Alter Eco: A chocolate-centric, sustainability-directed food company that takes healthy indulgence to a new level.
- KLS
- Jun 17
- 13 min read
For the 193rd feature of our "Together Talks" campaign, we collaborated with Alter Eco and CEO, Keith Bearden. Alter Eco® is a chocolate-centric, sustainability-directed food company that takes healthy indulgence to a new level. Alter Eco is creating a new category of enlightened indulgences made with next-level ingredients, and offers a full portfolio of melt-in-your-mouth chocolate bars, blissfully delicious truffles and amazing no-sugar added granolas. Engrained in full-circle sustainability, Alter Eco is obsessed with spreading social justice and environmental regeneration, while setting a high bar for delivering mind-blowingly tasty foods. All Alter Eco products are USDA Certified Organic, Fair Trade Certified, Carbon Neutral Certified, and Certified Gluten-Free (excluding Deep Dark Salt & Malt), with vegan options available.
"Together Talks" feature # 193: Alter Eco presented by KLS - Your Trusted Shipping Solutions In The USA
Story of how it was created?
Alter Eco was founded by two friends and activists, who aimed to bring delicious foods to conscious consumers, addressing issues of fair trade and environmental impact. They saw some of the challenges that the farmers had in getting some of their products or crops to market. They had this idea that they could create a brand called Alter Eco to help restore some ecosystems because they were very focused on climate control and helping improve the climate. It didn't start out really as a chocolate brand. It started out more focused on things like quinoa and rice and coffee. But chocolate comes from those regions. Cacao beans come from those regions. It just kind of evolved into really what can we pull from those regions of the world and help those farmers. The company was originally founded in France and then later established as a separate company in the US.
Over the years both the European and US companies have dialed in and have became more of a chocolate company. We still have a line of quinoa in the U.S. And then about three years ago, we decided that we would test the market and see if the consumers would follow Alter Eco into a different category. We launched a line of organic granola and the consumers followed us with no problems. Granola has been in the market about three and a half years or so, and it's become almost 20% of our sales. It's doing very well. We source some of our oats from regenerative farms with the goal of getting to 100%, just like we focus on sustainable and regenerative agriculture with our chocolate. Cacao plants grow for 50 to 75 years. We try to help the farmers create a dynamic agroforestry system because cacao plants generally grow in the jungles and they coexist with banana trees and plantain trees and avocado bushes and passion fruit vines.
It does a number of things in terms of helping the ecosystem, hence the name Alter Eco. We help the ecosystem by those plants sequestering carbon and carbon emissions, but also they provide shade for the smaller cacao plants because cacao trees don't get very tall and the big banana trees and the big leaves and everything provide shade. In times of drought, the roots of those taller trees are much deeper. They pull up groundwater and provide more groundwater and more nourishment for the cacao plants. Secondly, and another principle of Alter Eco is to improve livelihoods. Those other plants give the farmers additional revenue streams because they can sell their bananas and their plantains and their avocados, sometimes even on export because they're growing them organically.
What have been the biggest challenges?
I joined Alter Eco in 2019, end of 2019 as a board member to start with. A private equity group that owned it asked me to join the board. Alter Eco, like a lot of mission-driven companies, they had great impact, but they weren't necessarily profitable. They were being funded by private equity and outside investors. As a board member, I kept stressing the need to become profitable or have a path to profitability. That didn't happen. Then in 2023, the private equity group that owned it at the time decided that they really needed to sell the asset.
That's when I raised my hand and said I would buy it because I knew the loyalty that the consumers had for the brand and the respect that the market had for the brand. Having been a board member for three years, I really knew what levers to pull to get it to profitability. We acquired the company. I found some investors to help me with this. We acquired the company in December 2023. In 2024, we became profitable. That was all well and good and planned, I had a roadmap. What I didn't anticipate was that cacao prices would go from $3,800 a ton when we bought it to four months later, $12,800 a ton in April 2024.
During my first board meeting with the investors, everybody knew it because it had become national news, the cacao prices and coffee prices. My investors said, "did we do the right thing?" I said, "well, had I known this was going to happen, I'd have probably recommended that we all put our money into cacao futures." But I didn't know that that was going to happen, nobody did. But we're still going to make it work. And we did.
How did overcoming that adversity change the belief within the company?
The uncertainty with trade wars right now, and I don't want to get political, but tariffs have definitely not helped, especially in industries where we don't have an alternative. Cacao beans don't grow in the U.S. We don't really have an alternative for these types of things. Even a tariff as low as 10% has a big impact on a consumer packaged goods company because our margins are only about 10%, and that's on a good day. With the cacao prices where they are and a 10% tariff on top of that, it makes it very challenging. However, we learned how to navigate with almost $13,000 prices for cacao beans. We'll learn how to navigate with the tariffs.
All of our chocolates are manufactured in Switzerland. Initially, Switzerland got hit with a 31% tariff. Now that got reduced back down to 10%, at least until July, and then we'll find out what happens then. 31% wouldn't be something we could absorb. And I don't think any of the chocolate companies could absorb the 20% or 30%. One of the things that we've talked a lot about and we've done a fair amount of research is what is the price elasticity of premium chocolate, of organic, fair for life certified, non-GMO, gluten-free, premium, high-end, high-quality, manufactured in Switzerland. What's the price of elasticity for that? What will consumers pay? Our products sell on average for between $3.99 and $4.99 for a bar. Will a consumer pay $7? I don't know. Will they pay $6? I don't know.
I was at a conference not too long ago, and there was a presentation by Barry Callebaut, the largest chocolate producer in the world. They said consumers are going to have to get used to the fact that a chocolate bar is going to cost $7 because that's where it's going. Hershey's came out with a report about the tariffs that said 10% is going to cost them an additional $200 million a year in cost of goods. Can we navigate it? Yeah, we can. Is it going to hurt? Yeah, it's going to hurt. We're a lean company. Part of the way we became profitable is we became very lean. But with that, I don't have a lot of levers left to pull in terms of operational expenses and overheads to get to where we need to be.
What is the next milestone you'd like to reach?
Alter Eco is one of the top performing products in the natural channel. That's predominantly been our focus since the founding of the company because 20 plus years ago, you wouldn't find organic products necessarily in Kroger or Publix or Meijer. However, today you do. Alter Eco started out natural channel, like Whole Foods, Sprouts, Natural Grocers, those well-known brands and retailers across the Natural Channel. We are the number three chocolate overall in the Natural Channel. If you narrow it down to dark chocolate, which that's all we do is dark chocolate, we're number one.
Our goal is to very rapidly push and try to expand in the conventional market. We're already in a lot of conventional retailers, but most of them are regional. We're in Harris Teeter out of the North Carolina area. We're in Wegmans in New England. We're in Rouse and Raley's in the Southwest. But our goal is to really land those larger conventional retailer accounts like Kroger, like Publix, like Albertsons. That's the focus and that's the growth area.
Same for Canada. We're also a pretty sizable chocolate brand in Canada. If you look at organic chocolate, we're number one in Canada. We actually haven't gotten the purchase order yet, but we got verbal confirmation that we're getting five bars listed in Loblaws. that push into conventional retail is really where we see the growth opportunities. The chocolate category in and of itself is about a five and a half billion dollar category. Natural organic chocolate is about $1.6 billion, believe it or not. We just see that being the opportunity where we need to go play in the big sandbox.
What were your concerns to buy this business and how did your time on the board help?
I've been in food and beverage for about 25 years. I know the consumer package goods space pretty well as I've run a number of different branded products companies. But I've also worked on the operation side and I've run a couple of companies that were contract manufacturing. I understand some of the levers that you can pull in order to create operational efficiencies, eliminating slow performing SKUs because you have to run a minimum quantity and your cost of goods go up, things like that.
When I was asked to join the board of AlterEco, one of the tasks that I was asked to undertake was to really figure out how to paint a path to profitability so that the company could get to a point where it could be sustainable. Both from a company perspective, but also sustainable in an Alter Eco, in an ecosystem perspective. It was all about brand awareness, brand build. Building, loyal consumers is great, but in order for the company to be sustainable, it has to be profitable. When the company came up for sale, I knew that we had such a great brand and such a loyal following that with the right changes, we could move it to profitability.
I had literally identified three or four projects that I knew would turn the company to profitability. We executed those in the first quarter of the ownership and literally closed the first quarter books with a profitable number. For me personally, to jump into that, it was so well laid out for me. I had such an easy roadmap and strategy that I had been working on for almost three years. The challenge was selling that vision to investors because the company had not been profitable. Like you commented, remodeling a house is a perfect analogy. I went and met with these investors individually and I painted that picture for them.
I drew clear lines of what we could do and what the savings would be and what the results would be. At the beginning, I took drastic measures. We cut it back to the bare bones. I said, "we have to become profitable." Then we'll slowly add back. And we'll add back where we can measure the return on that spend. That's what we did. We didn't bring marketing back into the picture until July of last year. Even then I did it on a fractional basis as opposed to hiring full-time people.
It meant everybody that was left on the team after we cut it back to the bare bones has had to wear a lot of hats. My management style is very focused on transparency, I tell everybody what we're doing. I show them the numbers. Everybody in the company knows what our profitability is. Because I believe that's important. They'll make better decisions if they understand what impact it has. That allowed us all to start rowing in the same direction.
Share a decision that you made that was detrimental?
Obviously with cacao prices skyrocketing like they did, everybody last year had to take a price increase, the whole market. The good news about cacao prices skyrocketing is that we're all playing by the same rules. Hershey's has to pay the same price, Mondelez has to pay the same price, and I have to pay the same price. Unfortunately, for a small brand like Alter Eco, the retailer doesn't necessarily have to have us. I mean, they may lose some loyal consumers, but that consumer is not going to stop shopping there if they don't have it. Hershey's, Mondelez, the big guys, Nestle, Mars, they kind of have to have them. So they can get away with a 30% price increase, but we can't.
I calculated what I thought our price increase needed to be to keep us profitable and to help us grow our velocities because the gap narrowed between our premium price and some of those below us. And to make sure that the retailers were playing along with us so that if I gave them a 12% price increase, which I did, which meant I had to eat about 8% of my cost of goods, actually a little more than that. But if I gave the retailer a 12% price increase, I wanted to make sure that they only took a 12% price increase at the shelf because they could have easily taken a 30% price increase at the shelf because everybody else was doing that. But that would have been unfair to me because I wouldn't have gotten it. And what I told them was, "if you'll work with me to just pass along the increase that I'm giving you, we're going to do more promotions, we're going to do more marketing and advertising, and we're going to increase velocities." And it worked out. It all worked out.
Should I have taken a bigger price increase? Probably. I look at it now and our margins have eroded quite significantly. And prices are still going up. So now I'm going to have to take another price increase in 2025, as is most of the market. But I should have taken more. Instead of 12, I probably should have taken 18 or maybe 20. I would have still been less than everybody else. I didn't need to cut it as hard as I did.
What is your why?
Alter Eco is something that is a company and a brand that stands for something much larger than the products, in my opinion. Our three principles, as I mentioned earlier, restoring ecosystems, improving livelihoods, and the last one is reducing waste. If you look at the packaging of our chocolate products, everything except that foil around the bar is compostable. And our truffles, even our little truffles, are in backyard compostable wrappers. We're the only company in the world that has that. We do those things because we want to give the consumer a high-quality product.
The Swiss make wonderful chocolates. They've been doing it for over 400 years. We give customers a high quality, excellent tasting product, but we give them something that is helping. I use this phrase often, "You're helping to restore the planet one chocolate bar at time." We were fortunate enough last year, we got recognized by Food Business Magazine as one of the top organic companies of the year. They did a cover shoot. They did a big article on Alter Eco and they wanted to put me on the cover. I said, no, no, no, you can put our farmers on the cover or pictures of our farms or something. They said their model is to always put the CEO of the feature article on the cover of the magazine. But I don't do this for me, just for me, I do this for the next generation and the next generation. At the time, my youngest granddaughter was about six months old. I sent the magazine a picture of me holding my granddaughter and she was all smiles and they loved it and they used it on the cover of the magazine. I said, that's why we do what we do.
Do you have a moment that brings you the most joy?
Well, I think pulling those first quarter numbers and seeing that we had already become profitable in one quarter. And able to share that with the investors and say, okay, now we can just build on top of this. I expected quarter one to be close to break even, but I actually forecasted a little bit of a loss in Q1. And then by quarter two, were, so you guys were- In Q2, we were going to be profitable. And Q3 and Q4, we would be on a positive run rate.
But we were profitable by Q1. I mean, fortunately with the cacao bean crisis, we had pre-bought a lot of our beans when they were at $3,800 a ton. So that helped. So we were able to withstand that for about six or seven months and then it got hit. But we were still profitable in Q3 and Q4.
Piece of Advice
I had an opportunity to speak at a conference not too long ago, and the topic of the conversation and the presentation was about impact. It focused on what impact can companies have, what impact can individuals have, and how that shapes your company and shapes the way you behave in your everyday life.
I said... "your vision for what you want to accomplish is your impact."
The vision of Alter Eco is to deliver the best tasting, cleanest, greenest snacks on earth. That's our vision, we've trademarked that tagline as well. But that becomes our impact. If it's clean, it has to be clean label. If it's green, it has to be sustainable. It has to be climate neutral. And most importantly, it has to taste good. I've told everybody in all the companies I've run in consumer packaged goods, don't ever bring me something that doesn't taste good.
Because taste is the price of admission.
I think that from a personal and a business perspective, I've always run companies trying to understand what is that impact I want to have. Sometimes it's an environmental impact, sometimes I want to enrich the employees. I want to make this a place where employees can create generational wealth, where they can have a life that's beyond what they could imagine. And I've done that through ESOPs and different things in terms of other companies that I've run.
But I think you have to understand what is that impact that you want to have and you believe in. Then that shapes the vision of how you operate day to day. shapes the vision of how the company operates. It shapes the vision of how I operate.
Community Callout
He was the one that helped me pull together the team that sponsored me to buy Alter Eco. I've done three or four private equity deals with Daryl, and when I had the opportunity to buy Alter Eco, I called him up and he told me he would introduce me to some people.
In Closing
KLS wants to thank Alter Eco and CEO, Keith Bearden, for today's "Together Talks" feature. Follow along for their journey with their social handles below!
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