Building Night Chocolate

I graduated in ‘24, and yet I remember very little of my college time – except for my final year. It was honestly one of the most exciting times in my life.

My friends and I were jamming about random things and we decided in a very young spirited way, that we work really well with each other, we should start something together. After a lot of brainstorming and evaluation, we landed on “selling chocolates”.

Chocolates in India have a really interesting background – about 75% of the market is concentrated in the hands of 3 players (Cadbury, Nestle and Amul), and about 3/4th of it is just Cadbury. It is an industry where innovation and new product thinking seemed to have just stopped. The products have remained roughly the same for the past decade. We heard stories of biggies like Future Group which had so much distribution back in the day, trying to get in, and yet were unable to. The dynamics were very interesting, a monopolistic-like market with very little innovation seemed like just the right market to bring something new to.

What seemed even more interesting was that, in India, which is famous for its rich flavor and great heritage of sweets, how well a brand achieved to establish itself as a symbol of “celebrations” when we literally have mithais that are unparalleled.

We wanted to bring something new to this market, we did a deep dive on how chocolate is made, processed, distributed, etc. Our initial idea was to sell a chocolate that has no/very-little sugar and is primarily aimed for that sweet treat you crave right after dinner. We wanted to make a guilt free snack to satisfy those post dinner cravings. We named it Night Chocolate. However, after much contemplation and sales trials, we realised our only moat was packaging and positioning. There already existed healthy chocolates, we were just introducing them as a new concept – which didn’t seem powerful enough to garner market share. As we got deeper into the chocolate ecosystem, we realised the potential was much larger.

An opportunity that appeared was Indianising chocolate – how to make treats that are inspired by Indian flavours and yet capitalize on the mass awareness of chocolates. We pivoted to making fusing interesting Indian flavours with chocolates.

As students, we had very little money and knowledge about space. We wanted to experiment as much as we possibly could. We smuggled a small induction stove into our hostels, rented a mini fridge and started running experiments right from our hostels. We bought a bunch of coverture grade dark chocolate, a bunch of essences, fruit extracts, etc.., and started trying them ourselves and also studying on what flavours do well together.

We tried numerous – Aam (Mango), Sitaphal (Sugar-Apple), Jamun (Indian blueberry), Masala Chai, Filter Coffee, Paan, Santra (Orange), Cranberry, Cinnamon, and so on.

We were constantly researching on how flavours could be infused into chocolate and would keep trying different methods. We used to then call a bunch of friends over, make them eat random flavours and choose which ones tasted good. After about 20 iterations, and having the confidence that these are working, we fixed on these – Aam (Mango), Sitaphal (Sugar-Apple), and Jamun (Indian blueberry). These fruits were truly a part of every Indian childhood, and evoke a nostalgic sense.

Now that we decided on what to make, we had no idea on how to make these at scale. We had about 2,00,000 INR (~$2,300) saved up together. This was really not much. We had to figure out manufacturing and sales. I studied at NIT Warangal, and the closest big city to us was Hyderabad. We started contacting every chocolate manufacturer we could find in Hyderabad. Most were purely reluctant to even entertain us – we were too small, they had large MOQs, which we could definitely not afford. The others were just bad. They had low quality outputs and seemed very shady.

When we were just about to loose hope, I randomly come across a chocolate ad on instagram. (Thanks to me only researching about chocolates for so long and the algorithm trying to make sense of it). As a habit, I go to their website, check them out and look for who they use as a manufacturer (It is mandatory in India to disclose this on the packaging). And like pure magic, I find a new manufacturer based out of outskirts of hyderabad, who was not listed on any of the directories we had previously searched on.

I call him, he speaks well, I request for an appointment, I finally reach there and he shows me around his factory and gives me a detailed tour. I was literally a kid in a chocolate factory – ecstatic. I pitch our idea to him, with soo much desperation, that he finally agrees to partnering with us. We re-work the whole infusing flavours into chocolates in a scalable way. We establish SOPs and begin manufacturing.

But wait, who do we sell it to? We have no customers, no contacts,.., and no money. We invested almost all of what we had in the first batch of manufacturing, packaging, moulds, dies etc. (Convincing packaging vendors to work with us, was a whole different challenge).

We had no money to invest into running ads, getting retail spaces, or anything like that. This is when we thought, why not go B2B first? But who buys chocolates as a business? Some do, like office campuses, hotels, etc.

We spoke to every 4-star and 5-star hotel in Hyderabad, literally each and every one. I know most of their purchase managers by name. But, the business we got into was very tricky. Food quality is something these people were very very pedantic about. And we failed to convince them to try out a new brand by a few 20-year olds. After having spent about 3 weeks waiting outside offices of these purchase managers, one said yes. They actually had a small kiosk store in their hotel where guests could buy things – he said yes to that, not actually buying it themselves.

We used that win to get two more trial orders. We were confident that we could convert them into final customers. Our product, packaging, concept, everything was really good. We were making about $5K/mo at this point.

One thing the hotels beat us down on was the pricing. Our chocolate was very expensive. We did not have economies of scale on our side. It was costing us 50% more to manufacture, than the big brands were retailing their chocolates for. It was a HUGE difference. What also contributed to this was, we were really adamant on making good quality stuff. Most brands would just use hydrogenated oils as base in their chocolates, it is unhealthy and leaves a greasy after taste. We were using nothing but cocoa butter.

And while we were only just about breaking even, a new shock hit us. About 80% of chocolate in the world is produced by Africa. And in 2024, there was a cocoa crisis primarily because of the crop getting affected by Black Pod Disease. Even though we were not sourcing our cocoa from Africa, we were affected because cocoa rates went up everywhere. What was 400/kg when we started rose to 700/kg in just a matter of 4 months.

We had no leverage here. We couldn’t sustain the competition, and couldn’t get our partners to buy from us at the increased price. We were not immune to these factors like the big players were. We ultimately had to sunset the operations.

Even though it didn’t have the most amazing ending, it was incredibly fun. I still remember, the first train from Warangal to Hyderabad left at 6:30am and the last train from Hyderabad to Warangal reached at 1:20am. And I took those two everyday for 4 months straight. Managing college and trying to set up a chocolate business. And I would do it all again, a little differently, a little better, and fix a lot of mistakes – but would definitely do it again.