In Economics class, we learn that a business that is not willing to grow, is not a healthy one. It is against the economic concept of growth, against shareholder value, against entrepreneurial spirit to stagnate and stay where you are when everything is working out so well that you could expand business.
Josef Zotter does not want to grow. He runs a company whose maxim is not profit maximization. Whose annual turnover is 14 million euro, though. Upward tendency. Harvard Business named its case study on his business “Living by chocolate”. Living, not more, not less.
“We were growing too fast, borrowed more and more money from banks, without having reserve assets. When turnover cracked in two of our shops, we weren’t able to pay the interest anymore”, Zotter explains.
He started all over again. Since his insolvency, he did not enter a single bank anymore. Financing through internal cash flows. His only business partner is his wife who is in charge of the finances. Although he does not even advertise his products, he consolidated his market position within the premium segment of the Austrian market for chocolate. However, he claims not to be afraid of competitors.
“In contrast, I would be happy to see more companies changing their business to bio and fair-trade. I don’t fear them, because they would be in the same price segment as I am. The worldwide bio cocoa amount is at only 0.1 %.”
When buying his cocoa beans from the suppliers from Africa and South America, Zotter pays twice to three times as much as the world market price demands. He negotiates long-term treaties. He organizes exchange programmers for the farmers. To those from Brazil he showed how their cocoa is manufactured to chocolate which they had never seen before. After oil and coffee, cocoa is the third most traded commodity on the world market. However, according to date of the UN-organization UNCTAD, 95% of the world’s cocoa farmers live below the poverty level.
Fair traded cocoa. Bio milk from local farmers. No business plans, no advertisement. No market research. Zotter breaks all rules of conventional marketing. His transparency is financed by transparency: Only in 2011, he had 214000 factory tours, each paying 12 euros. Of course, the time- and labor-intensive manufacturing process and the high prices of Zotter chocolates limit the scalability of the company.
However, Zotter is happy:
“I found my optimal company size. We are big enough to work innovatively and I can convert my ideas.” From his former failure, he learnt one main lesson: “You start something and as soon as you succeed, everything has to be faster and bigger. When a machinery starts to run, you stop asking yourself: What did you actually want?”
Zotter learned cook and confectioner and knows what fits, his chocolate is known for being “unconventional”: pepper & mint; poppy and cherry; date & shiitake; pineapple & paprika are only some of his creations
Zotter may not be the average entrepreneur. Even though he stays average-size, he does not run an average business. A business whose business model cannot be transferred to any other arbitrary one. However, he shows that business calculations do not run his company, but entrepreneurial spirit does. That entrepreneurs need to be innovative. Obstinate. And courageous.