2018 and 2019, they opened 10 stores in succession in tourist-intensive cities, with the goal of “exporting on the spot”, that is, selling to foreigners, a group of customers who easily open their wallets to buy Vietnamese handmade chocolates for their own use or as gifts.

Mr. Yan recalled that this was an “all-out” decision. The couple used their savings, including all the social security money he had received from working for nearly 20 years, with the original intention of giving it to their son until he turned 18.

In addition to Ho Chi Minh City, the couple opened stores in Hanoi, Danang and Nha Trang. “At the time, foreign customers accounted for 80% of sales,” Ms. Diep said. Riding on this victory, they plan to increase the number of stores in 2020.

“But one disaster after another. We started to be ‘clinically dead’ from Covid-19,” she said. The first cases of infection appeared in early 2020. One of two shops in Nha Trang had to close before selling. “At first I turned on the air conditioning and stocked up, thinking it would be under control in a few days like SARS, but it turned into weeks, months, and then waves after waves, multiple lockdowns, until 2021,” she recalled.

Negotiated to reduce the rent of some stores for a few months, but handmade chocolate cannot be preserved for long and it is difficult to make money, forcing the family to close eight stores, retaining the Hoi An branch and a stall in a shopping mall in Ho Chi Minh City.

Mr Tran Duong Xu Vu, chief executive of food training and equipment supplier TIM Corp, witnessed a period when the Alluvia chain flourished and then “quickly withered” due to the pandemic.

“At the time, they planned to open a store in Cambodia, but Covid-19 caused their system in Vietnam to shrink, and plans to export abroad were not completed,” said Xuan Rong, who also worked in the industry and later became a partner.

Later, Mr. Vu became a partner of Xuan Ron Cho Gau, providing equipment and chocolate experts to support their training. Mr. Vu appreciated that the two founders did not get discouraged during the epidemic and still took advantage of the opportunity to upgrade production capacity. “I remember that they couldn’t sell during the epidemic, but they always wanted to reopen the chain stores as soon as possible,” he said.

In 2020, they also came up with the idea of ​​opening a tour to visit the cocoa garden and experience handmade chocolate making. However, the travel company refused to cooperate because Zhuo Gao and Gao Cong are located on the opposite route of the journey to the west.

They promote themselves and welcome many families in Ho Chi Minh City to bring their children to experience nature when they are unable to travel far due to the epidemic. “I am engaged in interactive tourism, which is different from tourism that only views and purchases existing products,” she said. As of now, the tour is still available for customers to book in advance on weekends and has received about 10,000 visits.

The family also started selling online and secured an export order to Taiwan in July-August 2021. “I was under a lot of pressure at work after receiving the application because there were only eight people in the factory. It was ‘three on the spot’ at the time, and if just one person was infected with Covid-19, it would be a loss,” she said. But fortunately, the order went smoothly, thanks to a safe workforce and enthusiastic local support from vaccinations to travel documents.

Questions after Covid-19

With the help of its coping strategies and the support of its partners, the startup “escaped” and resumed business. Ms. Dip said that by 2023, the company will have enough funds to maintain operations and “have meat for the Spring Festival.”

In the first seven months of this year, nearly 10 million international tourists came to Vietnam, exceeding the same period in 2019 (the year before the pandemic). The return of foreign customers brought hope for revival, and Ms. Dip and her husband once again opened sales points. There are currently 14 stores in Hanoi, Danang, Hoi An, Ho Chi Minh City and Phu Quoc Island.

“I thought I couldn’t return to Hoi An or Danang because of the pandemic. This year, thanks to tourists, business has recovered about 70% compared to 2019,” said Ms. Dip. Currently, foreign customers account for about 60% of the chain’s sales.

But another challenge emerged. Due to the global cocoa shortage, the prices of inputs from butter to cocoa generally rose by 30%. The company began to consider the roadmap for raising selling prices. But the price increase at this time is still quite “substantial” because costs have risen steadily after the epidemic, but purchasing power has not been so good.

“In 2019, customers rushed into the store to spend money. Now dozens of people come in, and only a few buy after thinking,” said Ms. Dipe. To retain customers and diversify the experience, she sold more beverages in some stores. The company is also pushing direct exports to markets in Southeast Asia, Japan and Taiwan.

The company’s products have a HACCP certificate from Bureau Veritas and an OCOP certificate from Tien Giang province. But tasting chocolate is not a skill that the general public has, like enjoying coffee or wine, so the road will be more difficult.

Experts believe that Alluvia should choose a niche with different flavors and packaging in order to achieve lasting success. Mr. Tran Duong Xu Vu estimates that there are 40-50 artisanal chocolate companies in Vietnam, mainly established in the past 5-7 years. Vietnamese chocolate still has a very limited position in the global market.

“Experts know a lot, but mass consumers don’t. Artisanal chocolate is more complex and should follow a niche market because we can’t compete with global industrial manufacturers,” Mr Vu suggested.

Olivier Nicod, a French expert who has been studying cocoa and chocolate for 25 years and consultant of Alluvia, also supports this direction. He said that the quality of Vietnamese chocolate ranks among the top 5% in the world and is known as “fine flavor”. “Vietnamese chocolate has the taste of fruit, especially the taste of citrus fruits in the West, which is very rare in the world. At the same time, chocolate from other places mostly has the taste of nuts.” Mr. Olivier Nicod introduced.

When they realised that Vietnamese people were gradually liking bitter chocolate due to health issues, they developed the “dark 100%” series (i.e. 100% cocoa), which few dared to do in the normal market, compared to “dark 85-90%”. “I can do this because Western cocoa has a citrus fruit flavour and is less bitter than elsewhere,” Ms Diep explained.

She and her husband said they try to follow a diet that does not negatively affect their health. If sweetness is needed, they can also use natural sugars. For example, they recently introduced coconut nectar chocolate from Tra Vinh startup Sokfarm.

In addition to packaging that depicts Vietnamese characteristics, they also produce a series of chocolate series that combine local agricultural products such as Binh Phuoc cashews, Northwest McCann, Ben Tre coconuts, Phu Quoc pepper and Tra Bang cinnamon. Lam Dong Coffee believes that pure Vietnam from the inside out is the way to the world.

Ms. Nguyen Ngoc Diep said: “We try our best to promote the characteristics of Vietnam and are proud to let foreign customers know more about it.”

telecommunications