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The Future Growth of Organics

Back in July, I had the pleasure to attend the National Cooperative Grocers Association’s Annual Convergence Conference in St. Paul, MN. My counterpart at our West location, Matt Hofstede, our West Wellness Manager Angie Pohlman, and the Co-op’s Purchasing Manager Dean Kallas also joined me. This four-day conference is a chance for grocery, wellness, and purchasing managers to get together and network. We attended various presentations and workshops on both product and retail education. This year the underlying theme of the conference was growth—growth of our own co-ops and communities. This was well conveyed with personal accounts of successes, trials, and failures presented during the retail education workshops. The other, maybe larger,aspect of growth was in regard to the organic market, brands, and getting good organic food to more people.

The day of product education workshops was kicked off by a keynote speech by Gary Hirshberg, former CE-YO! (CEO) of Stonyfield Farm. Gary’s impassioned speech centered around both the history of Stonyfield and the current and future status of the organic market. To shed a little light on both where this article is headed and some background on Stonyfield as a company, let’s establish some history.

Stonyfield Farm
Back in 2003, French food corporation Group Danone, better known as the makers of Dannon yogurt and Evian water, purchased all available non-employee-owned shares of Stonyfield, enabling it to achieve majority ownership of the company. At the time this seemed like another victim in a long line of large food corporations buying up much smaller organic businesses. However, this merger was unique. After the merger, Gary Hirshberg remained the Chairman, President, and CE-YO! of Stonyfield. There were no changes made to the employee base, facilities, or operations of Stonyfield. Their milk was still sourced from CROPP dairy farm Cooperatives (a.k.a. Organic Valley) in the Midwest and Northeast. Also, all of Stonyfield’s sales, marketing, and branding strategies remained independent from Danone.

This was not a fast let’s-get-rich sell-out. This was a slow, planned out win-win merger for both Danone and Stonyfield. Danone got an established organic brand and production plant with folks who knew the market and product. Stonyfield got a partner with strong financial backing that also has its own well-established brand and, more importantly, distribution lines. This last bit speaks to a pivotal and underlying point of Gary’s keynote address: growth, or rather, growth through distribution. Growth for Stonyfield means more of their organic product being on the market. Through good marketing and branding, this means more organic food in a larger number of consumers’ homes.

But let’s not beat around the bush here—Gary Hirshberg is a businessman. In fact, he has stated, “I am a passionate capitalist who has created thousands of jobs and millions of dollars of capital...” So naturally, he wants to grow his brand and business. But let’s not forget the other things that Gary is passionate about—the environment and the larger world around us. I think that the vast majority of us can agree that organic food and its production is better for the Earth and for our health. There have been countless studies that have concluded that conventional foods, their production, and byproducts that are used to produce them significantly contribute to all of our health issues, both potential and existing. And again, growth of organic companies means that a healthier product is getting out to more consumers in broader markets.

So now, in this newly cast light of health and environmental responsibility, these mergers of smaller organic businesses with larger food corporations can almost (if they are done properly) seem honorable.

Honest Tea
The emphasis here is that these mergers and buyouts must happen slowly and thoughtfully. At another conference workshop, Seth Goldman, co-founder of Honest Tea, presented his firsthand experience with a more recent big business acquisition. This is one that I know many Willy Street Co-op staff and customers were aware of and concerned about.

Early in 2011 Honest Tea, a favorite brand of many of us, was purchased by Coca-Cola. Coke had begun investing in Honest Tea in 2008 with the option to purchase the remainder of shares three yearslater. I know many staff (myself included) and customers alike were shocked, dismayed and frankly disheartened to hear about this merger when it was finalized. Coca-Cola is about as big of a company as they get and they don’t have the greatest humanitarian or environmental record.

So why would a company like Honest Tea even briefly consider partnering with, let alone selling to, them? Again, it comes down to growth. From a quote from Seth Goldman, “We entered the deal with the goal of expanding the availability and the impact of our brand, and we’re making that happen in a way that we could never do on our own. We want to be the first mainstream organic beverage.” Prior to the Coke merger, Honest Tea was available in about 15,000 retail locations. About a year after the merger, Honest Tea is now available in over 100,000 locations. Honest Tea’s growth is not limited in sales alone. Since the acquisition they have been able to expand the number of Fair Trade teas from 9 to 19.

This last fact alone is a great example of how growth can benefit many, even on a global level. The benefit ranges from tea farmers in China and India, to consumers trying out a new organic tea at their local grocery store or gas station. For just one more example of this new broader availability, I personally even happened upon some Honest Tea on my way home from the conference in a small-town gas station. That was the last place I would ever expected to find an organic product, let alone a Fair Trade one.

This focus on growth means greater availability of organic foods to more people on a larger scale. How else can we grow organic food sales from the paltry 4.2% of total food sales in the U.S?

How else can we get more organic food that is better for our bodies and our environment to more people? These mergers and acquisitions need to be thoughtful and well-planned for us as consumers to benefit. Without vigilance by consumers and retailers, there is definitely a potential for a watering down of organic standards. Advocates of organic food standards need to stand firm on what is “right” with our elected officials and with our buying dollars, while still supporting the growth of this valuable industry.
As a brief sidebar: Stonyfield’s growth has been so tremendous in the past decade that they’ve had to build new wastewater treatment facilities. Their parent company Group Danone preferred them to build an aerobic facility that would generate tons of waste sludge a year. Instead, Gary stood up for his company’s mission of protecting and restoring our environment. He ultimately persuaded them to experiment with a newer and more expensive anaerobic wastewater technology that would reduce waste by 90%. Danone went for it and given the self-sufficient nature of the facility, it paid for itself in a matter of two-to-three years. Group Danone is considering building more of these anaerobic facilities in the future.

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