Sweet! High-end chocolate business booming

"Chocolate is an affordable indulgence. No matter how difficult economic times get, we'll always want to treat ourselves," said Joan Steuer, president of Chocolate Marketing LLC, which studies trends and new products in the industry.

But while sales are growing, so is the competition, crowding shelves of grocery stores with brands like Ghirardelli, Godiva, Dagoba and Scharffen Berger.

While there's only around a dozen U.S. "bean-to-bar" manufacturers that make their own chocolate from scratch, smaller players who buy their chocolate wholesale and melt it into bars are entering the market at a rate of about one a month, Steuer said.

"It's exploding," she said. "The market isn't saturated yet, but it's close."

That doesn't mean people are getting rich cranking out bars and bonbons, however.

Bulging input costs and paper-thin profit margins have squeezed traditional chocolate manufacturers and make it extremely difficult for new players to break in.

A commodities boom has pushed the price of cocoa, the chief ingredient in chocolate, above $3,000 per metric ton — the highest in 22 years and double the price from a year ago.

Battered by the increases, No. 1 U.S. candy maker The Hershey Co. and smaller rival Mars, maker of Snickers bars and M&Ms, announced earlier this month they were raising prices for their products by more than 10 percent.

Still, most new chocolatiers say passion — not profits — is what motivates them.

Many have learned the craft over the Internet, launched one-person chocolate factories from their kitchens and put up Web sites to sell their products online from anywhere.

"The Internet has really opened things up," said Pam Williams, who runs Ecole Chocolat, an online school that trains people to make their own chocolate and open a business. "Now you can go to Kansas City and find a good chocolate maker who rivals the quality and craftsmanship of that you would find in Europe."

Last year, one of her former students, Donna Smith, began selling homemade truffles, peanut butter balls and other candies online through her company Smithorganicchocolates.com, which she hopes will allow her and her husband to earn an income from home.

"The sky is the limit right now," said Smith, who works out of her kitchen in Akron, Penn., about 30 miles from the Hershey plant and who has seen sales steadily increase. "People love chocolate, especially in hard times when they want to be comforted."

Some niche chocolate makers have dreams of being bought out by a major candy manufacturer for a sweet payday. That's what happened to Dagoba, an organic chocolate maker acquired by Hershey's two years ago for an undisclosed sum believed to be between $10 million and $15 million.

But Childs, co-founder of TCHO, said his priority is building up the company — not cashing out. The company shuns venture capital and raised all its start-up funds through family and friends, who received equity in the company.

"For right now, I'm very happy just making chocolate that fills my factory, " he said.

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