Hello and good day!
Throughout 2021 and 2022, COVID and then the outbreak of war in Ukraine gave us a couple of really hard years managing logistics.
During COVID, ecommerce surged while port workers were sent home to stem the spread of contagion. This caused congestion at ports and container shortages. Shipping prices doubled on us. We experienced all kinds of unusual delays.
A freight company lost a container of our cacao in the giant complex at the port of Rotterdam. The container was worth hundreds of thousands of dollars. Somebody forgot to scan the barcode and without barcode scanning, every container looks exactly the same. That strung us out for several months and we ended up running out of chocolate in the United States.
The war in Ukraine caused gas prices to spike in the midst of still lingering COVID shortages. Our shipping prices went even higher. Coordinating logistics is a big part of the work we do.
From cacao trees on remote farms to our jungle post-harvest processing facility, in pickup trucks. From our post-harvest processing facility in the jungle to a mid-sized agriculture town on a small freight truck. From the agriculture town up and over the Andes mountains and down the northern Peruvian coast to Lima on a bigger freight truck.
On a cargo boat from Lima to Rotterdam. On river barges and freight trucks from Rotterdam into the Swiss Alps to manufacture bricks of chocolate. From Switzerland on trucks to Antwerp, Belgium. On a boat from Belgium to Houston. On a freight truck from Houston to Issaquah, WA.
As I've mentioned many times over the years, we're one of the few companies in the world who owns cacao throughout the entire supply chain. We buy cacao off of trees, do the post-harvest processing ourselves, and we maintain ownership of the inventory until our customers purchase products directly from us. We don't sell through distributors into large retail outlets and our products aren't available on Amazon.
The upside of all this is that we can offer an exceptional chocolate for a fair price because we've cut out all the middlemen who normally occupy the chocolate supply chain. And we can do this while voluntarily paying ten times fair trade premiums to our cacao farm partners.
We've consistently paid huge premiums for cacao over the last 15 years, and it has had a substantial, positive, economic impact on the lives of hundreds of cacao farm families.
The downside to our approach is that we hold inventory for a very, very long time. Under perfect conditions, it takes 7-8 months from the time a cacao pod is cut off a tree in Peru until the time we receive finished chocolate in our facility in Issaquah, WA. That means we lay a dollar on the line in January and don't get it back with our profit until August at the earliest. The profit is what we use to pay our employees in the United States and to pay ourselves.
But August is a hot month. Our online ecommerce business is low during the summer because chocolate melts in transit. As such, a dollar spent on cacao in January might not find its way back to us until October or November.
It has taken us 15 years of reinvesting profits to accumulate enough capital to fund this whole thing year in and year out. We don't have any outside investors. We are a family business, wholly owned by family members.
If we run out of chocolate due to choppy logistics, especially in fall or winter when online ecommerce picks up, it can become a wild ride.
For the most part, 2023 has been smooth sailing logistically. It has been reminiscent of the years leading up to COVID when we had our systems all worked out and things were running like clockwork.
However, over the last several weeks we find ourselves running into a problem opposite of what we've been dealing with during the last couple of years. Demand for cargo boats is declining rapidly. From our vantage point, it looks like the global economy is slowing down. Shipping prices are half of what they were last year, which is good for our pocketbooks.
But the quirkiest thing just happened. In 15 years, we've never seen this, and we don't know how it will play out. Cargo boats are leaving ports partially empty and then stopping at other ports to consolidate their loads.
A shipment of chocolate that is very important to us left Antwerp, Belgium a week ago. All shipments are important, but this particular shipment is what will get us through the holiday season. The weather is cooling now in most of the country and online ecommerce will pick up soon.
We have about a three-week window for that shipment to arrive before we'll run out of chocolate. Late last week, we received an unexpected notice that our container has been unloaded in Le Havre, France. We've never done any business in Le Havre. We have no experience there and we don't know anybody at that port.
It is supposed to depart on a new boat in one week, which will be fine if all goes according to plan. But if it doesn't....oh brother.
Before signing off, I want to point something out. Few things go exactly according to plan. This is true of being a business owner and it is also true of life in general.
We've dealt with so many business hiccups over the years, that we've become expert at setting our jaws, clinching our teeth, and facing down challenges. One thing that helps me in these situations is remembering that all good stories have conflict in them.
This morning I read about a football game that took place last night. One of the teams was a heavy favorite. The underdog was up at the end with just a couple minutes to go. It looked like a big-time upset was in the works.
Miraculously, the favorite drove down the field from their own two-yard line and punched in a touchdown with thirty seconds left on the clock. They needed a two-point conversion to tie it up, which they were able to convert.
The favorite ended up winning in overtime. The stadium erupted and the crowd stormed the field. Here is an interesting question to ponder. Which games will the players remember 20 years from now? What about the people in the crowd?
Will they remember the times when the home team won easily? Or will they remember and cherish the times they had to fight and scratch and claw like hell to overcome adversity?
We don't desire adversity. We'd prefer that our chocolate wasn't held up in Le Havre. But ten years from now, when we look back, this will be the shipment we'll remember, and we'll be proud of ourselves for handling it well.
This is the silver lining of facing hard challenges. They become the stories that build your confidence down the line.
Thank you so much for your time today.
I hope that you have a truly blessed day!
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