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Bankruptcy, flood, weak economy: Still, chocolatier has hope

Brian Beck and investors bought Bernard Callebaut out of receivership in 2010.

Chris Bolin/The Globe and Mail

Selling chocolate was never meant to be this hard.

Bernard Callebaut chocolates have been loved in Calgary and beyond as a sumptuous delight for decades. But after a high-profile bankruptcy that resulted in the Belgian-born founder being barred from using his own name as a trademark, and the destruction of a manufacturing facility in the city's 2013 flood, it's proven to be more of a struggle than anyone could have imagined.

Now, the head of the company behind Chocolaterie Bernard Callebaut, which he and investors acquired out of receivership in 2010, is opening a new manufacturing facility in an industrial area of Calgary, just as the local economy is in the throes of its worst downturn in years.

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"Just at the moment when we would otherwise be thinking we'd have maybe a stable standing start again, of course the world around us has changed," said Brian Beck, president of Cococo Chocolatiers Inc., which owns the brand. "But we're very hopeful and a lot of people depend on us."

With Valentine's Day – when purchases kick into high gear – at hand, Mr. Beck sees the opening of the factory as another in a series of beginnings for the brand.

The reputation of the swish sweets grew over decades, especially in Calgary, under former owner Bernard Callebaut, who lost the business five years ago. After a very public legal spat, Mr. Callebaut the man is no longer connected to Bernard Callebaut the brand. He's making a second attempt at a new operation, and as far as losing the name goes: "I'm over that," he said.

That name, the quality of Cococo's product and growing sophistication of the business should carry it through tough economic times on its home turf due to the oil-price collapse, Mr. Beck says. The company has 29 stores across Canada and two in the United States and is building up a wholesale business. It employs up to 150 people, depending on the time of year.

"There's this aspect of chocolate either as an indulgence or, if it's better chocolate, a so-called affordable luxury – it stays up when things are down," he said.

"But here in Calgary it's direct retail buying behaviour that affects it. At Christmas, our sales were down at the till but sort of on a trend everywhere. We could see that it was a Calgary phenomenon, and sort of in line with what we were guessing."

Annual sales are around $10-million, which is relatively modest for the volume of drama the Callebaut story has produced. Mr. Callebaut, whose family has made chocolates in Belgium since the early 20th century, started the business in Calgary in 1983 and the confections became local, and eventually national, favourites.

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A bad real estate deal and, as he has described, his bank's loss of patience amid falling sales finally pushed the company into receivership. The Cococo investors emerged with the business.

Mr. Beck, who was once Mr. Callebaut's lawyer, says he has reached out more than once to collaborate in some way, but has been rebuffed. While he waited for a response to one of those offers after he bought the operation, he says, Mr. Callebaut launched Papa Chocolat, a new brand to compete with his old one.

Mr. Callebaut was fined $150,000 for contempt of court for removing items from the company while it was in receivership.

For his part, Mr. Callebaut disputes there were offers to collaborate. "Does it mean that I'm open to talk? That's always possible. You never say no, right? But he definitely has never put forward an offer to me. Never," he said.

Papa Chocolat struggled, and the company shut down, even after Mr. Callebaut appeared on CBC's Dragons' Den in an unsuccessful attempt to raise capital to continue.

Meanwhile, as Cococo's legal storm was subsiding, its manufacturing facilities in the basement of a strip mall just south of downturn Calgary were swamped when floodwaters submerged much of its district during the province's costliest natural disaster. The company was forced to patch together a new plant one floor up in the building "in a MacGyver way" so it could sell chocolates in the all-important Christmas season that year.

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With the new plant starting up, Cococo is playing up growing expertise sourcing ingredients directly from farmers and expertise in high-end sweets as well as baking products.

"The chocolate industry is generally going to trend in a direction of more authenticity, of better understanding of what chocolate is about. There will be a lot more pressure to have good, authentic products, which there are less of and probably cost a bit more. It will be like wine in that sense," Mr. Beck said.

In October, Mr. Callebaut launched Master Chocolat, with a single location at Calgary's farmer's market.

He recently went through personal bankruptcy, which he says helps him restart with a clean slate.

"So losing my name is not important for me any more, because ultimately people associated my name now with my old product, and now I'm out of that," he said. "You can reinvent yourself, and that's what I have done."

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About the Author
Mergers and Acquisitions Reporter

Jeffrey Jones is a veteran journalist specializing in mergers, acquisitions and private equity for The Globe and Mail’s Report on Business. Before joining The Globe and Mail in 2013, he was a senior reporter for Reuters, writing news, features and analysis on energy deals, pipelines, politics and general topics. More


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