My father used to say, ‘don’t focus on the money; focus on the passion, and the money will come anyways’. So, after researching Tony Chocolonely’s journey, I would have to agree.
They describe themselves as an impact company. Almost every financial report you read states initially, “although we don’t focus on money”. Instead, it’s just a “means to an end” before they divulge their unequivocal growth of more than 10X+ in 10 years.
They are an example of a company that walks the talk on living their mission of ridding the chocolate industry of slavery and child labour, providing a fair deal to all whilst achieving astounding financial results.
Here is an extract from the ‘Annual Fair Report’:
The company’s financial performance has been impressive. Ten years ago, the company had a turnover of less than €1 million. Today, they turnover over €100m with a growth rate of 24% and a healthy and growing gross margin of 46%.
In the Netherlands, for instance, they occupy over an 8% market share of the chocolate industry, providing ammunition that ‘purpose’ and ‘profit’ can go hand in hand. Moreover, their foray into more than 13 other markets, such as the UK, has been met positively by consumers, fuelling their growth even further.
Since 10x’ing a company is something many of us aspire to achieve in our careers, the question is;
What is the secret sauce that Tony has deployed to achieve this?
It’s also worth noting that they have achieved this across relatively mature markets rather than riding the wave of faster-moving economies. This makes the feat far more impressive and suggests it’s down to the company’s strategic intent.
Ok, let’s dive right in.
1. Purpose
Let’s kick off by watching Tony’s Chocolonely Manifesto Film:
I should start the story with their purpose, which fuels just about every decision they make. In a choco-shell, their founder Dutchman Teun van de Keuken, while working as a journalist, was aghast at the level of inequality spread right through the industry’s value chain.
At the centre were African cocoa farmers who were worst off, with modern slavery and child labour practices rife.
But, despite his call for action, few took notice.
Therefore, Teun began making the first 5,000 bars himself in an equitable way, which is where the term ‘Lonely’ came from.
Cut to today, and Paul Schoenmakers, Tony’s Head of Impact, explains: “Progress takes time. To tackle two of the most serious issues in cocoa – child labour and poverty – we must enable farmers to earn a living income. To do this, farmers must be able to sell more of their beans at the Living Income Reference Price. This can be achieved via further growth of Tony’s Chocolonely to buy more of these beans. That’s why we also need more industry players to join Tony’s Open Chain and pay the higher price.”
1a. Evidence on Purpose-driven brands
There is evidence to suggest that some Purpose driven brands do outperform those without a defined purpose. A Kantar report showed that brands recognised for high commitment to Purpose have grown at more than twice the rate of others.
However, this line of thought comes with a caveat. Whilst some brands can benefit tremendously from this, others not so much. So authentic and ‘all-in’ action is really required here.
2. Multi-stakeholder perspective
Now in the last section, ‘join Tony’s Open Chain and pay the higher price’ was mentioned, which is their rallying cry for other manufacturers to join in their mission.
Compared to most competitive environments, they would happily give up their USP for the cause since they recognise their impact limitations without everyone joining in. They have already garnered support from a range of Open Chain mission allies.
I particularly like their recent rallying cry to Toblerone to get them to join the movement.
Interestingly, we can see the amount of organic social reach they get as a consequence is impressive.
In addition, clearly, it’s a galvanising thought for the teams working within the company to champion the cause to others.
They also take a multi-stakeholder perspective to make their mission happen, focusing on each aspect of the value chain.
We can see from the graph that their value chain consists of a wide variety of entities.
From the cocoa farmers to even the government’s need to all be involved in order to develop an equitable solution, across the value chain.
3. Focus on two geographical areas
Key to the success of Tony’s is recognising that they needed to start somewhere. So rather than bite off more than they could chew, they focussed their impact and case on two regions; Ghana and Cote D’Ivoire.
These were two of the most badly off regions with the highest poverty levels. However, they have made strides in reducing poverty and child labour through their work of re-balancing the pricing mechanism.
4. Re-defining pricing across the supply chain
Now, while most organisations are trying to cut prices on their supplies, Tony’s has done the opposite.
Recognising the balance was tipped in the wrong direction; they added a ‘Living Income Premium’ to the current wages of the farmers to give them a better deal.
Here is a breakdown of the model:
This goes way beyond ‘Fair Trade standards. For example, in Cote D’Ivoire, they paid 61% above the Farmgate price. They paid €6,490,561 on top of the Farmgate price in premiums (including the co-op fee) on cocoa purchased. And 77% of that premium ended up with the farmers.
Importantly, through this new sourcing model, they have proven a reduction in child labour.
Notably, they found a link between high levels of child labour and higher payment of cocoa.
By increasing the latter, they could seriously impact the former.
5. Translate into profit for Tony’s
Now, you’re probably feeling all warm inside for Tony’s, right? But of course, you want to know beyond the ‘impact’ how they were able to 10x their growth. So first, in this instance, there is a direct link between their ‘purpose’ and ‘profit’. Let’s explore this more.
Their purpose is so overt that it creates immense goodwill and positive association for the brand. This in itself makes it stand out from the crowd. It also reinforces their premium signal and legitimises them in the top category of chocolate brands.
This is, interestingly, done so in a way where people don’t mind paying more as they buy into the company’s purpose. Interestingly, their gross profit margins are higher than the industry average at 46%, highlighting that they can sell at higher prices despite higher costs.
6. A Growth Matrix Approach
Tony’s growth strategy can be viewed through Ansoff’s Growth Matrix, which consists of four quadrants and highlights how they used each lever to fuel their growth plans.
6a. Market penetration
One aspect Tony has done very well is to increase their overall physical availability. They are now represented in almost every supermarket, independent retailer, and cafe/restaurant. This gives them extended reach into their heartland markets and ensures they are high on a shopper’s agenda.
At this stage, it’s important to note that all the branding and visual identifiers play a huge role in distinguishing themselves on the shelf from other premium chocolate brands.
In addition, they do some incredible brand activations, which bring out their visual identity and the brand purpose and positioning. It helps to create mental availability for the product and brand.
6b. Market Development
An essential part of their growth strategy has been the expansion into different regions and marketplaces. For instance, moving into the UK has served them very well in aiding them to cross the €100m revenue mark.
They have also moved across Europe into France, Germany, and the US to gain further growth. Interestingly, one crucial aspect has been maintaining their quality level through this period. Here is a list of other markets that they have moved into.
To achieve this, they have backward integrated, purchasing their manufacturing factory, Althaea-De Laet International.
Therefore, keeping costs down and owning more of their supply chain is wise.
6c. Product Development
Variety and colour schemes
You will also note the different colour schemes, representing the vast number of chocolate flavours available. This is very important as it expands the level of inventory as well as creates more choices for the consumer. This means they will have their personal favourites, making sharable moments and greater loyalty to the brand.
Product Differentiation
Even the structure of the chocolate, a mish-mash of broken pieces symbolic of a broken industry, creates a level of differentiation quite like no other. It’s a real talking point that helps distinguish it from more traditional chocolate brands. It’s akin to the Toblerone triangles, which is the hallmark of that chocolate.
Branded Experience
The brand has also recently opened up a new Tonys Chocolonely Superstore in Amsterdam to create an experience around its brand and educate others about its mission.
Now, you may feel with a global brand like Tony’s why would they open a local store in Amsterdam?
Well, beyond the fact that it could well be a replicable model like M&M’s did with their M&M’s World, it plays to another very important point; brand stamp and heritage.
They are proudly Dutch and place a lot of their brand values on Dutch culture and society.
It goes back to the very DNA of the brand. So creating an icon in the Dutch capital brings to life its heritage and what makes it special.
The role of branded experiences in a consumer’s life is also increasingly important. Being immerse into an experience that creates an emotional connection and also allows you to get the ‘full attention’ of a consumer for a short period of time is very powerful. It builds lasting memory structures, associations and affiliations with the brand. After having ‘lived and breathed’ their store it would be hard not to think of the experience each time to picked up a Tony’s bar of chocolate.
Occasion-based marketing
One of the best ways to increase penetration is to introduce new products based on different buyer occasions. Here is an excellent example of their Easter and Christmas promotions:
This goes back to a fundamental concept in marketing known as ‘category entry points’. This is where a consumer’s mental journey to identify a need begins. If a brand can be well placed at the moment a consumer ‘enters the category’ they have a significant advantage over their competitors.
6d. Market Diversification
A critical move Tony’s has made is their foray into new product ranges through partnerships with Ben and Jerry’s. This takes them into new categories and expands their reach into new and exciting marketplaces.
The fit across their values is critical to their partnerships, citing their relationship with Ben and Jerry’s as a choco-love affair.
The partnership is certainly not at a transactional level as Ben & Jerry’s will also commence converting its ice cream portfolio to Tony’s Open Chain, prioritising the cocoa in its ice cream base mix. It will also commit to Tony’s 5 Sourcing Principles, which means, among other things, paying a fee to further support the partner co-operatives in Côte d’Ivoire.
Summary
Tony Chocolonely is making considerable strides forward with a real focus on doing the right thing and doing things right.
They have delivered considerable impact whilst maintaining growth and commercial success.
The reality is that this brand is just starting and is one to watch over the next few years.
They are a shining example of a b-corp status brand that is genuinely committed to redefining the end-to-end working practices for the benefit of society at large.
