OM Scharffen Berger Case Facts

Founded in 1996 by Robert Steinberg and John Scharffenberger

The vision was to produce of highest quality chocolate from the finest beans available

Established at 27000-square-foot brick warehouse in Berkeley, California

In 2003, Jim Harris recruited as COO to lead the business and manage company’s growth

The company 60 employees, 24 working in production area, 18 at retail stores and 18 in Administrative functions

Scharffen Berger sold its chocolate through its 5 retail stores, various other retail outlets and its own website

The chocolate industry was segmented into two categories : ◦ Mass market ◦ Premium

Premium segment was considered as the growth segment of the industry, with 15-20 % annual growth projected between 2000 to 2010

Scharffen Berger competed in the 1.2 billion premium segment , a large part of which was dark chocolate

The retail price of the product spanned from $10 to $100 per pound

In premium segment, Scharffen Berger was considered to be at the high end, in terms of price and positioning

Sales in 2004 was $10 million and it was estimated 2005 revenues would exceed $15 million

Product Mix included 7 different products with differing amount of contents leading to nearly 80 SKUs

Market Offerings in four consumer sizes 0.2 oz, 1 oz, 3 oz and 10 oz

The company also made professional sizes of 2 kg, 3 kg and 15 kg that were used primarily in food industry

Trader Joe’s is the company’s largest customer which accounts for 20% of its sales.

Scharffen Berger also made a speciality 60% cacao blend in two ounce bars for Trader’s Joe.

Production Area 20,000 sq. ft. Beans sourced from various countries Beans purchased 6-9 months prior to use Maximum production of 40,000 kgs in a month Bottleneck in Conche due to high processing time (50

hours on average) Average Monthly output 27 Conches

Bean Cleaning Roasting Winnowing Melangeur Conche Tempering Molding

Bean Cleane

r

Melangeur

WinnowerRoaster

Conche (2)

Tempering

Conche (1)

Molding

200 kg beans 8hr/day

192 kg in 15 mins

250 kg in 1.5 hrs 8 hr/day

Capacity 450 kg in 1 hrInput is 250 kg 8 hr/day

185 kg nibs

115 kg in 1.25 hrs 16hrs/day

140 kg in 1 hr Capacity 200kg/hr 16 hrs/day

140 kg in 2 hrs 8hrs/day

1400 kg in 24-36 hrs effectively. 24 /day

Packaging

Bean cleaner◦ The machine could process approximately 200kg at a time◦ Time required for the operation is 15 min◦ The cleaner operated during one 8 hour shift, 7 days a week◦ Output = (192*8)/0.25 = 6144kg/day

Roaster◦ The beans from different places were roasted separately in order

to optimize the flavour, as roasting time and temperature varied◦ It can roast 250kg at a time and the time required was 1.25 hrs◦ it operated during one 8 hour shift, 7 days a week◦ 15 minutes kept for cooling◦ Output = (250*7.75)/1.25 = 1550kg/day

Winnower◦ It could process 450 kg of whole beans each hour◦ Each batch was approximately 250 kg, from which 185 kg nibs

were recovered◦ It operated during 8 hour shift, 7 days a week◦ Output = (185*8)/0.56 = 2642kg/day

Melangeur◦ Melangeur ground nibs in 115 kg batches and each batch stayed

in the machine for approximately 1.25 hrs◦ The Melangeur was used seven days a week in two 8 hr shift◦ Output = (115*2*8)/1.25 = 1472kg/day

ConcheScharffen Berger used 2 Conches to refine, mix and

aerate the chocolateEach conche processes approximately 1400 kg batch of

single recipe99% conching process contains 1400 kg of nibs whereas

62% contains 850 kg of nibs. Average 1050kg of nibs is used in batch with approximately 35% additives

Each batch spent between 48-72 hrs in the concheThe conche was staffed 24 hrs a day, 7 days a weekOutput = (1050*24)/30 = 840kg of cocoa processed/dayOutput = 840 * 1.35 = 1134 Kg of final chocolate/day

Tempering It could process up to 200 kg/hr run at 140kg/hrTightly coupled with Moulding

MouldingThe moulding machine processed about 140 kg/

hour It operated in two 8 hr shifts, seven days a week

PackagingScharffen Berger did the packaging for 35% of its

products, remaining 65 % were outsourcedIt operated in one 8 hr shift, six days a week

Bean Cleaner Roaster Winnower

MelangeurConche

Tempering and Molding

Packaging

Conche

Install Ball Mill to reduce 40-60 hours spent in Conche to 15 hours in conche and ball mill combined

New bottleneck will be melangeur. Install additional melangeur for $50,000