Plain 'ol egg -- average opportunity
Introduction to this startup concept
Chocolate is the king of sweets. Take a look around and you find so many kinds of chocolates, from low quality ones to high quality ones, and from 75% cacao chocolate bars to truffles.
The movie “Charlie and Chocolate Factory” has stirred the imagination of magical process of how chocolate is manufactured and sent to your pallet.
The question is, can we make it at home? Actually, you can. You can make chocolate at home like you can make ice cream, and bread, or brew fresh expresso. The only difference is that there’s no simple automatic “chocolate maker” as there are bread makers, ice cream makers, and expresso machines.
This weeks’ new startup idea is the commercialized home chocolate maker and supplies, which will target consumers during the holiday gifts season. Want your Golden Ticket?
Background: Today’s home chocolate making process
Making chocolate at home today requires a process more complex than that for baking bread or making ice cream. The process is somewhat like processing coffee beans and making ice cream at the same time. Take a look the basic steps involved:
- Roast cacao beans
- Crack or mill beans and take out the nibs (the seeds inside the hard bean shells)
- Grind the nibs so it turns into cocoa liqueur
- Refine and smoothen the cocoa liqueur with additional flavoring and sugar, and it so it turns into a smooth chocolate liquid
- Temper the chocolate by continuing to mix the liquid while you keep it at the exact certain temperature, so as to optimize crystallization
- Mold the chocolate
For more details, please refer to the two great Wiki-How articles that explain the process of making chocolate at home: “How to make chocolate” and “How to make chocolate by hand”. In each step of making chocolate, we have to use alternative cooking devices like juicers and coffee grinders that are not optimized for chocolate making process.
ChocolateAlchmey sells a kit for $525 for making chocolate. The kit includes roasted beans, roasted nibs, and these above-mentioned, non-optimized products like a mill and a melanger. (A mill costs $255 and a melanger costs $410 if purchased alone). The company is closed until Dec 15th, according to the site.
Given the complexity and lack of quick tools for making chocolate at home, I see a great opportunity. Come up with a specialized home chocolate maker and supplies, and then target the holiday shopper.
How to make an attractive proposition?
1) Offer various roasted, pre-processed nibs through an alliance with a known chocolate brand
Both raw and roasted cacao beans and nibs are easily available. So, I suggest you make it easy for the consumer, and go with the latter. Get roasted, pre-processed nibs for consumers as accompanying supplies to your maker. Choose a limited number of kinds of cacao to minimize complexity.
This provides three advantages for your business model:
i) Controlled product performance: You can develop your chocolate maker in an optimized manner, focused on the packages of cacao nibs you would offer. As a result, you increase the chances that consumers successfully make good chocolate.
ii) Strong repeat-purchase revenue model: If you are successful, you may be able to sell a lot of roasted cacao nibs after the initial sale of your maker.
iii) Opportunity to leverage strong chocolate brands: Once you prove your technology works well and there market demand exists, known chocolate brand players may be interested in creating a partnership with you. They may be willing to sell their branded high-premium roasted nibs through you. You should definitely pursue such a partnership, as it will immediately lift your brand awareness and increase sales demand.
2) Engineering the most simple product
You would need to work with experienced engineers to make a product that combines the chocolate-specific grinder, melanger, and temper into one mechanism. Automate the process as much as possible for the end-user by integrating the product as much as possible. By doing so, you will make it easier for the end-user and also reduce your material cost, and thus your starting retail price.
I am not an industrial designer or an engineer, so I would recommend you to work with an engineer and spend time to develop the design.
Mass retail, mass manufacturing model with a consumer price
The most important aspect is the price. If the make is priced at $525, like the one previously mentioned, only a very few consumers would buy.
Home bread-makers cost from $40 to $200. So this chocolate making kit needs to be also around $100-$150.
The only way to achieve this price point is to make it possible to sell the products on a large scale. You need to create economies of scale needed in the manufacturing so you can keep low price point. As a consequence, you must get your product into the Mass Retail Channel in order to succeed.
Again, like the startup idea Healthy Halloween Trick or Treat you will need to target the seasonal shelf space for the holiday seasons. Most retailers will expand their offerings in those categories, like home bread-makers, and home ice cream makers, and may fit in your product as well..
Financing this startup idea
Unlike other ideas I’ve talked about, I think this idea would require financing capacity in the early stage. The R&D process would be more complex, and until you achieve the break-even volume of unit sales, you would be making a loss.
To move forward with this idea, you need to elaborate on the business plan, and try to raise a fund of a few $100,000 dollars from angel investors. Use these funds to create your prototype. With a successful prototype, you would probably need to raise further investment to support commercialization.
The good news is if you become successful, you will likely find an exit by selling your business to large manufacturers like Cuisineart, Hamilton Beach, KitchenAid, and Braun.
Who should pursue this startup idea
With the risk profile, I hope you have a good enough saving before you take on this idea. Also it would be ideal if you have an R&D background of electronics appliances.