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(Mail Tribune / Jim Craven) Oh, so sweet U.S. giant Hershey buys Dagoba chocolate operation in Ashland, a deal estimated at $10 million to $15 million By GREG STILES Mail Tribune ASHLAND — Trendy and highly-successful Dagoba Organic Chocolate LLC, which took flight not far from the Medford airport less than four years ago for a site on Benson Way, is now part of one of the nation's oldest and largest chocolate companies. Hershey Co. of Hershey, Penn., the $5 billion chocolate and confectionery giant, announced Thursday it acquired Dagoba, which has projected sales of $9 million this year. Although the deal has been in the works for a year and a half, Dagoba founder and Chief Executive Officer Fredrick Schilling didn't sign off until late last week. Hershey announced the acquisition during its third-quarter results conference call with analysts on Thursday. "Organic chocolate products are experiencing dramatic growth as consumers continue to trade up for indulgent, high-quality products," Richard H. Lenny, Hershey's chief executive said in a statement to analysts. "Dagoba, with its well-regarded portfolio of quality organic products, will enable Hershey to build on its leadership in the North American chocolate market by meeting emerging consumer needs and building profitable new marketplace opportunities." Schilling, 35, moved to the Rogue Valley from Colorado and began manufacturing in a small facility off Table Rock Road in 2003. Advertisement The company shifted operations last year to Ashland, where it produces organic chocolate bars, hot chocolate and chocolate-covered coffee beans sold in natural foods outlets and gourmet stores. Dagoba becomes part of Hershey subsidiary Artisan Confections Co., joining Scharffen Berger of Berkeley, Calif., and Joseph Schmidt Confections of San Francisco, which were acquired in August 2005. Dagoba employs 40 people, all of whom will continue working at the Benson Way operation. Hershey, by comparison, has about 13,000 workers worldwide. Chris Baldwin, who heads up Hershey's North American Commercial Group said in a statement that: "Dagoba's strong presence in the natural channel is a real plus for Hershey, allowing us to expand our presence and broaden our offerings in this growing arena." Terms of the cash and stock purchase weren't disclosed, but one analyst familiar with organic food company acquisitions estimated the sale was for between $10 million and $15 million. "Six or seven years ago when the natural organic trend was really hot, people were paying two-times revenue," said Scott Van Winkle of Canaccord Adams' Boston office. "I'm guessing it's at least one-times revenue, but not 11/2 times." Schilling will continue to run the local operation, taking on the title of director of innovation for Artisan Confectionery. He said Hershey's financial muscle will help Dagoba improve and expand its mission of improving cacao farmers' livelihoods, expanding organic farming methods and further ecological sustainability. "The joke around the office is that nothing will change for anyone except me," Schilling said. "And now I'm held accountable. I'm going to keep on doing what I've been doing, being committed and passionate about our core values." Those core values are part of what turned the deal into a year-and-a-half process (see sidebar). Although a Hershey spokesman wouldn't detail the company's development of an organic/speciality division, it began several years ago. Early in 2005, Hershey representatives approached Schilling at the San Francisco Fancy Food Show in the Moscone Center. "I'm a pretty good judge of character," Schilling said. "From the get-go, I thought they were real genuine people, which makes it easy for me." When the company first put an offer on the table, Schilling rejected it out of hand, he said, because he didn't see it fitting with his mission. As time went on, however, he came to appreciate what could happen if he were able to champion his organic farming cause. "Not only does this benefit consumers wanting a premium organic product," he said. "But it's going to impact thousands of cacao growers at the point of origin around the world." Closer to home, Schilling said there is room to double capacity at the present plant, which would put another 20 people to work here. "Hershey understands chocolate. They've been making it 100 years and they have a lot of equipment sitting around their warehouses." Dagoba wholesale customer Jeff Shepherd of Lillie Belle Farms in Central Point said he had heard that a deal for Dagoba was in the offing. "Hershey and others have been scooping up chocolate companies for a while," Shepherd said. "They want a piece of that artisan thing, the higher-end trend which is pretty big. If you build a company that gets big enough, it's going to attract the big dogs of the universe. I'm not surprised by anything anymore in the chocolate industry; it would take a lot to shock me." The transaction follows a trend that has brought major food producers into the organic field. Barbara Haumann of the Organic Trade Association, based in Greenfield, Mass., said organic food sales have consistently grown 15 to 21 percent since 1997. "That's a good reason why you find more and more companies like General Foods acquiring established organic brands." Haumann said. According to an Organic Trade Association's manufacturer survey this year, the nation's organic industry grew 17 percent overall to reach $14.6 billion in consumer sales in 2005. Organic foods jumped 16.2 percent in 2005 and accounted for $13.8 billion in sales. The OTA survey said it represented 2.5 percent of total U.S. food sales — three times the penetration rate in 1997. Reach reporter Greg Stiles at 776-4463 or at [email protected] Would you like to respond to this story? If so Click Here to visit our forums. Advertisement Copyright © 1997-2006 Mail Tribune, Inc. All rights reserved. Privacy Policy | Terms & Conditions | Website Feedback online casinos news Home Security Systems Windermere Van Vleet Men's Clothing UK Homeowner Loans GMAT Prep Fundraisers Send Flowers Texas Electric Choice Entertainment Guide Casinos Canada Trunks, Footlocker Online Casino Reviews Online poker at AbsolutePoker.com