In our trainings we talk about the values of innovative thinkers. Apart from being humble, open and curious, innovation often requires a lot of courage and persistence. Having a creative idea can sometimes mean to belong to a minority consisting of one person.
The Austrian entrepreneur Josef Zotter is such a person. He is breaking almost all rules of established management thinking. However, doing this Zotter developed a very successful business model that made his chocolate manufacture the only Austrian enterprise that is now taught as a case study at Harvard Business School.
The chocolate market worldwide is dominated by a few big players that offer their products more or less for the same price, with the same few varieties and using the same suppliers. The only differentiator is the brand printed on the packaging. What these big players have in common is that they only focus on a small part of the chocolate manufacturing value chain, outsourcing the rest to specialized suppliers. That is exactly what current business theories would advise. The Zotter Schokoladen Manufaktur uses a very different philosophy: Zotter follows his bean-to-bar approach controlling the entire value chain from the cacao-bean until the end product - the bar of chocolate. He has direct contracts with the cacao farmers, roasts the beans and does all further processing steps himself. Instead of efficiency and often poor quality he focuses on high quality accepting less efficiency in the production process.
Instead of 10 flavors he offers 300 (!) with highly unusual tastes like fish-coconut flavor.
Currently Zotter’s company has a yearly turnover of 14 Mio Euros with 55% being generated in Austria and 45% from other – mainly European – companies. South Korea is currently the only Asian country where his chocolate is sold. Zotter’s market share in the premium quality chocolate segment is only 5%. However, Zotter is not interested in growing for the sake of growing. He is more interested in keeping his high standards and doing what he enjoys most as a business.
He is giving employment to 100 people, mostly women from the region of his small village who walk to work. The salary he pays is 25% higher than the industry average with 8 weeks of vacation per year. All ingredients that can be bought locally Josef Zotter sources from his region such as milk and sugar. Furthermore he only uses bio and fairtrade ingredients.
Buy half and pay double
Zotter was born in 1961 growing up as the son of a farmer in rural Austria. His childhood growing up on a farm cultivating his own food and being in contact with farm animals and nature coined his character and his values. He has a strong sense for being in and being connected to nature. This also means paying attention to the quality of food and how animals are treated.
In his view, the current trends in the economy and agriculture are neither sustainable nor fair. His research trips to the cacao farmers in Latin America enforced his views. Therefore he decided to use only biological and fairtrade products for his chocolate to ensure high food quality. According to Josef Zotter most people lost any sense and understanding for the value of food buying (1 kilogram of junk-meat for 1 Euro and spending hundreds of Euros on “stupid TV and cell phones”).
He repeatedly voices his opposition to the current growth- and consumption-craziness. He is against consumption for the sake of consumption or consumption out of boredom. Therefore he uses his entrepreneurial activities to get people to reflect their consumption patterns and learn to appreciate the value and quality of a good.
He wants to prove that there are others ways than the current negative standardizing of economy and agriculture with identical and interchangeable products. In an interview he said that “it tears my heart apart when I see how other companies produce chocolates for 1 Euro. Of course it is possible to do so. And if you produce millions of pieces of it you might even make a profit out of it. But who needs so much chocolate? Why not produce less but with higher quality?” For Zotter the new consumption pattern for food should be: Buy half and pay double.
That’s the approach he follows with his company and which made him very successful. At the same time he does not want to be called an eco-social entrepreneur supporting cacao farmers in a special way. He just provides them with the conditions it takes to produce the best cacao possible and to do what they love under conditions that make this possible. He respects them as a specialist with passion and not as a cheap supplier that can be further and further squeezed. He wants them to cultivate something special that enables him to make a special chocolate.
An unusual dreamer
Josef Zotter describes himself as a dreamer that sometimes loses his sense of reality. Therefore going bust in 1996 was so important to him because it made him humble and down-to-earth again. At the same time Zotter is a person that explodes with ideas and sometimes finds it difficult to focus on only a few them.
That led to now 300 different chocolate flavors with very unusual combinations. He is aware that 300 flavors are about the upper limit of what customers can “digest”. Still, every year he creates about 60 new flavors. How to add them to the current portfolio? He exchanges them with existing flavors. Economic common sense would advise to exchange the flavors that are not well accepted by customers. Zotter does the exact opposite: He takes out the flavors that sell best and exchanges them with unusual ones. He believes that the best-selling sorts are a threat to his unique positioning in the market which is to offer high quality chocolate in many different varieties. If he reduced the number of varieties he would be an easy target for his competitors. Using his unusual approach he forces his customers to try something else. He believes that people don’t try enough new things, so he just forces them to do so. Bestsellers can only go down, varieties that don’t sell, well still have potential. Some sorts hardly sell at all for a few years but then they suddenly pick up. Zotter thinks replacing too quickly deprives them of their potential. He is absolutely convinced of each chocolate sort he decides to offer and sometimes spends years before he is satisfied. Only customers are sometimes too conservative to try, that’s why they need to be forced to try.
Everything about Josef Zotter contradicts mainstream business logic and mainstream thinking. He doesn’t do any market research, he doesn’t write any business plans for his new projects he just follows his passion. For him it’s more important to turn his ideas into reality instead of making money. Getting money for his products is a necessary condition but never a goal in itself. He strongly believes that only passion for something will bring out the best of people and lead to the best result possible.
He reads current business theories created by the so called experts and then says “Ok, now let’s do the exact opposite.” His unconventional way of doing things consequently attracted the attention of these business experts. A group of scientists from Harvard were researching ways how to create successful business models after the recent financial crisis. For this they observed unusual but successful businesses around the world and found Josef Zotter. They didn’t just find him, they were very deeply impressed by what he does and how he does it. Now his company is not only the first Austrian firm having his own Harvard case study, Josef Zotter also received a lectureship at Harvard that he delivers via skype from Austria. The man who never came close to attending university himself is now a teacher at one of the most prestigious universities in the world.
The eatable zoo
Zotter’s latest coup is the fulfillment of a long-time dream. In May 2011 he opened an eatable zoo on a large property he bought. To display his special kind of humor Zotter created a poster at the entrance that says “No animal makes it out of here alive.” This eatable zoo displays a large variety of local domestic and working animals such as pigs and different cattle. Also on display are “mobile eggs”, chickens that run around and drop their eggs wherever the want. All animals grow up in a perfect natural environment and at some point in time will end up on the plates of the visitors. Before the opening there were sometimes heated discussions about this concept that some people perceived as being macabre. However, Zotter’s goal is a very different one that fits with his values. He want’s people to reflect on their food consumption patterns and behaviors and understand what it takes to make high quality food and what kind of price tag comes with it. The meat he sees in restaurants and supermarkets makes Zotter vomit he says. What is necessary is a new appreciation of food and a change of consumption habits. For him meat is like chocolate. It should not be eaten every day in junk quantity but consumed every once in a while but with a high standard of quality. With the current eating and food production habits we will not be able to live on this planet in a sustainable way.
Zotter hopes to do his part to make people, and especially kids, aware of this.