The Profit Recap: Marcus and the Chocolate Factory

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Photo: CNBC
The Profit

The Profit

Zoe's Chocolate Co. Season 4 Episode 18
Editor's Rating 5 stars

Zoe’s Chocolate is a Waynesboro, Pennsylvania–based confectioner owned by Zoe Tsoukatos and her brothers, Pantelis and Petros. Their family has been in the chocolate business for more than a century, and family is why they started their shop in the first place: Their dad, George, is a Greek immigrant who serves as their master chocolatier. In 2007, the 40-year veteran sweet-maker was unexpectedly laid off from a previous job, so Zoe and Pantelis — then working high-powered, non-chocolate-related jobs in D.C. — wanted to do whatever they could to help, including founding a company.

Their gorgeous chocolates may taste amazing, but Zoe’s sales have sharply declined. Is the Tsoukatos legacy doomed to melt? Let’s see what ails them.

• Although Marcus — who would have you know he eats chocolate literally every single day, thank you — gives stellar reviews to their 18 Mediterranean-inspired flavors like baklava and sesame tahini, he can’t help but notice that their largely empty case looks “anemic.” But expanding their narrow product offering will be challenging. When Marcus suggests adding relatable basics like chocolate-covered pretzels (they are in Pretzelvania, after all), Zoe bristles because you could get that anywhere.

• There’s even more tension when they talk about the company’s story. One of Marcus’s biggest problems with Zoe’s Chocolate is that their compelling background — a rich family history, an immigrant success story, a family banding together — isn’t really mentioned in their branding or brochures. Telling a good story, Marcus says, is vital for a retail business. But Zoe won’t budge. “I can tell that Zoe’s getting uncomfortable with it, but I don’t care. I’m going to keep pushing,” Marcus says. He takes her aside and asks her upfront about the reasoning behind her reluctance: She’s wary of embarrassing her dad.

• As is all too often the case on The Profit, this business is seriously lacking in process and organization. The shipping, storage, and kitchen facilities are part of the same narrow yet deep space that stretches past their storefront, and all are crying out to be KonMaried.

The ownership of Zoe’s Chocolate is divided among the siblings: 35 percent for Zoe (who runs the whole operation), 35 percent for Pantelis (who handles outside sales and finances), and the remaining 30 percent for Petros, who runs the kitchen with his dad. All three have sacrificed a lot. They will often forego their earnings or split a smaller sum among themselves — even their dad hasn’t been paid recently. In 2015, they made $757,000 in revenue, but in 2016, that fell to $675,000. That big drop is partly because they lost a lucrative deal with Whole Foods and some other accounts because they failed to develop new products, out of a resistance to fall into step with the “mainstream.” Marcus finds this attitude “counterproductive.” Stubbornly refusing to expand the brand isn’t the same as protecting it.

Nevertheless, Marcus makes them an offer: $250,000 for 50 percent of Zoe’s Chocolate, with that money to go toward paying down their $162,000 in debt, updating their retail space and online store, and developing new products and packaging. When the siblings express their desire to hold onto a majority of the family business — that’s what would make their dad happiest — Marcus counters with $200,000 for 40 percent. And of course, he’ll need full financial and operational control. They take the deal.

As a first step to rethinking the online business, Marcus records a Facebook Live video (watch it here!) as a massive “focus group,” telling his viewers to place online orders with Zoe’s so he can test out their “wildly unorganized” process. Within about 15 minutes, the store has a whopping 150 purchases to contend with — considerably more than the exactly one (1) they’d received so far that day. All hands are on deck to fill these orders, in a chaotic swirl of cardboard boxes and airborne Styrofoam peanuts. Now that it’s clear to everyone involved that having no system whatsoever isn’t going to work out, Marcus assigns Pantelis to organize the entire facility from top to bottom, all on his own.

Next, Marcus sets out to remodel the meatspace (chocolate-space?) store, expanding the cute but cramped shop and installing a window so customers can look into the working kitchen. During construction, product development keeps chugging away, with Marcus asking George and Petros to develop 12 more products, incorporating on-brand flavors like ouzo.

Zoe and Petros meet Marcus in L.A. for a meeting with a company he previously invested in called Flex Watches, who are “masters at marketing and branding.” (How watches fit into any of this is unclear.) Inspired by Mediterranean imagery, these guys propose a blue color palette for the new Zoe’s packaging, and a vaguely religious white-on-white logo with a cross. Zoe hates all of this: “What’s the story to this? That we’re Greek?” Marcus is “shocked” by Zoe’s attitude, which I get, but also, I think she’s probably right. I like you, Zoe.

Back home, she uncomfortably broaches the topic of leaning into the family story in their branding with their parents, who are remarkably encouraging. Her mother, Eleni, tells her that the family shouldn’t be “embarrassed” by their all-too-common struggles. “How strong we got is because everybody love each other, because of you,” George tells Zoe. Is it just me, or are all of these chocolates suddenly tear-flavored?

Pantelis’s first go at reorganizing the shipping department — which still relies on the time-tested “giant stacks of paper” system of organization — is not good enough for Marcus. “Don’t let it fool you. It’s not that bad,” Pantelis tells him, which is perhaps mathematically the worst possible thing he could have said in this moment. The kitchen looks even grodier: A plastic tray covered in chocolate-drip stalagmites under one machine seems to particularly enrage Marcus. “Do you guys want me to be your business partner or not?” he asks his co-owners. “I don’t want to be here because of shit like this.” The siblings protest that they did as much as they could, raising their voices to match his, before Marcus fussily picks up a broom and starts cleaning up himself.

Things quickly take a turn for the better when Zoe and Marcus compromise on new branding: a modern yet whimsical cocoa-bean-centered image that, it’s worth noting, bears zero resemblance to what Flex Watches pitched them. Petros has devised new products, like a delicious-sounding quinoa brittle. Pantelis has converted the guts of the facility into a “well-oiled machine,” with everything labeled and sorted. That’s all just in time, because Marcus has made them an important appointment: In one week, they’ll be meeting with Norwegian Cruise Line to pitch their chocolates for inclusion on all their boats worldwide.

Aboard a ship in Miami, the Tsoukatos family pitches to three senior execs, telling them the origin story of their business and what it was like to grow up with a “Willy Wonka” dad. The human angle is effective, and even more effective when they ply the Norwegian Cruise Line team with new offerings like a coconut-curry chocolate, chocolate-covered edamame, and treats printed with custom logos. One executive isn’t thrilled to hear that their largest order yet was for just 7,000 bars — that’s less than what they’d need for two ships — but Zoe maintains they have the capacity to produce five times their current output. She convinces them to commit to a handshake agreement that Zoe’s Chocolate will develop a program for Norwegian Cruise Line, impressing Marcus and, more importantly, me, because I am now prepared to bestow upon Zoe the inaugural Profit Recap Amazing at Business Medal of Business Excellence.

Back in Waynesboro, the remodel is complete. Marcus poured $100,000 into the Zoe’s Chocolate storefront, and it shows, with new floors, new lighting, new seating, new everything. One wall is prominently decorated with a large portrait of George, who ceremoniously flips the door sign from CLOSED to OPEN at the grand opening. Locals flood in to snack on samples and peruse the sweets for sale. Someone even calls it the best chocolate he’s ever had.

That’s just the taste of good business, friend.

The Profit Recap: Marcus and the Chocolate Factory