Alter Eco founders on NextWorld Evergreen’s acquisition: Chocolate consumers want a story

By Douglas Yu

- Last updated on GMT

Alter Eco sources cocoa beans from Ecuador and Peru.  Pic: Alter Eco
Alter Eco sources cocoa beans from Ecuador and Peru. Pic: Alter Eco

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Private equity firm NextWorld Evergreen has acquired San Francisco-based single-origin chocolate company Alter Eco for an undisclosed sum.

The deal, said founders of Alter Eco, could help the company scale up its business growth from the current 35% year-over-year to 70%, to reach $100m annual sales in the next four to five years.

Edouard Rollet and Mathieu Senard of France started the company in 2005 based on their existing network of farmers primarily from South America.

Alter Eco Dark Chocolate Coconut Clusters_Group
Source: Alter Eco

“We originally had eight product categories, including tea, coffee, rice, olive oil, and chocolate,”​ said Rollet. “As our business evolved, we decided to mainly focus on chocolate which now accounts for 85% to 95% of our business.”

Alter Eco currently manufactures a variety of chocolate bars ranging from 47% cocoa to as high as 90%. All of them are non-GMO, organic, and fair trade certified.

“We source cocoa beans [for making dark chocolate] from two co-ops in Ecuador – it’s a national variety bean which has high quality and natural floral scent, and we also have another long-term partner co-op in Peru,”​ said Rollet.

He added that Alter Eco is the fourth largest organic chocolate brand in the US natural food space.

From seed fund to private equity

Alter Eco was initially supported by 35 small investors from France, including a dentist, a monk, and a tax collector, according to Senard.

“We raised $2m in early stage. As we grew, we added two rounds of funding in 2010 and 2012 separately to lure equity investors,”​ he said.

In 2016, the company reached $20m in annual revenues.

However, Senard said, “Growing from $2m to $20m is one thing, but growing from $20m to $100m is a ‘whole other set of challenges’.” ​That was when Alter Eco started looking for an investment firm for acquisition.

“We found NextWorld Evergreen around five years ago… They were looking for mission-driven companies, and not looking to buy a brand to sell a few years later. They wanted to keep the brand’s value and culture which is the most important thing for us,”​ he said.

“We were also in discussions with many CPG brands, [as] many of them approached us before. Although they would provide synergies, we would lose most of our team, and the team is really the spirit and culture behind the brand that resonates with consumers in terms of authenticity,”​ Senard continued.

“In the natural and organic food space, if you have a very strong halo of sourcing, consumers do have a tendency to like independent products that have a story versus those under a big umbrella,” ​he pointed out. 

“Unfortunately, many brands lost market shares after being acquired by major CPG companies, because consumers want a story behind those brands.”

“I believe this is what Hershey is trying to do to keep the authenticity of Dagoba and Scharffen Berger Chocolate (both under the company’s subsidiary, Artisan Confections Company),”​ Senard said. “On the packaging of Dagoba, it doesn’t say Hershey, but Artisan Confections Company instead.”

Capitalizing on the snacking trend

Upon the acquisition, Alter Eco has started implementing new marketing strategies to target emerging consumer trends such as snacking, said Rollet.

“Chocolate is a dynamic category, and we have to look at what consumer will eat, let’s say, five to 10 years from now. Snacking is one of the fastest growing segments in the food industry,”​ he said.

Earlier this month, Alter Eco launched its first line of coconut clusters dipped in single-origin Ecuadorian chocolate.

“There are more and more Fairtrade chocolate in the market now, and we have to make sure that our products stay relevant among consumers,”​ Rollet added.

He said, in the next two years, chocolate will remain a “big part”​ of Alter Eco’s business, and the clusters line is expected to grow as well.

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