The Chocolate Is Utter Bliss - And So Is The Bottom Line

THE FOUNDERS have stepped back in, making sure Seattle Chocolate's balance sheet looks as good as its luxuriously wrapped truffles.

Three years ago, Seattle Chocolate was close to bankruptcy.

It wasn't able to make payroll. There were problems with production costing. Profits? They were nowhere in sight.

Then Seattle natives Steve Abel and Steve Elliott stepped back into the business they bought in 1992.

They've been rebuilding ever since.

They hired Terry Wakefield, an Oregon native and former vice president of manufacturing at Continental Mills, as the company's vice president of operations.

By focusing on marketing, packaging and creating customized products sold under the names of large retail chains and hotels, they've landed new customers, such as Saks Fifth Avenue, Bloomingdale's and the Bellagio hotel in Las Vegas.

Sales last year totaled $3.5 million, compared with $865,000 their first year in business. And the company is back in the black.

Seattle Chocolate, located in a small 1918 brick building south of downtown Seattle, has plenty of competition in a field crowded with gourmet-chocolate companies.

It's a given that the chocolate has to be top-quality, Abel said. Beyond that, the partners learned they needed a marketing and sales strategy that would set their products apart.

Their success has been built largely around a niche called the "ready-made gift market," boxed chocolates in well-dressed packages that can be given as a gift without the hassle of wrapping.

The company's signature item, an 8-ounce square box of individually wrapped mint-flavored chocolate truffles, is elegantly designed, hand-tied with satin ribbon and topped with a gift tag. Depending on the store and the city, the eight-ounce box can sell from $9.99 to $14.99.

To win new business, Seattle Chocolate often creates a mock-up box using a customer's signature logo or style. For example, when Seattle Chocolate tried to sell its product to Victoria's Secret, company officials brought along a truffle box decorated with the retail chain's pink- and white-striped logo and covered with a solid pink lid, sprinkled with white hearts.

Often Seattle Chocolate will "co-brand" with customers. For the Bellagio hotel in Las Vegas, the company markets a truffle box featuring the Italian town on Lake Como - the inspiration for the hotel's design.

Seattle design firms Hornall Anderson Design Works and The Culligan Group help the company come up with its ideas.

"Packaging is important," Elliott said. "It's hard to sell a Cadillac if you put it in a Chevy body."

`We were ignorant'

Before starting Seattle Chocolate, Abel, 51, now president and chief executive officer, was on a sabbatical from his job as a high-school history teacher.

Elliott, 50, Seattle Chocolate's vice president of sales and marketing, was a landscape contractor and had been dabbling in investing.

Elliott was bored, and Abel was willing to try something new.

Elliott had recently purchased Tacoma-based Camelot Candy, a company that was in desperate need of revamping, he said.

So, with about $100,000, the grade-school friends decided to take it on.

The two moved the company in spring 1992 to a 3,200-square-foot rented basement on Elliott Avenue near downtown Seattle and changed the name to Seattle Chocolate.

The founders knew "less than zero" about the chocolate business, Elliott said, but, they knew the company "wasn't going to get any worse."

"Once we got in it and made the decision we were going to stay in it, we read everything we could get a hold of (about the business)," he said. "When we started, we were ignorant, but we were smart enough to admit we were ignorant and ask questions."

To help them with product development, Abel and Elliott hired Seattle chocolatier Bruce Reed, who learned the business while working for the Seattle-based Frederick & Nelson candy factory, overseeing the company's signature Frangos.

Thanks in part to Reed, the company's first big customer was Nordstrom. Seattle Chocolate produced, and continues to make, a signature triangle-shaped box, labeled "Habits," for the retailer. Nordstrom sales made up about half of their business the first year; the rest came from sales to Seattle-area boutiques and florists. The company was profitable within seven months.

By 1994, Seattle Chocolate was growing faster than Abel and Elliott anticipated. They realized they needed more capital and made the decision to sell most of the company to a group of Seattle investors. Abel and Elliott kept about 25 percent of the stock and eventually stepped out of day-to-day management.

A second chance

After that, "the company just lost focus," Elliott said. "The customer and the company became, for whatever reason, secondary to the needs of the board. And when you do that, you pay for it."

Two years later, they decided to buy their company back.

"We still felt it was a good investment," Elliott said.

Today, Seattle Chocolate counts about 2,500 wholesale customers, including Larry's Market, Fred Meyer, Amtrak, Made in Washington stores, Seattle's Best Coffee, Nieman-Marcus, Nordstrom - its biggest Northwest customer - and Host Marriott Services, the company that runs gift shops at Seattle-Tacoma International Airport.

"It's a souvenir of Seattle as well as fine chocolate," said Mary Hall, merchandise operations manager at Host Marriott Services. "The service (at Seattle Chocolate) is great. The quality is top-notch."

Seattle Chocolate produces, on average, 4,000 pounds of chocolate a day at its factory, at 1962 First Ave. S.

During its busiest season, from August through mid-December, production rises to about 15,000 pounds a day. The company employs about 25 workers during off-season and about 100 during busier times.

About 25 percent of the company's sales are in the Northwest.

"We're making a great product," Elliott said. "We want it to look great. We want the customer to be delighted. And that's what we focus on."

Other area chocolate companies have similar marketing strategies. Seattle-based Dilettante hand-ties a ribbon on its elegant rectangular style boxes. Fran's, also Seattle-based, wraps its chocolates in gold foil and displays them in a cream-colored box tied with a ribbon.

"In this arena, you can have the greatest product in the world," said Brian Davenport, Dilettante's chief executive officer. "But it won't sell if the package doesn't measure up. The two go hand in hand.

"Seattle is very fussy about what it eats," said Davenport, who attributes the strong Seattle chocolate market partly to the Northwest's cooler climate. "You can't survive in this market with bad food. People out there know good food. They react to things like chocolate."

Tamra Fitzpatrick's phone message number is 206-464-8981. Her e-mail address is: tfitzpatrick@seattletimes.com