I rarely take a public position when it comes to chocolate companies, but a recent statement in a BusinessInsider.com video brought me up short. Before I go on, I do have to say that what Rick and Mike - and everyone involved - have done is phenomenal. They were in the right place at the right time with the right product with the right ethos, capturing the cultural zeitgeist perfectly - guiding and riding it expertly.
But I have never been a huge fan of the chocolate they make, or more properly, their skills as chocolate makers. I don't mind vintaging in wine where the differences in a particular bottle occur from year to year. My issue with the Mast Brothers stems from the fact that I never know what I am going to get from batch to batch of what is ostensibly the same chocolate. If I find a decent bar and go back several weeks later to get another of the same, it will be different. Sometimes very different. And sometimes difficult to recognize as being the same chocolate. Yeah, I know, small batch variability and all that. When the Mast Brothers are on, they turn out good chocolate - but too often I am left wondering what all the fuss is about. I've even had bars with rancid nuts, purchased fresh from the factory store.
Going back to the video: At just after 3:00 minutes in, Rick claims that they've paid up to 10x the average price for commodity beans (and 3x-5x market price more generally).
Last Friday's spot closing price was $2352.94 per MT (metric ton, 1000kg), down from over $2800/MT in November, 2011. If what Rick is saying is true, then at some point in the last six months they paid between $23,000 and $28,000/MT for beans. 18 months ago, 10x market would have been nearly $40,000/MT.
Really? I'd like to see the paperwork supporting those claims.
If it's true, and the farmer actually received 10x market for their beans, then that's good news and I will be the first out the gate to let people know about it.
But - if it's not true - what are the implications and potential ramifications for the craft chocolate industry? Not just for the Mast Brothers, but for every craft chocolate maker who is trying hard to improve the lives and livelihoods of the cacao farmers they source from.
Do some math. Is it possible to pay $25,000/MT for beans and make a 2.5 oz (71gr) bar of chocolate that can be sold (profitably) for $7?
At $25,000/MT raw, whole beans in multi–ton quantities cost about $11.35 per pound. By implication in the video, that money is paid to the farmer and therefore would not include customs, insurance, freight, and other costs, so the calculation understates the actual landed price of the beans and therefore the following cost basis is low.
Assume an 80% yield on those beans (i.e., every 100 lbs of beans yields 80 lbs of usable nib after roasting and winnowing - this is generous) raises the price per pound of nib to about $14.15. Assuming a 70% cocoa content chocolate, that means that the cost of just the cocoa nib component of a pound of chocolate is north of $9.90 - also assuming zero loss in the process of making the finished product.
For what its worth, I paid $11 for a bar of their single origin Dominican Republic in Los Angeles, one of the only places I have seen it in my area (not that I have scoured the state for it, but its not for sale in my town).
If they are paying those prices, and its true that they process about 1 full bag a day (~50,000lbs/year; according to an interview--I need to get a reference for it though), that is a lot of money per year to shell out, especially when picking it up by sail boat!
Highly unlikely those prices were paid anywhere, to anyone....
premium prices run about $5k+ a MT for FTO....and they arent saying they use FTO are they?
Do farmers get such high prices for Fair Trade Organic cacao? This price seems more like what you would pay for a superior grade cacao. I was under the impression that FT cacao could bring a premium of about $150 above the commodity price... and I would be surprised to hear that Organic added such a premium to cacao. Assuming a $2-3K per metric tonne price...
My understanding is that paying $5K per metric tonne is a very handsome price. Never mind paying $20-30K per metric tonne.
Farmers in the Dominican Republic who are members of farmer's cooperatives get the market price for the cacao. The benefits are access to fermentation centers, technical assistance, ability to get certified organic and 10% of the profits from the cooperative go back into community projects. No other real advantage from what I have learned so far. The major cacao producers are also establishing similar relationships with the more medium sized farms. There are other certifications which they qualify.
I will be looking closely on how cacao is graded coming out of the farm and the price differentials. From what I have seen so far, have control over harvesting and fermentation are the key components out of control of most chocolate makers working with Dominican beans. The Rizeks are probably more advanced on a large scale, in creating a fine cacao which can identified from the farm. I know there is sourcing for cacao beans at the cooperatives but do not know to what extent. So much of what everyone handles is bulk cacao and will looking at how higher graded cacao is sourced.
I do know of three other individuals/groups who are also harvesting, fermenting and handling the entire process up to chocolate in the DR and the US.
From what I have been told, the differential for fermented cacao is about US$800 per ton above commodity prices. Any price above that is news to me.
Theoretically it IS possible to pay that much for cocoa beans and still make craft chocolate at a profit. The finished price of the chocolate per lb (transport costs included) will be somewhere around $12-13 per lb. Given that their bars are 70 grams +/- they will get 6.5 bars per lb and at $10 per bar that's $65 per lb retail, putting their food cost at roughly 20% - 10% lower than the standard in the food industry.
Personally, I think paying that much for cocoa beans is foolish, and bragging about it is even more foolish.
The most I've ever paid for cocoa was $10k USD per ton for my Chuao, but that also came with the ability to say that it is the legendary chuao. Jeff is correct that the average for premium beans is around $5k per ton.
This is of course just my opinion.
I am still amazed what folks will pay at POP retail for chocolate. That, in itself, leads me to believe that the education of the consumer, through both private and public channels, has reached a noteworthy state.
As far as claims made about the cost of purchasing beans at a super-premium price, let's allow the truth to filter to the surface instead of digging for it. We must be professional in our pursuit of excellence and careful about the time spent monitoring the activities of others. Big world, lots of customers, do what you do and stay the course.
PS - look to Guatemala for some big breakthroughs in both crop maintenance and drying/fermentation practices in the next two years. Some money is being invested and it will improve the quality of their already interesting bean crop.
good point jim. It is very easy for those of us making chocolate to be nit picky and catty about what others do in this industry. Its really none of my business what the mast brother pay or say they pay for their beans.
It is true that we shouldn't care about what they say they are paying, but the members of this community are the only ones that are going to catch that type of exaggeration, one which would otherwise leave the general public thinking the Mast Brothers are saints pouring money on poor farmers, which could potentially sway consumers to choose them over X, Y, or Z chocolate brand....exaggerating a fishing story is one thing, but it is a little different when you're talking about what your business does (remember the debate over whether TCHO is bean to bar?).
I also agree with Jim that there is no reason to dig up dirt, but the statement was made in public, so to me its fair game to pick apart, as long as everything stays factual.
After watching the video I don't get the impression that he implies the 10x price common or even paid to the farmer itself.
He seems to mention they have paid up to 10 times the regular price, but not necessarily that it is the regular practice. I guess finding a unique origin or testing new ones can justify paying a 10x higher price for beans. If you look at online sources for fine beans, prices are way over the regular market price. This is a good way to familiarize oneself with new beans.
There are a number of very interesting points here - which was the purpose of making the post in the first place, to encourage discussion on what I find to be a very interesting and surprisingly (to those not familiar with cocoa pricing) controversial. To make people THINK about how fine chocolate is being marketed.
It's important to keep in mind that most of the people who watch the video are not sophisticated and don't know what paying 10x market price means in dollar terms - and will neither question the assertion or think about what it means. They will naively assume that the farmers are getting all (or at least the major part) of the difference and that the Mast Brothers are making great strides in supporting the farmers wherever they buy their cocoa beans - when in actual fact they may not be. This makes it more difficult for other chocolate makers who (now) may be called upon to "justify" the "low" prices they pay for their beans.
I will argue that the assertion (paying 10x market price) without any supporting context is harmful to everyone - consumers, chocolate makers, and farmers.
Over on Twitter the following points were brought up by Colin Gasko:
1) Just mentioning a price, out of context, raises expectations in a potentially very unproductive way. [ Farmers are competitive and when they hear that someone is getting a higher price than they are, they want to get the higher price. When the higher price is "justified" as a result of an external certification that requires extra work, the difference can be explained in a way that the farmer can understand. If they're willing to make the investment, then they can earn the higher price as well. ]
2) The increased price has to be tied to something tangible - preferably an increase in quality and consistency. [ Paying for nothing accomplishes very little, and, counterintuitively, may do more harm than good. ]
Context is important. Without context it's impossible to assess the meaning and value of the assertion. It should be easy to provide the context - what about it, Mike and Rick?
This is a very interesting topic, but in what way are their claims any different different than "re-melters/Fonduers" claiming to make chocolate when all they make are confections out of chocolate, or large companies claiming "artisan" products, or using "fair trade" or "organic" as a marketing tool?
If it were Nestle' or Cargill, or Callebaut who started boasting about prices paid such as that I would be concerned, and I'm sure someone would call them to task. However, the Mast Brothers following / production capacity is so infinitesimally small in the whole grand scheme of of even New York chocolate consumption (let alone US chocolate consumption), that it will have virtually no impact on what happens in the chocolate industry.
For those of us who are in the industry, actually "making" chocolate, it's good to know what others are doing and saying, and at the very least prepare our answers if the question arises. However, the overall impact of what a micro chocolatier says or does hardly creates a ripple in the pond, so my position is why worry about it? I think I'll wait to circle the wagons when Nestle' makes such an outlandish claim.
Someone wise once told me to stop sweating the small stuff....
Just my thoughts...
Here on TheChocolateLife we discuss many things that are not necessarily interesting to members of the general public.
You are right when you say that claims like the Mast Brothers will have little to no affect on the chocolate industry as a whole, but it has, and will continue to have, a huge effect on the craft chocolate community here in the US, as well as on foreign companies who do business here in the US. Any deliberate misrepresentation is an issue.
Using Fairtrade and organic as greenwashing techniques is insidious, and ultimately, misunderstanding about the value that fair trade and sustainable initiative actually deliver affect people's lives in more direct and harmful ways.
I have brought (and will continue to bring) to the community's attention issues that I think are relevant to the community because I believe - just by the act of becoming a member - people have signaled an interest in these larger issues.
I have to disagree that what a micro-chocolatier says or does hardly creates a ripple. Take a look at the press the Mast Brothers gets. Pay attention to the channels they are in. People listen, pay attention, and measure others' performance by what they say. While the effects may not be seen in the supermarket or on Nestle's or Mars' bottom line - it does affect other craft chocolate makers and the people who really do care about the evolution and growth of the market.