Fair-trade Theo Chocolate fairly booming
Theo Chocolate recently spent more than $1 million on new and refurbished equipment to quadruple its production. It needs to keep up with demand at more than 4,000 stores nationally, from Whole Foods to REI to top-tier Safeway and Kroger stores.
Seattle Times business reporter
History: Launched 2004 by Joe Whinney and Debra Music. Started making chocolate 2006.
Owners: About 50 shareholders
Factory: Old Redhook Brewery, 3400 Phinney Ave. N. in Seattle’s Fremont neighborhood.
Tours: $6 per person. Reservations online and at 206-632-5100
Theo Chocolate used to be small enough that when TV crews and others needed quiet while taking a tour, it could shut off machines for a while.
It cannot afford to do that anymore.
At the old Redhook Brewery in Fremont, where Theo has operated for seven years, cocoa beans are roasted, skinned and ground into smooth, bubbly chocolate up to 24 hours a day depending on the season.
Sales have risen 40 percent annually for the past two years and are expected to pass $12 million for the fiscal year ending in June. The company recently spent more than $1 million on new and refurbished equipment to quadruple its production.
It needs to keep up with demand at more than 4,000 stores nationally, from Whole Foods to REI to top-tier Safeway and Kroger stores.
Theo carves out its own identity by being one of the only companies in the country making chocolate bars from organic, fair-trade cocoa that it sources itself.
Founders Joe Whinney and Debra Music insist that, unlike other popular, high-end chocolate-makers, they entertain no thoughts of selling.
Many once-small chocolate brands now belong to the world’s largest candy makers. Kraft Foods owns Green & Black’s Organic Chocolate, and Hershey bought the Bay Area’s Scharffen Berger Chocolate Maker in 2005 and Dagoba Organic Chocolate in Oregon in 2006.
"Selling the business off doesn't make any sense to me, because there's an opportunity for us to create something that long outlives myself or Debra or anyone else involved today," he said.
His goals are big — to help malnourished, undereducated farmers and their families, while demonstrating how to build a profitable business that does good in the world.
“Fair for Life” label
Much of Theo's new equipment sits in a space the company once leased to a small circus.
Now it houses four 12,000-pound chocolate holding tanks painted spring green, plus a giant machine that turns unformed chocolate into bars at a rate of 1,200 pounds an hour. They are expected to come online this spring.
The new chocolate-bar maker also incorporates nuts, dried fruit and flavorings — in chocolatier speak, “inclusions” — that currently are added by hand.
Theo has 84 employees and has certified its Fremont factory and its cocoa-supply chain as “Fair for Life,” a certifying label of the fair-trade movement.
A Washington, D.C., nonprofit called the International Labor Rights Forum recently accused Theo of trying to prevent union organizing in 2010 and said it didn’t deserve the label. Whinney called the report “fictional,” and its Fair for Life certifier released a detailed response in which it accused the nonprofit of conducting a biased investigation.
In some ways, the label is not necessary, because Theo has long bought cocoa directly from farmer cooperatives rather than distributors. It even posts its prices online and says it pays more than twice the conventional market price for cocoa beans.
But consumers like to see third-party verification from a trusted source like Fair for Life, Whinney said.
“Consumers want a simple story,” he said.
Theo delivers that on many fronts. One way is the story it tells during 50 to 80 factory tours each week at which it shows how cocoa is grown, bought and turned into candy — which the visitors also sample.
Perhaps most important is the playfulness of Theo’s packaging and flavors, said Melissa Abbott, senior director of culinary insights for the Hartman Group, a food-consulting firm in Bellevue that has not worked with Theo.
Theo’s national following “has a lot to do with taking the seriousness out of it,” Abbott said. “Their bread and chocolate bar has a playful savory bread and chocolate flavor that echoes forward-thinking chefs who are re-imagining bread pudding nowadays.”
Abbott said customers care about treating farmers well and reducing pesticide use, but they care more about product quality.
Sometimes hitting the organic, fair-trade message too hard can backfire, giving people “an idea of patchouli and moss and grain bins” that is not always associated with good flavor, she said. “Theo has an undercurrent of cocoa beans being sourced from reputable places, but it’s not the overarching message.”
That bread-and-chocolate- bar label includes a drawing of two cats, both wearing heart necklaces and one with butterfly wings. They are alongside the U.S. Department of Agriculture Organic and Fair for Life logos.
Its roughly $3.99 price tag for a 3-ounce bar puts Theo in a rarefied league well above Hershey bars, but below some high-end chocolate. A 1.1-ounce bar from Fran’s Chocolates, also made in Seattle, sells for about $3.39.
“There is a lot of very, very expensive chocolate out there that is totally unrelated to the cost or the production of raw materials,” Whinney said. It is related, instead, to “the desire for margin and profit.”
“I was losing money”
Whinney does not hold back about the vagaries of the chocolate industry and consumers’ responsibility to make ethical choices when they buy food.
He got into the business after spending time with impoverished cocoa farmers in Belize.
After dropping out of high school and sailing the Gulf of Mexico waters with a friend, he decided to “do something meaningful with my life” and volunteered for a conservation group that worked in Mayan communities, where he first met cocoa farmers.
“It became clear that something had to be done. Not only was the rain forest and the culture endangered there, but I learned that it was endangered all around the world,” Whinney said.
In 1994, Whinney helped create the U.S. market for organic chocolate by sending cocoa beans from farms in Central America through a Brooklyn chocolate-maker to customers, including Cascadian Farm and Newman’s Own.
Eventually, he realized he needed his own factory to buy directly from cocoa farmers.
“There were so many margin slices taken out in the supply chain that I was losing money paying farmers what I thought was a good price,” Whinney said.
Consumers have to be willing to pay more as well, he said. “They have to value it. When you look at the cocoa industry — most food industries — the real cost of that product is totally externalized.”
Whinney was shocked by the reaction of the World Cocoa Foundation to reports about child labor, trafficking and slavery on cocoa farms around 2000, when he sat on its board.
“All they wanted to do was spin it,” he said.
CNN reported in January that, despite industry promises, little has changed.
Bill Guyton, president of the World Cocoa Foundation, disagrees. “Much work remains to be done before we can declare victory,” Guyton said in a written statement, “but significant progress is being made through public-private partnerships that educate cocoa farmers on how to identify and avoid the worst forms of child labor.”
Cocoa from Congo
In 2004, Whinney tapped ex-wife Music, who remained a friend, to help create Theo, which is named for the cocoa plant, Theobroma cacao.
Their chief scientist, Andy McShea, is working on a new product that includes theobromine and polyphenols — the parts of the cocoa bean that are considered healthy — without the fats.
Initially, it would be sold to other companies for use in supplements and foods, after which Theo might create products using the ingredient under its own brand.
These days, Whinney travels mostly to Africa to help farmers affected by the continuing conflict in the Democratic Republic of Congo.
Theo buys about half its cocoa beans from the Congo and donates a portion of sales of its Congolese chocolate bars to the actor and director Ben Affleck’s Eastern Congo Initiative.
Whinney has visited Congo nine times since the partnership started two years ago, working with nonprofits and others to build a cocoa supply chain.
As usual, he does not take malaria pills or many preventive shots.
“What you get in Africa, you treat like you would a cold here,” Whinney said.
Music rolled her eyes and smiled. “He has more near-death stories than anyone.”
Melissa Allison: 206-464-3312 or firstname.lastname@example.org.