We live in a country that seems perfectly content with the Hershey bar. What inspired you to start a gourmet chocolate company?

Scharffenberger: You may say that, but almost everyone who visits Europe comes home with chocolate. We think Americans are following a path that was blazed by the wine business, the beer business, the cheese business, the bread business and the coffee business. Those various sectors have driven tremendous changes in what Americans like to eat.

What makes your chocolate taste different?

Steinberg: We make chocolate in which the cacao—the actual beans—is the most prominent feature. We allow multiple flavors of the cacao to come through, and we do not cover them up with sugar and other flavorings. From a marketing standpoint, we also want to make our process transparent, because we believe that the more people understand how our chocolate is made, the more they can appreciate its taste.

When you started this company in 1996, was this a passion that you were able to monetize, or did the business plan come first?

Scharffenberger: The passion came first. I’ve worked in food production all my life, so I love to make food that I like to eat. When Robert brought this idea to me, I said, "I eat chocolate every day, and it’s almost all European. Let’s try it. Let’s have fun. We’ll sell it to some of our friends in San Francisco in the food business, and have a nice weekend project." Well, it turned into something much more.

Robert, you were working as a doctor at the time?

Steinberg: I was diagnosed with chronic lymphocytic leukemia in 1989. I was told it was not curable, and that I had a 10-year median life expectancy. I wasn’t feeling well and I was not able to continue my practice. Although I wasn’t looking for anything else to do, I was open to a lot of things. I began taking piano and drawing lessons; I went to live in Italy for a couple of months. All of these things contributed to a sense that I could do whatever I wanted to do. I looked at my life and there was a hole. It sounds like a negative, but it was a positive. Relative to dealing with the illness, there were a lot of risks that I was taking. When John started talking to me about chocolate, I began pursuing it because it was so complex, interesting and challenging.

Who is your customer?

Steinberg: There is currently a huge interest in food in general, and we are part of that wave. Our customers are people who love to cook and explore various products for cooking. They are individuals who want the best of what’s available. Our product is sold in stores located in neighborhoods that are well-off, yet chocolate is an affordable luxury. You can buy it in small quantities and enjoy it for what it is.    

Do you call your product "gourmet" chocolate or "premium" chocolate? What’s the difference?

Scharffenberger: I think those are old-fashioned terms. Everyone tried to put a dollar demographic on it, like you had to be rich to enjoy it. They did that in the wine business, and it didn’t help very much. We just try to deliver high quality—it is a quality distinction rather than one connoting wealth. The people who have learned to like an espresso or a latte, or a glass of Chardonnay or Sauvignon Blanc—those are the kinds of people who like our chocolate.

In 2005, you were acquired by Hershey—specifically by Artisan, the company’s premium division. How does this acquisition fit into your long-term strategy?
 
Scharffenberger: When we started, we weren’t trying to be a fancy, gourmet, exclusive company. We just wanted people to think of dark chocolate that was delicious when they thought of our chocolate. I remember saying to Robert, "I would love to go to the airport and see our chocolate available there someday, next to all the other traditional candy bars." That is our hope. That is what Hershey brings to the table—a larger audience.

Are you concerned that your association with such a universally rcognized brand will overwhelm your unique identity?

Scharffenberger: I don’t know. The people at Ferrari must have thought that when Fiat bought them, or Jaguar when Ford bought them. However, these big companies are smart—they know the way to succeed in the marketplace is to work a niche and to work it well. I think that’s what Hershey is doing with us.

Steinberg: Hershey has been very clear about the fact that the method we use to make our chocolate and the way we select our ingredients are the keys to the chocolate tasting good. That is not something it is trying to change. As any company would, it wants to increase sales, but not at the expense of diminishing the quality.

Are there other American chocolate makers that are doing what you are doing in this niche market?
 
Scharffenberger: There have been a few. There is a company called Dagoba that got in on the organic side; it is now a part of Hershey as well. It was our main competitor. Now there are six little start-ups that are doing what we are doing.

Do you feel competition in the market?

Scharffenberger: No. Our only problem is finding enough cacao to meet the demand. It’s interesting: In the wine business there are 4,000 brands and 50 million consumers. In the chocolate business, there are 12 brands and 250 million consumers. It isn’t the niche it used to be.

Your factory is not your typical mass-production facility. It actually seems more like a chocolate museum.

Steinberg: We started out in an undistinguished space in South San Francisco. In 2001, we moved to a building in Berkeley built in 1906. It is a beautiful building, with high ceilings and brick walls. As you approach the factory, there is a pleasant odor of chocolate. We also have a store where we sell our products. In the production space, there are lots of pipes and machines. In one room we store the beans in burlap bags. Virtually all of these machines were constructed solely for the purpose of working with the cacao bean.

Sharffenberger: These small machines make chocolate the way it was made 150 years ago. It is a very old-fashioned process; you can see the chocolate being transformed from an agricultural product into chocolate bars.

As a Hershey company, are you going to continue to make your chocolate in Berkeley?

Scharffenberger: Yes. We built this factory with room to grow. Where we once had one machine, we might now have three—and we have room for lots more. Someone told me that Ghirardelli once had a factory the same size as ours, and in it, the company was making five times more chocolate than we make today.

In your book, The Essence of Chocolate, you write about
the difficulty of procuring the specific kinds of beans that are right for your chocolate. Now that you have Hershey behind you, is that any easier?

Scharffenberger: Not really. We are looking for beans that Hershey is not familiar with. We work with different bean suppliers, and we are in a different arena. We still have to find our own beans. With Hershey’s help, we are, however, able to secure larger quantities of cacao once we find it.

Do you plan to broaden the Scharffen Berger line beyond your current offerings?
 
Scharffenberger: Once we get to the point where we can satisfy the demand for our products, maybe. But I don’t see us offering a chocolate-brownie mix anytime soon.

What business goals do you have for the next five years?
 
Steinberg: I hope our product will continue to be extremely high-quality. I also hope that the farmers who produce high-quality cacao beans will be rewarded. There must be expansion on an agricultural level. It will require more education of farmers and more rewards for them financially. There must be more of a connection between quality and price rather than the tendency to view chocolate solely as a commodity. I hope that chocolate will be a force for improving the world in that way. It may be overreaching for me to think in those terms, but I would like to see that for some small part of the world.