From Local Niche Manufacturer to Hot Chocolate Powerhouse: Sillycow Farms Is Serious About Selling Cocoa

Jonathan Rutstein credits a midlife crisis for spurring him to switch gears from public planning to cocoa making. In 1988, he and his wife, Fran, bought Bread & Chocolate, a small Vermont company that produced Belgian chocolate sauces. After discovering there was demand for locally made hot chocolate, they developed a cocoa recipe, packaged the cocoa in a nostalgic-looking milk bottle with a cow’s image, and dubbed the company Sillycow Farms. Here, Rutstein discusses how those changes led to sweet sales gains. –As told to Karen Angel

I had always wanted to own my own business, and someone told us it was for sale. We struck a deal and bought it for $10,000.

It was an entrée into the specialty food industry in Vermont. When we looked at the customer list, we thought the company really had more potential and we could expand it in New England.

I started selling to mom-and-pop stores in Vermont. I asked them, “If we came out with another product, what should we do?” And they said, “You should come out with a cocoa.”

In 1990, we introduced Victorian Girl Cocoa with a Victorian girl on the label. Next came Heavenly Cocoa with Santa on a Holstein cow and Storytime Cocoa with nursery-rhyme characters imprinted on the tins. I did my own research and testing in terms of what I thought a cocoa should be. I figured my taste is sort of middle of the road, and if I liked it, the public would like it. And yeah, people liked it. We dropped the chocolate sauces to focus on the cocoa.

For the first few years, Fran and I made it ourselves and used a co-packer to package it. A nearby company let us use their factory floor to roll the cocoa and sugar in giant cardboard cylinders; then we had to hand-fill the tins.

We didn’t add dairy -- then you have to add chemicals for mouth feel and to make it dissolve correctly. We decided to go all-natural and gluten-free. You could see what was on the shelf then for cocoa – who’d want it? I couldn’t pronounce half the ingredients.

We started going to the Summer Fancy Food Show in New York City, and from that we picked up our first real national customer, Marshalls, in 1991. After T.J. Maxx bought Marshalls in 1995, we piggybacked on that. It was 60 percent of our revenue and over 3,000 stores.

Our co-packer went out of business, so in 1994, we bought a 10,000-square-foot building in Wells River that had sat vacant for 20 years and renovated it.

As we expanded, the impediment for us was labor, especially because our business is so seasonal. You’ve got an aging population, and the youth aren’t staying in Vermont.

The big sales start in August, September, October -- everyone wants it before Thanksgiving and Christmas. When you have three-quarters of your business in three months, it’s a heavy lift. We said, “Okay, we’ll increase the wages,” and that’s attracted more labor. But you have to go through 50 people to get 31 who stick.

What really started this thing going in 2008 was the bottle. I had a gut feeling we should look for some other way to package the cocoa, and a guy came in with these milk bottles. We said, “It’s a dairy bottle, so we have to have a cow on the front.” The first cow we tried looked silly, and that’s how we got the name. Our second front was more retro-looking. We were in the height of the Great Recession, and people kept buying it. There was no stopping the cow!

In 2009, our first regional distributor picked us up, and that was our entrée into Whole Foods. That led to national distributors picking us up. Now we’re in major chains in every state, and we’ve developed a network of brokers who work with distributors to get our product on the shelf.

Venture funding: $500,000 from Delta Capital Group, Simsbury, Conn.

12 flavors

Bestsellers: Chocolate-Chocolate, Chocolate Truffle, and Chocolate Marshmallow Swirl

Popular new flavor: Chocolate Java Chip

Retail price: $5.50-$8.99 per 17-ounce bottle

Based in Wells River, Vt.

Number of employees: 17 full-time; 14 seasonal (July through February)

Revenues

1988: $10,000 (under original owners), two employees

1996: $617,937, two employees

2015: $2.1 million, six full-time employees, 13 seasonal employees

2016: $3 million, 17 full-time employees, 14 seasonal employees

2017: $5.5 million projected, 17 full-time employees, 14 seasonal employees

Bottles sold

2015: 640,000

2016: 900,000

2017: 1.35 million projected

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