Future of Dunedin chocolate company Ocho in limbo as board seeks voluntary administration

Dunedin craft chocolate company Ocho faces the prospect of being put into voluntary liquidation.

The directors of Dunedin craft chocolate company Ocho are proposing to wind up the company amid financial difficulties.

The board today notified staff and shareholders that it was seeking voluntary administration, saying it believes the company is unable to trade out of its current financial situation and has no prospect of achieving future profitability under the current business model.

“This is not a decision that has been made lightly and the new board is mindful what this announcement means for the 11 highly talented and dedicated Ocho staff,” board chairman Pete Lead said.

“While Ocho Limited is currently solvent and can continue to trade for a short period of time, the new board hopes that winding up the company will present an opportunity for the business to be sold as a going concern.

“The best outcome for shareholders would be that the Ocho brand and its assets are bought by someone with a passion for craft chocolate and a desire to see chocolate-making continue in Dunedin, although this is not guaranteed.”

A special meeting will be held on June 26 to consider and pass a resolution to appoint a liquidator.

Lead told the Herald Ocho was operating in a difficult economic climate, with the cost of living crisis affecting sales and increasing prices squeezing its margins.

“There was no one incident or catalyst, just a sober assessment of our current and forecast position,” he said.

“It’s a challenging economic climate and consumers are being forced to make difficult choices around their purchasing, and sometimes that means buying a cheaper option or going without.”

He said Ocho’s supply chain for craft chocolate from the Pacific Islands – where it gets ethically sourced beans from – is less affected by the price increase for commodity chocolate.

“However, there has been an increase in supply side prices across the board which has impacted our margins.”

Ocho was founded in 2013 by Dunedin local Liz Rowe and operated as a small, craft chocolate company until 2017, when Ocho Newco was incorporated for the purpose of a crowdfunding campaign.

Rowe, who resigned as general manager in early 2019 but remains the company’s largest shareholder, said she was sad but not surprised to hear of the board’s decision.

“The crowdfunding in 2017 and the support from so many people who bought shares in Ocho was exciting and humbling. However, the company structure set up hasn’t proved to be the easiest model to work with,” she said.

“In essence, there was a big company structure being managed by a very small staff.

“Combine that with a commitment to buy cocoa beans direct from the farmers and an uncompromising approach to making the best quality craft chocolate and, with the benefit of hindsight, it’s not hard to see there were some challenges for the company from the start.”

Rowe stepped back from the company to give the then-board the opportunity to appoint someone with the skill-set needed to take the company from the start-up phase into a period of growth.

Ocho’s crowdfunding in 2017 raised $2 million in less than 48 hours from 3549 investors on platform PledgeMe.

The campaign came off the back of Cadbury owner Mondelez announcing it would close its Dunedin factory to move production to Australia.

In March 2019, Ocho opened its approximately 2000sq m factory.

Ocho launched another equity crowdfunding campaign in 2021, raising a further $498,000 from existing and new investors.

As of May 29, 3738 shareholders and 27,806 shares are on issue.

“While I haven’t had any involvement with Ocho on a day-to-day basis since 2019, I have followed progress with interest. I intend to support the board’s proposal to wind up the company,” Rowe said.

Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports. He reports on topics including retail, small business, the workplace and macroeconomics.