The Austrian chocolate maker Zotter puts social responsibility before maximum return and demonstrates that short-term profits and sustainable long-term growth are not mutually exclusive

The late “sausage-mustard-praline” flavor interred at Zotter’s cemetery of ideas.

Anyone who has visited its chocolate factory in Bergl, east of Graz, can attest to Zotter’s eccentricity, social philosophy and humor. There’s the introductory film at the “Choco-Shop Theater,” tastings of raw-cocoa and chocolate confections, the “Edible Zoo” (a 67-acre organic farm and self-supplied restaurant), and the array of solar panels that energize the entire compound. No question about Zotter’s USP (unique selling point).

Then there’s the “Cemetery of Ideas” – an ironic memorial to Zotter’s best-intended, though perhaps overly ambitious, recipes. Buried here, under chocolate-bar shaped tombstones and graveyard candles, are the flavor creations born of divine, but shortlived, inspiration: pink coconut with fish gum (d. 2012); salt, tomato and goat cheese (d. 2001); peanuts and ketchup (d. 2011); and many other disconcerting combinations.

It begs the question, “what were they thinking?”

However, it also reflects the thought and passion that have gone into building the Zotter brand. Such short-term “missteps” have never hindered the longer-term vision of this family-run business. Founded by Josef Zotter and his wife, Ulrike and dedicated to core principles of quality, creative innovation, variety, fairness and sustainability, Zotter has grown into a SME (small and medium-sized enterprise) with annual turnover of €20 million and 160 apparently happy employees. Ranked among the best in the world, its chocolate is sold in some 4000 outlets worldwide.

Going against business orthodoxy, Zotter measures growth according to core principles rather than maximization of profit. “Of course you need to make a profit to reinvest in your company, but I don’t define my success on my revenue figures. You can’t eat money,” Zotter says. “I don’t need to grab more market share. I just need better customers who value fairness and sustainability.” He prefers to remain a small, steadily growing business supplying a niche market that will pay a premium price for high-quality, fair-trade products.

Zotter is and will remain at the top of the world-best chocolate manufacturers and by far the most innovative chocolatier of all.

– Georg Bernardini, Chocolate – The Reference Standard

Ever the contrarian
Everything about Josef Zotter seems to go against the grain. He follows his passion rather than a business plan, yet he micro-manages every step of the production process. He travels around the world to source his cocoa beans and other ingredients directly from the farmers, paying them above-market prices to help ensure a high-quality, ethically produced supply.

Josef Zotter with Mayan cocoa farmers in Belize
Josef Zotter with Mayan cocoa farmers in Belize

 

Instead of confining himself to only a few varieties, he offers a bewildering assortment (365 products) that can make choosing a stressful experience for buyers. To accommodate 100 new varieties each year, he takes best-sellers out of rotation, provoking loyal customers into trying out new things. “It costs a lot of money to keep best-sellers on top – look at what Apple must do to keep its iPhone market share – and this comes at the cost of innovation,” Zotter told METROPOLE.

This is a labor of love, and Zotter is here by choice. In 1987, he quit his job as head chef at Vienna’s Hotel Imperial and opened a pastry shop in Graz with his wife. In a back room, he started making artisanal chocolates by hand and hired an artist to design the packaging, which helped differentiate his product from competition.

The couple opened three additional shops, but by 1996, they were insolvent. Josef recalls, “Ulrike said: ‘Well, so let’s do the confectionery, because I’m not really sure whether the chocolate really works.’” Ever the contrarian, he replied “Okay, so we’ll make chocolate.”

Back home in Styria, the chocolatier is still part of every step of the production process and involves the whole family in the enterprise.
Back home in Styria, the chocolatier is still part of every step of the production process and involves the whole family in the enterprise.

Re-launching on a shoestring
In 1999, the Zotters opened their chocolate factory in a barn on his parents farm in Bergl. Word about his product spread. “There wasn’t even a sign, but people used to knock on my mother’s door and ask if they could buy chocolate.” They expanded the facility to meet rising demand, building a state-of-the-art workshop and tasting facility – the first step to creating transparency, openness and close contact with customers.

After traveling to countries where cocoa beans are farmed, the Zotters began to institute social-enterprise principles into their supply chain. By 2006, they used only fair trade, organic sources and, by 2007, began producing “bean to bar” – from the raw cocoa pod to the elegant packaging – and turned the factory into a tourist destination that attracted 265,000 visitors in 2015.

Between 1999 and 2009, the Zotters invested €18.5 million into their physical plant, all reinvested profits. Once burned, twice shy. In 2010, their story became a case study at the Harvard Business School. Two years later, Zotter published his own memoir, Kopfstand mit frischen Fischen: Mein Weg aus der Krise (Headstand with Fresh Fish: How I Got Over the Crisis). Being unconventional has helped them survive. Zotter has taken advantage of emerging trends toward premium, high-cocoa content (and even vegan) dark chocolate – lower in sugar and fat and high in anti-oxidants. With its Fairtrade certification and ethically sourced organic ingredients, Zotter has also capitalized on heightened consumer concerns about food safety and environmental sustainability.

When I look back at Zotter’s recipe for success, then I must say that I’ve done exactly the things we were convinced of…We have simply always been honest.

– Josef Zotter

Both the case study and Zotter’s memoir question how the company could grow without destroying
what makes it special. “I tried to convince the Harvard people that the market is not divine. Actually, the market is stupid and doesn’t know what it wants,” Zotter said with a grin. “I believe that if you have talent and passion, whatever you bring to market will eventually find a niche. If I asked the market if they want insects in their chocolate, of course they’d refuse! “But we make chocolate according to what I want and it sells!”


 

zotter Schokoladen Manufaktur GmbH
Bergl 56, A-8333 Riegersburg
(0 3152) 55 54

Factory tours and tastings:
May to Oct: Mon-Sat, 09:00-20:00
Nov – Apr: Mon-Sat, 09:00-19:00

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American expat Michael Bernstein moved to Vienna in 2001, abandoning his previous career in arts administration. He is now a freelance writer, editor, translator and Internet Marketing consultant. He was a regular contributor to inventures.eu — an E-zine about the Austrian/CEE startup scene — and was Lead Editor for its 2015 Ventures Almanach. Photo: Visual Hub