Can This Entrepreneur Sell America on Gourmet Tofu?
Making tofu gourmet — and a little Oakland, Calif.-based soy startup national — is a formidable task. Scharffenberger has the extra challenge of stepping in to run a company that he didn't help start. He was a Hodo investor and board member when, this past summer, he was asked to become its CEO. In previous ventures — most recently Scharffen Berger Chocolate Maker, which he sold to Hershey's — he was there from day one. I spoke to Scharffenberger about how he's running the business and plans to convert the carnivores of the world into fans of soy.
BNET: You've had huge hits with gourmet chocolate, and even sparking wine. Why the tofu business?
Scharffenberger: I'm a fan of good food and good flavors. In a sense, it wasn't the tofu at all. It was the Yuba [tofu skin] that did it. I tried it at the Berkeley farmer's market. To get a bite of something with just this perfect texture, this noodle with, you know, what's that fifth taste?
BNET: Umami?
Scharffenberger: Yes! That umami quality in its flavor. I said, 'I don't know what this is, but God, this is just something I want to eat.'
BNET: So that's all it took?
Well, I don't think I would have gotten as involved with Hodo had I not been to Japan. I was on Hodo's board at the time and on a trip to Japan I discovered this whole world of tofu — the flavors, consistencies, these custardy tofus that were like the most delicate farm cheese you could imagine — that I knew were possible at Hodo.
BNET: In Japan, that makes sense. But in America?
Scharffenberger: The world is ready for new flavors. One of the problems is that the soy industry makes plastic out of soybeans. It makes gear shifts. It makes all kinds of wacky things with it — things that aren't good for the planet or people. But Hodo's making tofu akin to the way my friends are doing grass-pasture cattle. It's appropriate, sustainable, and it's the right way to consume the product.
BNET: So you believe in the product. But what about Hodo? What did you find once you took over this company?
Scharffenberger: Hodo had successfully gotten this local community to love the product… but they were only thinking of that small community and growing by word of mouth and social media.
A lot of our early employees came from the tech industry, so they thought that's the industry to market to first. But you can't just tweet about [the product] or spend a lot of time working on social networks on the Internet. It's a good way to reach people but at the end of the day, you really have to put the product in someone's mouth who has credibility.
(Check out the video below to hear Scharffenberger talk more about why getting the product right should trump everything else for entrepreneurs.)
BNET: Was there resistance when you wanted to shift marketing strategies?
Scharffenberger: Not for very long. The first thing I brought up at my meeting with our new media marketing person was the Fancy Food Show. And she was like, "That's not new." And I said, "No, it's not new. But having 70,000 people try your product, that's not so bad." Now, she's totally hooked. You need those experiential vehicles where people can interact with your products and your people to build up something that becomes, you know, liked. I guess they call that brand. I never thought of it that way.
BNET: How did you build the Scharffenberger Cellars — your wine business — and Sharffen Berger Chocolate Maker brands?
Scharffenberger: I never tried to start brands. I was trying to make good products and build good companies. If you do those things well, you end up building a brand.
BNET: So Hodo needed a different marketing plan. What other changes have you been making?
Scharffenberger: You have to look at some of the things that you started doing in the beginning that just don't make as much sense anymore. Packaging is a really good example. We have these wonderful little clamshell things that are easy to get and easy to open. The problem is they're expensive and they don't keep the product that fresh. Minh Tsai, our founder, thought they were perfect and frankly, they're not. And it turns out the only reason they started using the clamshell was because it was the easiest thing to get in small quantities.
BNET: And that isn't an issue anymore.
Scharffenberger: Right. Our customers are changing from the person at the farmers' market to the distributor sales person who's going to have to buy and resell the stuff to places like Whole Foods. And suddenly the distributor came to us and said, "Wait a minute, these leak." So we're going to scrap them. That's the equation in business that's sometimes lost: Everything should be getting better all the time.
BNET: And that's how you end up building a great brand, with any product.
Scharffenberger: It's not, build the brand and then make the product more cheaply. You can't ever really stop asking the question, "How can we make this better?" It keeps everything improving — both from a creative standpoint and for the customer.
BNET: How are you trying to keep things improving from a management perspective?
Scharffenberger: It's people management and that's something I've never thought I was good at. But so far, so good. I'm trying to be as gentle as possible. I sort of walked into a company that had very little internal communication. There were people with total secrets about really important things and they're just getting uncovered now.
BNET: Like what?
Scharffenberger: I know very little about perishable food distribution. I'm learning. But Minh has learned a lot in the last year because he's been out talking to a lot of people. But prying the information out of him… it's like, "Oh, remember what that guy said last year? We gotta do that now."
BNET: How do you make sure everybody is talking to everybody else?
Scharffenberger: Well, sometimes it's forced: It's like, you and you, go work on this together. There's a tendency for people to just sort of go off on their own and try to solve problems. But then they cause problems because they've solved them on their own.
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