When chocolatier Michiko Marron-Kibbey opened Deux Cranes, a small business selling Japanese and French-inspired artisanal chocolates and confections, she already faced tough odds.
A whopping 90% of new food products fail, according to Columbia Business School professor and consultant Steve Zagor. “More food products fail than restaurants,” Zagor said.
Marron-Kibbey’s business defied the odds, becoming profitable four years after launching in 2022. However, an unexpected surge in costs meant Marron-Kibbey needed to adapt in order to continue growing her business.
Earlier this year, cocoa prices spiked due to climate change and other factors, adding another hurdle for the Los Gatos, Calif.-based business. Costs increased “35% to 45% on an ingredient that we use in 99% of our product line,” Marron-Kibbey said.
Deux Cranes wasn’t alone in facing this hardship: 77% of small businesses claim that the rising cost of goods, services, and wages has created financial challenges for their operations.
The business responded to this uptick in cocoa prices by diversifying its product offerings. It increased the production of non-chocolate items and items with less chocolate, like cookies, caramels, and jellies. These items currently make up 3% to 4% of Deux Cranes’ products, though the company has a goal of getting that number closer to 10%.
Marron-Kibbey is also aiming to improve efficiency by adding new machinery to the manufacturing process. The company currently makes about 300 of its flagship chocolate bars per day and expects that number could increase to 500 bars per hour with added systemization.
Deux Cranes has resorted to raising prices for customers as well. It increased the price of its permanent collection of chocolate bars from $13 to $14 and raised the price of its bonbons by 7%-8%.
“Pricing is both an art and a science,” Zagor said. “You raise prices carefully, understanding what the competition is doing and understanding the circumstances.”
To be sure, Deux Cranes has successfully navigated uncertainty before. The company graduated from the “concept” stage and “startup” stages of the small business cycle and entered the “growth stage” by establishing steady profits, loyal customers, and well-established operations.
In 2023, Deux Cranes brought in revenue of $800,000, and it hopes to break the $1 million revenue mark in 2024 with wholesale, corporate, e-commerce, and in-store sales.
Marron-Kibbey hopes to weather the recent cocoa-related challenge and keep growing her business. Her ultimate goal is to have a retail location in Japan.