Israeli chocolate hits Big Apple

First US branch of Israeli premium chocolatier Max Brenner opens in NYC; despite launch’s initial success, industry observers recall brand’s previous failed attempt to penetrate foreign markets

Yaniv Halili|Published: 08.28.06 , 21:22

NEW YORK - Residents of the Big Apple may have believed that they had it all, but Oded Brenner and the Strauss-Elite company proved otherwise. The buzz generated from the opening of the first Max Brenner franchise in New York has yet to die down, and a second Manhattan store is already scheduled to open in another two weeks. Meanwhile, Strauss-Elite is scouting out additional American markets, and the company hopes to launch a Las Vegas branch next year.

The rapid expansion plan reflects the company’s confidence in the chocolatier. After all, Max Brenner is the first chocolate cafe in New York. Although many residents are on strict diets, they certainly will not want to forgo their city’s latest attraction.

“Almost every person who walks in asks how come no one did this before,” reports Oded Brenner from the first store, located on the southern edge of Union Square. Avital Refaeli, Strauss-Elite’s New York representative who oversaw the shop’s planning and opening, sits next to Brenner. While Refaeli handles the business end, Brenner is the brand’s creative force.

Young and hip

Max Brenner was founded by Max Fichtman, a candystore owner, and Oded Brenner, who studied in Paris and became Israel’s first chocolatier. Together, the two partners launched the first Israeli chocolate boutique, and the venture’s initial success encouraged them to subsequently open branches in Australia and London. However, they soon realized that they had bitten off more than they could chew.

Six years ago, Boaz Sheinfeld, an Israeli businessman residing in the United States, bought Fichtman’s share of Max Brenner and tried, unsuccessfully, to develop a chain of American stores. Sheinfeld eventually gave up and sold the business to Strauss-Elite at a bargain price.

Brenner turned to Strauss-Elite in despair. As Refaeli notes, “Oded believed in the product but not the brand.”

Like other Israeli companies in recent years, Strauss-Elite, which holds a controlling interest in Max Brenner, was bitten by the expansion bug. Although the brand’s history was littered with several spectacular failures, Strauss-Elite was not ready to concede defeat, and Refaeli was appointed to revive the brand. In addition to opening five Max Brenner shops in Israel, branches were launched in Australia, Singapore and the Philippines.

As a large company with a unique product, Strauss-Elite did not rush into the American market. Erez Vigodmann, Strauss-Elite CEO, says that Max Brenner’s international expansion was designed to pave the way for the brand’s American incursion. Moreover, the company views the step as part of its comprehensive plan for increasing exports. According to Vigodmann, around 40 percent of Strauss-Elite’s annual sales turnover, estimated at a billion dollars, comes from abroad. In the US, for instance, Strauss-Elite also owns Sabra, a thriving salad maker whose hummus is the second most widely sold throughout the continent.

Refaeli was sent to lay the groundwork a year ago, and Strauss-Elite teamed up with the Gaucho management company, owned by Shimon Bokovza, originally from Israel, whose holdings include the Sushi Samba restaurant chain. However, the partnership was eventually dissolved acrimoniously.

Strauss-Elite, which had never before opened a restaurant abroad, was more used to focusing on retail rather than on personal service.

“The challenge was to match Brenner’s creative head with the large body of a company like Strauss-Elite,” Refaeli recounts.

During the market research stage, the company relied on local consultants, including Peter Maslen, past president of Starbucks International. For example, much effort was invested in finding the perfect location.

“We didn’t want Soho because it’s too trendy, and not Fifth Avenue, because it’s super classy,” Brenner explains. “Union Square is both young and hip.”

Culinary jet lag

Two million dollars were invested in the first shop, which opened last week and spans 450 square meters. The coveted location comes at a price; rent exceeds 700,000 dollars a year. Investors hope that the café, which can seat up to 150 patrons at a time, will quickly turn a profit. Meanwhile, only a million dollars were spent on the second branch, which is set to open in a few weeks in the fashionable East Village neighborhood.

The shop’s decor was clearly inspired by the Tel Aviv branches; the menu is very similar to its Israeli counterpart; and even the floor resembles those in Tel Aviv. Astonished American customers are treated to design elements including pipes simulating flowing chocolate, a giant chocolate pot at the café’s entrance, and a liquid chocolate mixer. A gift shop, situated near the front, sells chocolate by weight and in gift wrapping; sales are expected to increase during the holiday season.

Emphasis is placed on service, and each menu entrée is accompanied by detailed explanations. Gimmicks include chocolate with jumping candies, a huggable mug of chocolate drink, and hot chocolate served over a burner.

Americans see Brenner as a new cultural hero. A savvy PR campaign attracted television and print journalists to the opening, and a crowd of customers followed in their wake. Brenner, popularly known as “The Bald Man”, has become a celebrity, and diners constantly request his autograph.

Although the first branch seems to be a success, industry watchers are nevertheless surprised that the launch of the second store is so imminent. Strauss-Elite’s rapid schedule is seen as risky, especially since the brand’s previous attempt at penetrating foreign markets ended in failure.

“We have five branches in Israel, and we know what the issues are,” Vigodmann responds. “In every process, one must take risks in order to succeed, and we are taking calculated risks. This isn’t our first immersion in fire abroad. Nonetheless, we must keep a finger on our pulse, because New York is a market that doesn’t tolerate mistakes.”

“We didn’t want to wait between the two branches, because we already waited a year to open this store,” Refaeli adds. “The manner is which the chain is founded is such that even if one branch is not a success, the infrastructure won’t collapse.”

The chain’s backers are equally ambitious. During the first year of operations, they hope to rake in six million dollars from the first store. Earnings are expected to be somewhat lower at the second store, where anticipated profits are set at three and a half million dollars.

When Brenner is asked about the possibility of failure, he responds dismissively.

“We have a sense that Max Brenner is on its way to becoming a strong global brand. This is a global breakthrough, and from our point of view, the goal is to appear in every tourist guide and to be identified with quality chocolate. Only when I see a line stretched outside of the restaurant will I understand that we have succeeded.”