Sept. 2 (Bloomberg Businessweek) -- Will chocolate weather the recession better than the finance industry? Eric Heinbockel is betting it will. With a year as an unpaid intern at a small New York brokerage under his belt and no decent offers after applying for dozens of jobs, the 24-year-old gave up on his dream of a career in finance. Instead, last year he and two friends he met while getting his political science degree at Columbia University started Chocomize, an online shop that lets chocolate lovers customize their candy bars with ingredients ranging from graham crackers to gold flakes. "We looked into chocolate and saw it was relatively recession-proof," Heinbockel says.
Just as Dell (DELL) found success by letting customers tailor-make their PCs online, Chocomize offers customized candy. The company allows buyers to choose their chocolate—milk, dark, or white—and up to five of more than 100 add-ins. Beef jerky will set you back $1.85 on top of about $4 for the bar; cayenne pepper is 75 cents, dried raspberries are $1.20, and gold flakes are $3.25. One couple ordered 125 dark chocolate bars with bacon, Brazil nuts, and raisins for their wedding. "It's their day, so I guess they get to do what they want," Heinbockel says.
The Chocomize trio got turned on to chocolate after a happy accident. On a warm day in June 2009, Chocomize partner Nick LaCava, 23, left a bag of chocolate and other candy in the back seat of his car. When it all melted into a gloppy mess, LaCava's friends suggested it might be edible if he were to toss it in the freezer. He did—and loved the result. "To me, eating chocolate and gummy bears seems like the coolest thing in the entire world," says LaCava. "That's sort of when the lightbulb went off in our heads," he recalls. "All these different ingredients in chocolate. What if you could choose your own ingredients?"
LaCava, Heinbockel, and Fabian Kaempfer, 24, spent the summer learning how to make chocolate and figuring out how to start a business. When banks were unwilling to lend to three kids fresh out of college, Heinbockel's grandparents offered to help with the funding. The families of the other founders followed suit, and Kaempfer sold his car. The three eventually raised about $100,000.
By last November the Chocomize site was up and running, and it isn't just a facade for three guys making chocolate bars in the kitchen. Chocomize leases 2,000 square feet in Cherry Hill, N.J., where the company has some $40,000 worth of equipment such as tempering machines and a big refrigerator. In addition to the founders, Chocomize has three full-time chocolate makers and two who come in when needed. The company has sold some 50,000 bars in the past nine months and can produce about 4,000 bars a week (Chocomize usually makes half that, but expects orders to jump during the holidays). Heinbockel says the company became profitable in March, and he hopes to top $1 million in sales this year.
Chocomize has at least one entrenched rival. Berlin-based Chocrí has been offering a nearly identical product in Europe since 2008. It expanded in January into the U.S., where it's already profitable, says its U.S. boss, 25-year-old Carmen Magar, a recent graduate of the University of Chicago Booth School of Business. Chocrí, with 25 employees, makes 50,000 bars a month. "I think our extensive experience does give us a competitive advantage" over Chocomize, Magar says. Plus, she notes, Chocrí offers unique add-ins such as "candied rose petals from a tiny little farm in Austria in the middle of nowhere."
Joe Pine, author of Mass Customization: The New Frontier in Business Competition and co-founder of the consultancy Strategic Horizons, says custom chocolate is a good way for a small player like Chocomize to differentiate itself in the market, because it's a niche that mass chocolate makers like Hershey (HSY) will likely ignore. While the Chocomize founders have big dreams, their made-to-order strategy may ultimately limit the company's potential. "It's a customized product, so by definition it can't go into" supermarkets or stores where consumers might pick up a bar while they're waiting in the checkout line, says James Targett, senior analyst for global food manufacturing at London-based Consumer Equity Research. "The whole business model is to be individual."
The bottom line: After failing to land decent jobs in finance, a trio of recent grads decided to launch a company that makes customized chocolate bars.