THE SWEET SPOT

Despite little name recognition, San Francisco chocolate maker Guittard has managed to survive competition from both the Davids and the Goliaths.

For many, the arrival of Scharffen Berger’s bean-to-bar chocolate bars some 20 years ago—with their $10 prices, quirky origin stories and artsy wrappers—marked the starting point of the craft movement in American chocolate. For Gary Guittard, president of Guittard Chocolate, Scharffen Berger’s arrival marked something darker. “I smelled something dangerous for us,” Guittard says.

Scharffen Berger, using old world artisanal methods and rare cacao beans, upended an industry that had turned to industrialized manufacturing and cheaper ingredients to reduce costs. Over time, Guittard acknowledges, his company and others had “washed out a lot of the flavor in the beans.” The marketplace responded to the new brand with wild enthusiasm, says Guittard, 71, who concluded, “I needed to make changes in order to survive.”

He spent the next four years experimenting, a process Guittard says nearly did him in. Founded by Gary’s great-grandfather in

San Francisco in 1868, E. Guittard & Co. Chocolates & Cocoa survived the 1906 San Francisco Earthquake, the Great Depression and the sudden deaths of Gary’s father and brother, then the company’s president and its designated heir, respectively. The challenge posed by Sharffen Berger was to refine and reengineer manufacturing techniques to produce the kind of flavor found in artisanal batches but on a larger scale. “I almost lost my mind trying to duplicate that,” he says. “I went back to the way we made chocolate 100 years ago.”

In short, Guittard managed to find a sweet spot by using types of beans the company hadn’t used in decades, old family recipes and some new processing techniques. He could make chocolate with better quality than the big guys, and he could produce that chocolate in quantities that artisanal makers couldn’t match. In the $22.4 billion American chocolate market, Guittard generates more than $100 million in annual revenue, far behind Hershey and Mars, which together make up about three quarters of the U.S. market, but substantially more than smallbatch makers like Askinosie, Dandelion and Madécasse (Hershey acquired Scharffen Berger, then generating an estimated $10 million, for a reported $50 million in 2005). Today, Gary says, the company is profitable but chocolate-making remains capital-intensive, and he plows an aver-

Gary Guittard’s business has built key relationships, like one with a certain Seattle coffee chain.