California: How one chocolatier wants to bring luxury cannabis to the industry

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Shoppers flock to Union Square for its luxury retail outlets, with icons like Tiffany’s, Louis Vuitton, and Prada all sharing space in the busy downtown destination. Soon there could be a new option for high-end spending, but the wares are a little different than handbags: a shop to showcase high-end, sustainably produced, ethically sourced chocolates infused with sun-grown, organic cannabis. At least that’s the hope of Eric Eslao, founder of Oakland-based Défoncé Chocolatier. Eslao spent six years at Apple before diving into the world of weed about three years ago to start Défoncé (meaning “high” in French) in a quest to elevate chocolate cannabis to gourmet levels.

He saw a clear market opportunity: targeting health-conscious Californians, new to marijuana and wary of smoking, who would gravitate toward high-quality, low-dose edibles. His hunch has been right so far — edible sales are up since January 1, and Bloomberg estimates they may capture half of the cannabis market in the coming years.

”For me, I have two little girls at home, I’m married, I’m just not going to have a bong at home in my garage,” Eslao says. “I still don’t know how to roll a joint. Edibles just make sense for a lot of people.”

Now, the 38-year-old CEO is serious about opening the first-ever branded cannabis storefront this year — whether in SF or another California city. He’s even recently hired Christopher Peak, former head of retail design for Apple from 2012 to 2017, as a consultant.

His end goal (aside from presumably turning a profit) is to normalize gourmet edibles so much that people won’t think twice about bringing one of his chocolate bars to a dinner party instead of wine.

Cannabis and chocolate, together forever

“For so long, your typical edible company was a brownie or gummy made in a home kitchen, with no consistency — which is why most people have had a bad experience,” Eslao says as he makes his way through the first floor of his company’s 10,000-square-foot warehouse near the Oakland Coliseum.

While the warehouse smells like a new-age California version of Willy Wonka’s chocolate factory, it looks a little less magical, with concrete floors, white tents, and various machinery scattered throughout. Upstairs is more fun, however, as it’s home to the company test kitchen — there, chefs can try out new cannabis concoctions with ingredients like pistachios, toasted coconut, and even rosé Champagne.

Défoncé recruited skilled chocolatiers from well-known companies like Mars, Cadbury, and Godiva, and sources materials from Belgium and France. As for the cannabis, they use an extract from plants grown at organic farms throughout California, like Hummingbird Medicinals, which grows all of its marijuana in the sun of Sierra Nevada foothills using biodynamic farming principles.

Eventually, the bars are packaged in Défoncé’s sleekly designed boxes, with bold colors signifying each flavor. The bar itself is also designed to stand out — molded into 18 separate pyramids, each with a dose of 5 milligrams for a total of 90 milligrams.

Each bar is roughly $20, currently the average price of any cannabis chocolate bar found a dispensary shelf. “There’s not yet a spectrum pricing like you see in wine or spirits, but if you think about each dose as equal to a glass of Champagne or even a truffle at Godiva, it should be higher,” Eslao says.

A maturing market with a long road ahead

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So far this year, sales have been a bit slower in California that some anticipated, but experts remain confident about the industry’s outlook. Cannabis research firm BDS Analytics estimates that marijuana sales in California will reach $3.7 billion by the end of the year and $5.1 billion in 2019 — that’s bigger than the state’s entire beer market, which went over $5 billion just last year.

As for edibles, the game has changed dramatically since recreational use became legal on January 1 — a large number of companies have folded, unable to keep up with the expenses brought on by new rules and regulations. “It’s been a mass extinction,” Eslao says. “There will be even fewer of us once the July 1 grace period ends.”

Others in the luxury pot game, like fellow Oakland-based Kiva Confections, LA-based Lord Jones, and Beboe — the maker of chic, rose-gold vaporizers that’s also in LA — are all prospering. Défoncé alone has seen a more than 800 percent increase in sales since this time last year and has doubled its number of employees since January.

With such growth, why take on the mammoth effort and risk of retail? “Because the problem with the system is that manufacturers have no control over their product after it leaves our building, we have to trust others to sell our product.” Eslao says. “We want to curate the full customer experience.” For Défoncé, that could mean sleek stores with extremely curated style and branding, from the bar to packaging to how it’s displayed.

Weed at a mall near you?

Last fall Défoncé made headlines when the San Francisco Chronicle reported the company had submitted an application to open in the Westfield San Francisco Centre. If the deal had gone through, it would have been the first time recreational cannabis was sold in a “major class-A” mall in America.

But, after nine months of discussions, Westfield backed out. “That was unfortunate, but we’re still really aggressive on our retail timeline and are looking at several locations in both SF and LA,” Eslao says. His goal: to open one store this year and have two by 2019. Currently, Defonce is running its series A funding, which ends May 23, to raise $8 million primarily for retail purposes.

The catch, at least with SF, is that the process of opening a new cannabis business here is much more complicated in 2018 than 2017, involving multiple governmental approvals, permits, and roadblocks.

“Essentially, anyone who wants to start a new cannabis business here can expect the path to be long and winding,” said Nicole Elliott, director of SF’s Office of Cannabis.

Eslao says he understands it could be a process; he’s also exploring options outside of SF. As of now, Eslao can only name one other company interested in a storefront: Lord Jones, which announced intentions to unveil a boutique in the Standard Hollywood late last year.

Despite the complications of opening one, cannabis, in many ways, makes sense for brick-and-mortar stores. That’s where the majority of sales will take place for the foreseeable future, and cannabis while it can be delivered locally, it can’t be shipped. Why not create luxury shopping experiences for a high-end product?

“With retail, I’m just going by my gut, and so far it’s been right,” Eslao says.

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