He had already begun to contemplate his next act. "I was getting involved in a redwood forestry project that I thought would be a good idea," he recalled. "It wasn't, but luckily, I didn't lose any money." He was also thinking about manufacturing an alcoholic cider, using the overabundance of apples and pears that are grown in Mendocino County. "At the end of the day, it reminded me too much of the wine business for distribution," he said. "Each state is like a different country, without the European Union."
Having cleared a tidy sum from his stock sale to LVMH -- "it paid for my house and left me a couple hundred thousand" -- Scharffenberger was looking for an opportunity. Nix to redwoods. Nix to cider. At which point, chocolate presented itself.
Back in his hippie days in Ukiah, Scharffenberger knew Robert Steinberg, a physician and foodie who, like him, was a devotee of the counterculture. Steinberg later moved to San Francisco, where Scharffenberger, who was often in the Bay Area, continued the relationship. "The last time I saw him as a doctor, he said he had six months to live -- 'and, by the way, you have a hernia,' " Scharffenberger recounted. Given a diagnosis of terminal lymphatic cancer in 1989, Steinberg survived for almost 20 more years, before his death last September at the age of 61. But when he received the grim forecast, he closed up his medical practice to focus on the things he loved. At the top of the list was food.
With another partner, who was seeking more use from an underused coffee-bean roaster, Steinberg had spent a couple of years ruminating about crafting chocolate from cacao beans. In 1996, he asked Scharffenberger if he was interested. A self-described chocolate fanatic, Scharffenberger was very interested. The other partner eventually dropped out. "Which was fine with me," Scharffenberger said, "because he didn't have money or expertise or a place that we could use for a facility." Himself, Scharffenberger had a little capital, contacts to raise more, and a strong idea on how to set up production. "You find a cheap place and fabricate everything you can fabricate and buy everything else used, which is how I did the winery," he said. In 1997, he located an inexpensive industrial building in South San Francisco and bought secondhand machinery in Europe. To benefit from Scharffenberger's food-world reputation, the new company took a bifurcated version of his name for its brand: Scharffen Berger.
Steinberg and Scharffenberger envisioned their customers as dessert chefs. They offered only large sizes -- from half-kilo up to three-kilo blocks -- suitable for commercial kitchens. But they were having trouble making inroads on the entrenched brands. "We were running out of money, and the holidays were approaching," Scharffenberger said. "I had made a $300,000 investment, basically all the money I had." To drum up a little extra cash, they tried selling some chocolate in the weekend San Francisco farmers' market, chopping up a few blocks to distribute as samples. "We sold 400 bars at $4 a bar," Scharffenberger recounted. "On Monday morning, I said, 'We have to make more bars.' " They filled their large molds partway and reduced the size of their wrappers with a paper cutter. And they never looked back. With the coming of the new year of 1998, Scharffen Berger chocolate would be sold at retail.
Scharffen Berger won prominent endorsements from such culinary arbiters as Julia Child and Jacques Pepin, and the publicity helped the company grow. Whole Foods was the first big retail customer. As the company expanded, it needed more capital and corporate management skills, so in 1999, Scharffenberger enlisted Peter Wais, a Bay Area steel-industry scion who wanted to get into the chocolate business. Wais ran the day-to-day business operations and supplied the money to buy a handsome building in the industrial district of west Berkeley. (He then leased it to the company.) But the introduction of a third partner exacerbated the frictions that already existed between the original two. "In my memory, I think I'm a little rough on Robert," Scharffenberger told me. "For the company, if you think of it like a ship, I might have had my hand on the rudder, but he was the keel that steadied the ship. He kept it on a course that made sure it was a joyous place to work and also a delicious product. He wasn't managerial. He was slow, and we had to be fast, or we couldn't have a business." Scharffenberger can easily lose patience. "We were running out of money," he recounted. "We had to get organized with a new product line, say, of this baking chocolate. It has to be packaged and in a way that's replicable, and with a marginal cost that worked. He didn't know any of that, so I explained it to him. And then he asked again, and I explained it again. At which point I would say, 'I've shown it to you twice. If you don't get it, see ya. In holding your hand, I can't sink the ship.' I got to the point I wasn't willing to run the company at his speed. He became resentful." Wais told me that his own long-range vision was to expand the company over time and that Steinberg, because of his health problems, pushed for a quicker sale. Scharffenberger's history in sparkling wine inclined him toward selling to a bigger corporation, but he waffled. "John went back and forth," Wais told me. "He liked the idea of building something up, but he also went through periods when he wanted to sell." Scharffenberger was also domineering. "John feels supported when you mirror him," Wais said. "When someone does not mirror him, he is very ill at ease."
With a third partner, the ship veered out of control. As Scharffenberger argued with Wais, he felt that Steinberg was not supporting him. The alliance crumbled. "I raised all the money from friends and family to buy Peter out and recapitalize the company, and I told Robert, 'You're not my partner anymore,' " Scharffenberger continued. "It was sort of natural for Robert to be resentful, but it was all about the company working and the product being good." Steinberg continued at Scharffen Berger, with about a 13 percent ownership stake and an ongoing role in bean sourcing and blend tasting. "At the end of the day, Robert was a very good taster," Peter Kocaurek, the original production manager, told me. "He was very analytical about flavors and what he liked about them and didn't like about them. Robert was much more interested in picking out certain flavors, and John was into the overview." But Kocaurek laughingly agreed when I told him Scharffenberger's assessment of the problem with having two bosses. "The issue," Scharffenberger said, "was that partnerships aren't a good way to run businesses for employees. Peter Kocaurek could ask me a question and Robert the same question and take the answer he wanted. When you're formulating, it's one thing, and when you're operating, it's another."
