Guessing The Future
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Hello and good day! Even in the midst of our busy holiday season rush, we are forced to think about the future. The new cacao harvest will begin again in just a few weeks. Every cacao seed that we purchase from our cacao farm partners requires that we float dollars into the world that we won't see again for 8 months. This is part of our business model. The only way to cut out middlemen such that we can pay cacao farmers high premiums for their crops while still offering affordable prices to our customers is to finance the entire supply chain ourselves, from the very beginning to the very end. Because of this reality, we are constantly making bets about how the world will look eight months from now. I daresay, we've become pretty good at it. We have to be, or we'll go out of business. Given that we've managed to survive for 16 years, I think we are a fairly reliable source of an eight-month leading forecast about the world. And we don't just guess. We stake a lot of money on our predictions. Here are a few things that we feel pretty certain we'll have to contend with. First, there will be an El Niño. Crazy weather conditions will make life very hard out where we buy cacao. Flooding will impact every single phase of our operation. The dirt roads that our buying team uses to visit cacao farms will turn to mush. The roads that we use for exporting cacao out of the jungle and through the Andes mountains will be blocked by mudslides. Once our trucks are west of the mountains and traveling down the normally bone dry northern Peruvian coast, the roads will also be washed out by excessive rain fall. Because it is almost always dry along the coast, there isn't a good drainage system. Standing water will makes some stretches of the freeway unpassable. In short, we are going to have a logistics fight on our hands from the word go. We're used to these kinds of battles by now. But you still have to get your mind right for them and not pretend they aren't waiting for you. There will be delays and we will have to steel ourselves to the reality that our dollars might not come back to us in eight months. It might take ten or eleven months. Second, there will be ongoing wars. This is one of the safest bets in all of human history. Just after Russia invaded Ukraine, all hell broke loose on our logistics. Prices spiked. There were shipping container shortages. Certain ports were shut down and their shipments were rerouted to the ports that remained open. This created tremendous backlogs and confusion at ports that normally operate smoothly. The ports of Rotterdam, in the Netherlands, and Antwerp, in Belgium, became chokepoints, as they are the two main ports used for exporting goods from northern Europe. A while back, a big cargo boat was stuck in the Suez Canal, which runs through Egypt, and allows shipping from the Mediterranean to head due east for Asia. When that happened, Mediterranean countries sent their shipments north. We had a shipment leave just one day before the chaos began, or we would have been delayed by two months. During calm times, boats go south through the Suez Canal, down the Red Sea, and then have to navigate out of the notorious Gulf of Aden. The Gulf of Aden has been in the news a lot over the years for pirate attacks. In the past, most pirate attacks have been carried out by Somali pirates, but lately, there is news of attacks coming from Yemen, carried out by Houthi rebels. This will probably escalate over the next eight months. More shipping will head north, and we are going to have to be very opportunistic about getting our chocolate shipments out of Europe. The magic word will be yes. Yes, to price. Yes, to date. Yes, we approve. Yes, line it up right away please. The third thing we have to guess about is our kitchen. The lease will be up in 2024 and it is very likely that we'll have to move our entire manufacturing operation during the summer. That is a lot of work and a big decision, because we'll probably be tied into at least a five-year lease wherever we go. We believe that we must pursue additional oven capacity. In our current location, we have limited venting that does not allow us to use ovens as much as we'd like. There are several great products that we'll never be able to put online with our current set up because we can't run enough volume through our miniscule ovens. One of our long-standing goals is to have our online shop match our retail locations in terms of product selection. If we don't find the right place in time, we'll have to renew the lease in our current place. And this will require us to make investments in upgrades. So, we have to guess. Do we spend the money on upgrades now? Or do we wait it out with faith that we will find the perfect new place in time? If our goal is to maximize customer satisfaction, which it always is, we need the proper facility to make that happen. If I had to lay a bet today, I'd bet that we'll be moving our entire set up to a new place in the middle of the year. Finally, before signing off, I'd like to point out that certain principles are timeless. Conditions change, but fundamentals don't. The core of our business is to support our cacao farm partners by paying them the highest possible prices for their cacao, while also providing world class chocolate products to our customers at fair and affordable prices. We navigate a topsy turvy world, making adjustments, changing our approach every eight months, with unchanging goals. The concept of adjusting to conditions while leaving core long term goals unchanged has wide application. The world will never be static for us. It will always be dynamic. But what we stand for can be bedrock. We also feel it's a safe bet that people will still love really good chocolate in eight months' time. Thank you so much for time today. I hope that you have a truly blessed day! Adam Click here for wonderful chocolate made with pure Nacional cacao. Follow us on Instagram - @fortunatonochocolate |
