Not only is imitation the sincerest form of flattery, but it may also be the easiest way to make a buck.
Moonstruck Chocolatier operates out of a matchbox of a store in downtown Portland, Oreg., its 140 square feet of space wedged between a Payless shoe store and the entrance to the Oregon National Bank Building. It would be easy to miss Moonstruck, save for its striking blue awning.
Inside, you can buy individual truffles, freshly handmade at the company's plant in Portland. You can buy all manner of coffee drinks. You can also buy all manner of chocolate drinks, hot and cold. Moonstruck mixes fresh, high-quality chocolate into exotic confections, combining it with ingredients like coffee, root beer, Earl Grey tea, vanilla, and fresh peppermint. Although the store sells coffee, pastries, and ice cream, chocolate in varying forms accounted for 65% of its $170,000 in sales in 1999.
Down the block stands a store with a more familiar name: Starbucks. With its buffed stainless-steel sign, it conveys the institutional heft the world has come to expect from an enterprise as familiar and ubiquitous as Starbucks.
It's hard to imagine a greater asymmetry between two brands. The Moonstruck logo is scarcely known beyond downtown Portland. Starbucks has more than 3,000 stores in the United States and 19 other countries, and its logo is universally recognizable.
Still, Moonstruck has ambitions as lofty as its name. The business plan calls for the company to have 45 stores in Chicago, New York City, and Portland by the end of 2003, generating about $26 million in revenues.
Such a dizzying ascent may seem preposterous, considering where the company is today, but Moonstruck intends to hit those numbers and become a brand as well known as Starbucks. It plans to do that by copying the Starbucks model, substituting chocolate for coffee. And the parallels between what Moonstruck is setting out to do and what Starbucks has done are not inconsiderable.
Still, Moonstruck faces long odds. To consider just one barrier: Will Americans really drink chocolate with the same abandon that they drink coffee, an already popular beverage sold widely in coffee shops and cafés well before Starbucks came on the scene?
Moonstruck was conceived in 1992 by Bill Simmons, who is 62, and his wife, Deb, now 50 (with help from John Schouten, a marketing professor at the University of Portland). Bill began his career in the baking industry and migrated from there into high tech. Deb had been a schoolteacher for 22 years. They were looking to start a homegrown business that would combine their expertise in food retailing and education -- a business not unlike Starbucks.
Starbucks went public that same year, 1992, with 165 stores and $103 million in sales, having grown from a single Seattle storefront opened 21 years earlier. Starbucks started out as a purveyor of fine coffees and teas, which it sold in bulk. Its high-quality coffee came from arabica beans, which in 1971 accounted for a small fraction of the coffee consumed in America. The balance came from robusta beans, an inferior variety that produced the dark and acrid brew Americans had come to reflexively choke down as part of their Calvinistic heritage.
What really lit a fuse under Starbucks was not just its commitment to better beans but its move into retail -- selling coffee by the cup. The stores were decorated with bins of coffee beans, photos of coffee trees, and shelves of gleaming coffee paraphernalia. Employees were trained to educate customers about what they were drinking and why it tasted good. For many, the experience was so engaging that Starbucks became a natural gathering place, and that made the brand familiar.
Bill and Deb Simmons couldn't help noticing the success of Starbucks. Perhaps it was worth copying. "The more we poked at the Starbucks model, the better it looked," says Bill, who wondered what other commodity could command a cult following. The couple zeroed in on the cacao bean, which had a romance and lore all its own. People used to think of chocolate as something to drink, not eat. In Europe as recently as the late 19th century they congregated at chocolate bars in exactly the same way that people now meet at coffeehouses. "Poets and philosophers used to meet and talk over chocolate," says Deb.
The Starbucks analogy came into focus for the couple once they discovered that 95% of U.S. chocolate is derived from the forestero bean, the cacao counterpart of the inferior robusta coffee bean. Older, "gran cru" trees yield finer criollo and trinitario cacao beans, which are more flavorful than the lesser beans.
Chocolate from the finer beans is purer, requiring less sugar and fewer additives. More flavors come through to the palate, not unlike what a fine wine delivers. A typical American chocolate may have as little as 17% cacao content, compared with a minimum European standard of 56% for "fine" chocolate.
Moonstruck would bring the higher European standard to the American palate and revive the chocolate bar as a meeting place in a busy, anonymous world. In the process Moonstruck would romance the cacao bean and educate the customer, just as Starbucks had done with coffee. "We are not a chocolate store where you walk in and leave with a box of candy," says Deb. "We are about a chocolate experience. We want people to know what they're eating."
Moonstruck kicked off its business in 1993 primarily as a maker of truffles for the wholesale market. (It sold to other retailers, including Neiman Marcus, Marshall Field, and even Starbucks for a while.) The retail store opened in 1996 and its revenues grew rapidly.
Still, the store accounted for less than 20% of the company's $1 million in chocolate sales in 1999. Moonstruck, after all, was a company with a split personality. Bill Simmons, through his other business experiences, had been able to recruit a well-qualified board. But the relative abundance of board talent created a divide over which way to take the company. "We had a couple board members with bad experiences with retail. They were afraid of the investment in bricks and mortar," says Bill. Conversely, the board members counseling against a wholesale strategy worried that the brand would never flourish in wholesale.
