- CocoTerra, a Palo Alto, California start-up, has developed the world's first kitchen countertop chocolate-making appliance, with design partner Ammunition.
- A companion app guides users on how to make chocolate, right down to choosing the bean.
- So far, the company raised $2 million in angel financing from investors, including John Scharffenberger, recognized as the father of the American craft chocolate movement.
In 2013 serial entrepreneur Nate Saal was at a chocolate tasting in Palo Alto, California, when it dawned on him that chocolate — like coffee, the other beloved "bean" from the equator — is something consumers could be making for themselves at home. On the spot, he hatched the idea that would become CocoTerra, a countertop appliance now in final testing phases that turns roasted cacao nibs into refined chocolate bars in roughly the time it takes to watch "Charlie and the Chocolate Factory."
The path from aha moment to finished product shows how much tinkering, sweat and careful alliance-building goes into bringing new technology like this to the $103 billion global chocolate market, particularly when you're an industry outsider. Saal knew next to nothing about chocolate other than enjoying the taste.
Educated at Yale in molecular biophysics and biochemistry, he established his career developing and licensing software platforms at various Silicon Valley start-ups. But even after launching and selling highly complex products to companies like Cisco Systems, building a chocolate-making "robot" would require a significant learning curve.
It started with tons of YouTube videos. "I spent a year educating myself and taking classes on chocolate-making, chocolate chemistry, the physics of chocolate-processing equipment and also learning about growing, pruning, harvesting and fermenting cacao," Saal says.
Making chocolate from nibs typically takes at least 24 hours and a fleet of finicky, expensive machines. But Saal — an avid DIY hobbyist and amateur beekeeper and winemaker — believed he could speed up the process for making chocolate by grinding, refining, conching, tempering and molding in one unified system. He says, "The technology around producing chocolate hasn't changed in 150 years, and I thought, 'Well, why not?'"
The U.S. market for premium chocolate alone in 2018 was close to $3.9 billion, according to Mordor Intelligence. Often referred to as "craft" chocolate, these mostly independent brands produce in smaller batches with emphasis on sustainability and conscientiousness about sourcing finer ingredients with fewer additives from cacao bean to bar. Though six global conglomerates, including Mars, Nestle and Ferrero Group, manufacture most chocolate consumed as candy, this smaller sector of craft makers is growing the fastest in a larger market already thriving.
According to Zion Market Research, global chocolate revenues are expected to reach approximately $162 billion by 2024, growing at an annual growth rate of around 7% between 2018 and 2024.
Tapping into that stream took patience and schmoozing skills. In late 2015, Saal brought on Karen Alter, a highly regarded start-up strategist and Intel veteran who is now CocoTerra's chief operating officer. Together they began pitching angel investors at events that brought in the first checks. A contact Saal met at one gathering introduced him to noted design firm Ammunition (known for Beats headphones and the Café-X robot coffee bars).
Says Alter, "They were really excited about what we were building, believed in the product and wanted to help bring the first chocolate maker to market. It was the first big financial commitment for us as a company but was an important early engagement." Ammunition became CocoTerra's design partner early in 2017. "After lots of concepts, ideas and trials," Saal says, "the answer to my question about the possibility of making chocolate at home was yes."
The initial response from the chocolate trade wasn't quite as affirmative. "I thought they were totally crazy when I first talked to them on the phone," says John Scharffenberger, the San Francisco Bay Area-based vintner and chocolate maker behind Scharffen Berger Chocolate, the company credited with starting the American craft chocolate movement in the late 1990s. Hershey acquired Scharffen Berger in 2005 for around $10 million.
The CocoTerra team approached the industry godfather-like figure essentially as a cold call, and their risk paid off. "I saw the machine, met the management team and the engineers, and, most importantly, tried the chocolate, and went, 'Geeze, Louise! This is really good,'" says Scharffenberger, who is now a CocoTerra investor.
During a private demo last June at a cooking school in Santa Monica, Saal turned several scoops of nibs into snappy solid chocolate in just under two hours. CocoTerra's design breakthrough is a refining mechanism that uses stainless steel ball bearings to grind nibs into the tiny building blocks of chocolate. An active cooling system controls the temperature during the essential tempering process, which transforms liquid chocolate into solid form. The device also has a spinning centrifuge to dispense and mold chocolate into a unique ring shape of approximately 250 grams that can be broken up or eaten whole.
A companion app guides users step-by-step and includes recipes to tailor-make chocolate down to choosing the origin of the bean (as with coffee and wine, different cacao regions produce distinct flavors) and the cacao percentage (lower is sweeter).
Rather than positioning themselves as a David in an industry of chocolate Goliaths, CocoTerra chose to ingratiate themselves and work from within. Early on, Saal and Alter joined the Fine Chocolate Industry Association to meet and learn from various experts. They solicited advice at classes, and attended important chocolate events like the Northwest Chocolate Festival to establish relationships with farmers, chocolate makers and suppliers.
"The chocolate industry, especially at the craft level, is very open and collaborative, as is the consumer tech industry," Alter says. "People are excited about their craft and are happy to share learnings with new players. We went to chocolate, food and food tech conferences, worked our own networks, took advantage of most invitations that came our way. One thing leads to another. You just need to be willing to put yourself out there and be respectful of others' knowledge and time."
The company also chooses not to limit consumers to one specific chocolate brand or supplier the way, say, Nespresso does with its coffee pods. "It was never, 'Hey, look out chocolate world, we're coming after you," says Alter. "Our attitude was partnering with us is good for everyone. We're raising awareness about a chocolate-making process that everyday consumers don't know much about."
"As an industry, I think we are always up for new ideas that are shown to work, but a good story without proof doesn't get very far," says Greg D'Alesandre, Cacao Sourcerer of Dandelion Chocolate, another early tester who overcame skepticism and is now a CocoTerra collaborator. "The thing that impresses me most is how knowledgeable and driven Nate and his team are. They had an interesting basic concept with the vision to follow through and overcome whatever challenges came up."
CocoTerra does not yet have a release date, though a source with knowledge of the company said the first units should be available by next year's holiday shopping season. The plan is to sell direct to consumers at first with hopes to partner with retailers such as Williams-Sonoma over time. Saal says the company has raised more than $2 million in investments from "people who are excited about the potential for a table chocolate-maker, either because they love chocolate, or have relevant experience in related industries--food, wine, cacao--or have worked with us before, or just believe we can make it happen."
Now the test will be whether home consumers are ready to add another make-it-at-home gizmo alongside their ice cream and bread makers. For success on a large scale, some analysts say CocoTerra will need to partner up beyond the smaller craft chocolate market, with a company with global reach, such as a Nestle.
"I anticipate some niche appeal among chocolate and cocoa enthusiasts initially, but significant market traction is unlikely unless a top six chocolate player acquires or licenses the technology," says Oliver Nieburg, sustainable food and drink analyst at Lumina Intelligence, referring to the big confectionary conglomerates. "That said, an at-home artisan chocolate maker may offer consumers an alternative to the conventional sugar-laden candy bar."
Even after five years of R&D and the jitters that come with going all-in-one on a single product, one simple thought keeps CocoTerra going: "People love chocolate," Saal says. "The enthusiasm for it is off the charts. If we can add to that enthusiasm by getting consumers more involved in this passion, we're no longer in the chocolate business. We're in the happiness business."