Stonyfield Farm CEO: How an organic yogurt business can scale

Stonyfield CEO Gary Hirshberg says the challenges of the yogurt business are made easier by scale. He's been setting up a model that looks surprisingly like--are you ready for this--Wal-Mart.
Written by Melanie D.G. Kaplan, Inactive

Gary Hirshberg is the chairman, president, and 'CE-Yo' of Stonyfield Farm, the Londonderry, NH-based organic yogurt company. This is a man who was in the Oval Office with the president not too long ago, who travels around the globe talking about serious things like climate change, yet he mentions Stonyfield’s "moosletters," as though it were the most ordinary word in the world.

Hirshberg is author of Stirring It Up: How to Make Money and Save the World and was featured in last year’s documentary, FOOD, Inc. Stonyfield, which experienced double-digit growth from 2000 to 2008, celebrated its 27th anniversary in April. I spoke to Hirshberg earlier this month.

When we think “organic,” we tend to think of the small family farm. What are the challenges of replicating that on a mass scale?

I get asked that question a lot. Most of our challenges are made easier by scale. We were a farm when we started, and we learned early on that to be a farm and a processor at the same time is very difficult. So we decided we need to support family farms--not be one and not compete with them. We buy 100 percent of our milk from family farmers that average 70 to 80 cows. Family farmers are an endangered species, as you are probably aware from the terrible pricing policies we have. Because we are bigger, we can pay a more favorable and consistent price to our organic farmers than what they would get in the market. As far as quality and standards, in the case of every crop we buy, I can tell you without question that we are better purchasers, our standards are higher and our ability to enforce standards is greater.

This year we introduced the Grower Sustainability Toolkit—a standard we apply in our business that looks at how our suppliers treat their workers, their energy and water use, equity issues. At the end of the day, purchasing is one of the most powerful things you can do to influence behavior, and we are able to get growers to think about these issues.

So it’s not any different than what Wal-Mart requires from its suppliers?

No, it’s the same thing. Wal-Mart is the latest and best example of what happens when you combine capitalism with ethics and morals and values and principles: Every large company on earth stands up and pays attention. I was in China on a delegation to talk about climate change, and when the guy in our group from Wal-Mart stood up to speak, you could have heard a pin drop because they’re all interested in what Wal-Mart is doing.

I used to run nonprofits, and I had zero economic power. In my 20s I became aware of my impotence as a change agent. I realized then--if you want to if you want to change the way the world operates, you need to marshal your economic power. Nothing turns hippies into capitalists faster than a distributor coming in and wanting to buy whatever they’re selling.

Let’s go back to Wal-Mart for a minute, and the unlikely partnership you have with them. How much organic did they sell before Stonyfield?

Not much. They were not much into organics when we started, and I’m still amazed, to be blunt, by how aggressively and open-mindedly they took on organics.

It wasn’t that long ago that people didn’t look very fondly on Wal-Mart, and it seems like a some of that shift in perception came from them carrying organic yogurt.

Wal-Mart gets a lot of credit for how much they’ve reinvented themselves. There are no more non-concentrated laundry detergents now, because Wal-Mart said simply, “We don’t want to spend our money to ship water across the country.” They changed the industry. And in the same way, Stonyfield is supporting 180,000 acres of chemical-free agriculture. Being able to say to farmers in the Central Valley of California, “If you do this, we’ll buy your stuff.” That’s how you change the world.

How much of your business goes to Wal-Mart?

We sell more to Whole Foods than Wal-Mart. I’d say they’re about 10 percent. But you live a little in fear. It’s great having their large orders, but you worry: What happens if it suddenly goes away? I used to say to them, in lighter moments, “Why do you keep doing this?” They say as long as we’re hitting their expected number…

It seems like you had your cause in place—making the world a better place—long before you had your product. What, or who, was your model for that?

Ben & Jerry’s was about seven years older than us and was an inspiration. They showed us that we could talk about stuff that we thought was really important in the marketplace--in those days, a lot of it was anti-nuclear. But they weren’t organic. So the truth was, in those days, there was no one else doing it, and there were plenty who could show us how to fail. I often joke that we had a wonderful company when we started, we just had no supply and no demand. We were not business people. We had this set of values figured out, but convincing a supermarket to carry an organic product was kind of crazy. We had to retreat from organic because we couldn’t find enough supply or demand. Over time, with scale, we eventually got back to 100 percent organic.

You print 10 million messages a month on yogurt tops—about everything from global warming to voting. Where do these ideas come from?

They come from my team and from my head. We work about seven months ahead on our lid messaging; right now, we’re on January 2011. People have seen the power of these lids, so it’s become a much-desired space for all kinds of activists. Plenty of nonprofits come to us and ask to be on the lid. Alice Waters—I was with her at dinner, and she said, “Can we do a lid to promote my book?”

Yogurt’s available in many more forms today than it was a decade ago—Greek yogurt, baby yogurt, smoothies. What’s next?

I have another company, O’Naturals, an organic fast food chain. We’re rebranding it as Stonyfield Café, and the first one opened in Falmouth, Maine. Of course people eat things other than yogurt, so in our restaurant you can get a complete meal, all day long.

All these dreams are made possible by scale, and all of that is made possible by making a better yogurt. I wouldn’t be having this conversation with you if people didn’t love our yogurt. So you ask, “What’s next?” What’s next is today’s batch. We have to do it well and do it right, or we don’t exist.

This post was originally published on Smartplanet.com

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