Simon Pattinson, operations director, Montezuma's
Before we started this business I was working as a shipping lawyer in London. I wouldn't say that becoming a solicitor had been a burning ambition of mine; I just knew I wanted to do something intellectually stimulating and the law seemed like a good idea at the time. But by the time I got into my early thirties it was gradually dawning on me that I didn't actually want to do this anymore.
My wife Helen felt exactly the same way, and in 1999, we quit our jobs, flogged our house in Putney, put all our stuff in storage and caught a plane to South America. The plan was to have a break, but also to formulate business ideas.
I'd say we probably had about 10-15 reasonable ideas in the notebook before we stumbled upon chocolate. We were in Argentina at the time and I was struck down with food poisoning. Helen, meanwhile, was wandering around the local town and came across these Germans running some incredible chocolate shops selling very high quality chocolate. Later in the holiday we got friendly with the owners of a cocoa plantation in Venezuela and pretty soon we became convinced that this was the business opportunity we were looking for.
Initially, the plan was to buy in finished product to our specifications and sell it under our own brand from a shop we had leased in Brighton. But then disaster struck. I was getting twitchy because we were at the stage of fitting out the shop and I couldn't get hold of our key supplier; I eventually went there in person and the place was locked up with an administration notice on the door.
Sink or swim
It was an immediate sink or swim situation. I guess we could have found an alternative supplier at that stage, but we just decided to make it ourselves.
In the first year, we started manufacturing from a tiny little rented converted stable five miles up the road from where we are today, before moving to a converted piggery. I'd say we were handling about 15t of chocolate as a raw material. Today, at this site, which we moved into in 2005, we're processing 300t.
When I say 'making' chocolate, I'm not talking about harvesting cocoa beans, roasting and conching [kneading] and so forth. We buy the chocolate made to our exact recipes, re-temper it and deposit it. Virtually everyone does this. We're a hundredth of the size of Thorntons and it's not even viable for them to make their own, never mind us.
Currently, we just have one depositing machine, which does constrain how much we can produce at any one time, but we have another machine on order, which will significantly boost our capacity next year.
With hindsight, I'd say we should have taken a much harder look at the manufacturing side of the business a couple of years ago. It certainly would have made the last few months a lot less painful, but it's all part of the process of what I call 'professionalising the business', which has involved everything from upgrading our IT systems to getting in external people to help us make the transition from a start-up business to a more mature operation.
A key part of this has been hiring a general operations manager with experience of working at a major food manufacturer, albeit in a different sector. Up until relatively recently, our efficiencies were pretty appalling; we weren't measuring and monitoring things properly and our stock levels were ridiculously high, which was giving us cash-flow problems.
Sales have never been the problem. We're expanding very rapidly; particularly in the online business, which is growing at more than 120%. The big challenge has been controlling costs and managing cash flow as we're so seasonal. A lot of this is actually very basic: getting proper recipe control, improving our utilisation of ingredients and setting and recording proper production targets.
I suspect we will also have to reduce our range to make things more manageable.
A major challenge has also been managing staffing levels so that we have a core of people working for us throughout the year and extra people we bring in on short term contracts at busier times. Like a lot of firms, we would have sunk without hiring eastern European staff. They've been a massive asset to our business.
As for chocolate, about 85% of ours is organic. For me that's primarily a quality issue. We loved the quality of the beans we found in the Dominican Republic and they happened to be organic. So we thought if we're paying a premium for them, we may as well pay a premium for other organic ingredients like sugar, milk and call the whole product organic.
But I'm not an evangelist for organic, which has become this kind of badge of honour for the middle class. You won't find me shouting from a podium about the Soil Association. Likewise, while we take environmental issues seriously, I'm not going to pretend there is anything fundamentally 'green' about chocolate given that its primary raw ingredient is shipped half way across the world to get here.
Quality not quantity
So what makes a good chocolate? Good quality ingredients. Cocoa percentage is not actually a hugely useful indicator of quality. It's a bit like measuring the quality of wine by its alcohol content. Our chocolate is unusual because it uses high quality ingredients and interesting flavours like salt, chilli, geranium oil, mandarin, paprika, lime and tequila. Because we're still quite small we can also be very flexible and experiment with very short runs and try things out in our own stores first to see how they sell.
As for the skills involved, when we started out, I was reading every book I could get my hands on about how to make chocolate, although looking back, I actually think the best chocolatiers I've met are self-taught. People from the Swiss and French tradition can get very sniffy about it all, but I've got an open mind. I just want to make top quality, affordable chocolate. I love chocolate. I don't see it as 'good' or 'bad'. If I'm on a long journey and the only thing I can pick up from a garage is a bag of M&Ms, I'll eat them and enjoy them.
Currently, we've got six of our own shops, a mail order business and a website, but we also supply a whole raft of delis, farm shops, independent retailers and small chains on a trade basis via wholesalers - which I'd say now accounts for 65-70% of our business.
Recently, we've also struck a deal to supply Waitrose with nine products. But I'm not sure I want to supply the massive multiples, jumping through hoops of fire naked carrying bars of chocolate to keep them happy. I also think there is huge potential to grow, at least in the medium-term, without doing so.
We don't want to be Nestlé. We want to grow steadily and sustainably. So far we've also managed to do this without any external finance. Helen and I own 91% of the business and our families own the rest. I'd say we've had three serious offers for the business, but at the moment, we're not interested in selling. I don't know how to do anything else anyway!
INTERVIEW BY ELAINE WATSON
FACTORY FACTS
Location: Montezuma's, Birdham Business Park, Birdham Road, Chichester, PO20 7BT 01243 514 725
Products: Chocolate bars, blocks, moulded shapes, truffles. c250 stock keeping units, 40 of which are individual truffles
Employees: Production staff numbers vary across the year from about 20 to 45
Turnover: c£5M (includes turnover from retail business)
Customers: Own retail estate, independent retailers via wholesalers, Wholefoods Market, Fresh & Wild, House of Fraser and Waitrose (from September)
PERSONAL
Name: Simon Pattinson
Age: 42
Career highlights: The first one was probably leaving London and the second opening our first chocolate shop in Brighton
Domestics: Married to (co-founder) Helen with two daughters
Outside work: Road racing (cycling), spending time with the family, going to the beach