After over 40 years in business, chocolate company Harbor Sweets is looking to grow by expanding beyond gift and into grocery.
The Salem, Mass.-based company announced last week that it acquired five-year-old Cocoa Santé, an all-natural line of organic hot cocoa mixes with a budding presence in grocery. Terms of the deal were not disclosed. Cocoa Santé currently has five exotic hot chocolate offerings — including flavors like Azteca, Parisien and Kashmir Spice — that retail for $9.99 to $10.99.
Cocoa Santé founder Jennifer Keegan told NOSH she decided to sell her company shortly after the departure of her business partner, Shannon Ames, for personal reasons. As a fellow Massachusetts-based entrepreneur, Keegan was familiar with Harbor Sweets and approached the company about a possible deal.
“I think for me it was a time to refocus on some other things in my life, my family mostly, and I thought Cocoa Santé was really placed at a great place for growth,” Keegan said. “I knew an established company would have just a great experience in growing it, entering new markets and a lot of [other] things that were just stretching me really thin.”
Although Harbor Sweets manufacturers its own chocolates, for now the company will continue to use Cocoa Santé’s current co-packer. Keegan will stay on with Harbor Sweets for the next year to help with the company’s transition.
Harbor Sweets CEO Phyllis LeBlanc told NOSH she felt Cocoa Santé — which is currently sold in over 200 stores including retailers like REI, Roche Brothers and select Whole Foods Markets — would be a solid addition to the company’s portfolio. The acquisition comes as her company has been embracing more global flavor profiles and seeking to expand their offerings.
“It’s a great product for us because we have often thought about doing a hot cocoa and this is already developed, the flavor profiles are fabulous, and the ingredients are terrific,” LeBlanc said. “There is an appeal for a customer that we may not be reaching… I think this expands our opportunity to offer a good product to that audience.”
Reaching that audience means also being available where those customers are shopping — and for millennials, that means both grocery and online. Harbor Sweets already has a booming e-commerce presence, which accounts for over half of the company’s sales.
Keegan said she thinks Harbor Sweet’s direct online sales business gives Cocoa Santé “tremendous opportunity for growth” as e-commerce has not been a focus for the company to date.
The acquisition is also a distribution win for Harbor Sweets. The chocolate maker has not made grocery the focus of its distribution, instead focusing on independent gift shops. Now, the deal will mark the company’s entrance into grocery and provide insight into how to possibly sell other SKU’s in grocery. LeBlanc said hot chocolate is different than gourmet chocolates in that it is both a gift item and beverage for everyday consumption. However, both categories are currently seeing increased attention thanks to the growing popularity of gourmet products across channels.
According to research conducted by Mintel and The Hartman Group, specialty and gourmet options are expected to see an increase in sales in 2017 and 2018. . Researchers believe this growth is largely attributed to millennial consumers who are seeking out specialty foods for both special occasion and regular use. This trend helped to drive business in grocery and mass merchants, where, for the first time ever, sales of specialty and gourmet products outpaced those of both natural and specialty chains.
Given the expected sales growth in specialty and gourmet, LeBlanc said she feels confident in the synergies between Harbor Sweet and Cocoa Santé.
“I think that probably the business model is similar in some respects,” LeBlanc said. “For instance, with cocoa the canisters are more of a gift item, but it is also something people can use every day for themselves… distribution through grocery stores where people go on a more frequent basis is different for us and part of the reason we wanted to [acquire Cocoa Santé].”