Upmarket Australian chocolate brand Koko Black has had quite a journey since it entered voluntary administration five years ago. Since it was picked up by Simon Crowe, founder of Grill’d, it has strengthened its operations, brand positioning and product and it’s ready for expansion. Here, CEO Nicolas Georges discusses Koko Black’s relationship with its customers, the competitive landscape and the premiumisation of the food category. Inside Retail: Closing stores last year must have been ha
hard for upmarket food retailers like Koko Black because so much of it is about the taste and smell experience. Tell me about what you did in the e-commerce space to make up for the closures. Nicolas Georges: We accepted very quickly that we couldn’t just sit and let things happen, we really had to take charge and say, “Let’s very quickly look at how we can reach out to people.” That meant we had to think about how we communicated with customers in a short, sharp way. We had to also know when to talk to people — a lot of brands were bombarding consumers, so we had to be selective. The second thing we did was emphasise the fact that Koko Black is a gifting brand; it’s an emotional thing. We tried to give people who could not be with loved ones the option of sending gifts. We created personalisation options, we developed ways for people to send messages and we beefed up our delivery systems so we could reach anyone anywhere. We offered employers the ability to send something to their employees in their homes. In other words, rather than think about us, we thought about our customers. We tried to turn it around and think, How are we feeling in this period? What would we want to do and say to people we want to be with but can’t? How would you do it with taste, care and compassion? That’s what we built into our e-commerce business so we could deliver that. That made a big difference for us. Koko Black’s stores reflect the fact that it is a modern Australian chocolate brand. IR: Tell me about how contact tracing helped Koko Black’s operations. NG: As a CEO, one of the biggest fears I’ve had throughout this process is what if Covid gets in my workplace? We operate nationally. What are the protocols you put in your place? Of course, there’s social distancing and sanitising but that’s just the first line of defence. We’ve learnt that you can do all that and still have an outbreak because one person somewhere doesn’t follow the process. It’s a fast virus. Our worry was we have one site of operations, we send everything nationally, we do our e-commerce from the same building. Not all our people can work from home. We have to make, pack, and send products. Our office people could stay at home and we still operated our stores using as minimal contact as possible, but we had to make sure they were all protected. This is the mindset you have in the food industry anway. You have to be able to trace any major issues so you can very quickly react and protect customer safety and narrow the impact on the business. We tried to apply that logic and say, “If this virus was to come, how do I corner it so that I can minimise the amount of people who need to be isolated?” That’s when we came across Contact Harald and it’s this simple system using wearable cards. If you were in front of me at less than 1.5 metres for more than five minutes, my card would register that and if ever got sick, it would send you a text to say that you should get tested. If someone gets sick, we only need to isolate only those people who were actually in contact with him or her. It means our staff are protected and we can continue operations in a safe manner. IR: In terms of your store network, what’s it looking like now and what are your plans? NG: We have 15 stores open, the majority are still in Victoria, then we’ve got the Australian Capital Territory, South Australia, New South Wales and Perth. Our intent is to rotate those as leases end but to also expand, particularly in NSW. We’ve got a strong presence in Victoria, but NSW is where we need to add stores. If Covid hadn’t hit, we would have probably opened two or three more stores. We have two major types of retail environments. One is a traditional lounge concept — in Claremont in Perth or the Royal Arcade in Melbourne, where you have the opportunity to sit down with a hot chocolate and cake. It has almost a European chocolatier type of experience. It’s about immersion. Then we have a number of other stores in a contemporary environment. Unlike most other brands in chocolate, we’re very new-world, modern Australian. Even though we have a lot of products for your consumption, the majority of people who come in want to buy a nice gift, so we want people to feel like they’re getting the best that they can get. They want something that truly is going to be unique. That’s part of the experience. You can personalise your gift, you can choose the flavour of pralines and the kinds of chocolates you can give, you can really cater it to the person you’re buying it for. Our business has been transitioning from that traditional experience into the modern retail offering. IR: In the past, you’ve worked at Mondelēz International, Nestle and Baker’s Delight. What are your thoughts on the confectionary landscape? I can see there’s been a big drive into high-end sweets and desserts aimed at adults in the past few years. NG: There’s definitely a movement into premium that’s been going on for years. The whole industry is going towards premiumisation, personalisation and occasion-based consumption — it’s definitely about chocolate becoming part of a lifestyle. Customers are looking for products that are enhancing the moment, a relationship or gift. Chocolate is one of the categories that has evolved the most in that regard. Wine is a similar category in that way. It’s not just about breakfast, lunch dinner — it’s about occasions, social relationships and events. Whether it’s through Cadbury at a mass level or Koko Black or Haighs at a premium level, the category is becoming about a lifestyle rather than focusing on just product and I think it’s been successful. IR: In the Sydney CBD, there’s a Koko Black store at The Strand, directly opposite from where the Kit Kat Chocolatery is located and around the corner from the Haigh’s QVB store. That’s a lot of chocolate in a small space. Tell me about the competitive landscape. NG: There is a lot of competition! The good news for everybody is there’s a lot of market for it. Interestingly, getting into the business of chocolate is not hard. It’s not like when I used to work in ice cream — that’s hard. The treat market is not hard — you can do it in your kitchen or garage, there are a lot of chocolateries with just two shops that do well. It’s going to the next level that’s hard. You’ve got the big guys like Cadbury and Lindt, which occupy a major part of the volume market, then you’ve got the small guys with two shops that have found their niche and do it well but can’t go beyond that because it’s too hard. The reason you’re starting to see businesses like Hey Tiger and Koko Black is more because people are elevating their needs and because we still have tourist trade and foreign Australian trade, people who are adopting Australian foods in other countries. It’s incredible what the wine category has done in Australia. Think 20-30 years back, it was a small business globally and now it’s huge, it’s because people are aspiring to modern Australian food and I think chocolate is in that transition. We see a lot of requests from international businesses to set up business with them in China, Japan, Korea. They’ve experienced the brand coming here, but there’s a lot of demand to work towards export. It’s because this whole market is moving up and we’re lucky to be part of that. There’s a lot of competition because of the fact that people love doing it, it’s not hard to set up and the pie is getting so much bigger. It’s not a problem — it reinforces that different brands are doing things differently, it’s quite good for everybody. IR: What are your plans for global? NG: We’ve always had the aspiration to go global. For us, it’s more about how we do it at the right pace. We’re very protective of our brand and we don’t want to lose control of it. There are many stories of brands that have gone too fast and fallen flat on their face. It is such a high quality product that making sure that quality is maintained is hard enough within Australia. We’ve started to work through the digital channels, going towards China. We’re working with third-party partners, working through their digital platforms and having a go at it. We’re seeing how it can expand, but we’re doing it at a pace that we know we can sustain and ensure we offer the best for customers. We don’t know how soon international trade can return, so we thought, “We may as well go to them [through online] rather than wait for them to come back!” IR: Koko Black has gone through quite a journey since coming out of voluntary administration a few years ago. How are you getting it back on track? NG: The business went into administration in late 2015-2016, then it was acquired by Simon Crowe, who owns burger franchise Grill’d. He’s been funding the business for a couple of years. Before my time, the business was stabilising and a strategy was being redefined. Now we understand who we are — we’re a contemporary, Australian chocolate brand. We know that’s who we need to be and in early 2019, we did a lot of work on our products and packaging to deliver that vision. From there, it’s about how we operationalise it. One of the reasons the business struggled wasn’t because it wasn’t a good brand with great products, but because the business fundamentals weren’t there, so we had to work through a lot of boring stuff — systems, operations and training — but we’ve done a lot of that now and funnily enough, we were two thirds of the way through that when Covid hit. In a lot of ways, the Covid period allowed us to finish the job on that front. We feel we’re ready for the next phase to scale up and we feel the structure underneath is strong with good products, branding, systems and we’re set up in different channels that we weren’t in before — we work with resellers, corporate clients, international partners and e-commerce. Now we’re about controlled growth and that’s how we’ll secure the business’ future.