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StateImpact New Hampshire
Fri January 13, 2012
Q&A: Outgoing Stonyfield CEO on the Organic Business Model, His Political Future and Agent Orange
Gary Hirshberg has spent half his life at the helm of Londonderry-based Stonyfield, growing the brand from a small dairy farm to the world's top organic yogurt manufacturer, employing 470 people.*
Now, after 28 years, Hirshberg's stepping down from his position as CEO (or "CE-Yo," as the position's been dubbed at Stonyfield).
StateImpact took the opportunity to talk with the well-known organic foods crusader about how the growing organic food market has changed, the challenges it faces, and his plans once he leaves his long-time post later this month.
Q: First off, what was the impetus for stepping down from the CEO position?
A: Well, I think 28-and-a-half years in one job is a good run. It's a really good time for the company now. I think change is often healthy. I'm not really leaving Stonyfield. I'm moving into the Chairman's role, where I'll be frankly a lot more active on policy issues and pursuing a lot of the food, ag, and energy policy issues that we've been speaking about for years, but now I'll be able to focus on them.
Q: And what will that focus entail?
A: I sit on a number of advisory boards on the national level, and then of course, there's some local issues as well. From the local side, I've been engaged in helping to convert this very large farm over in Canterbury over to organics. I've been helping with a number of issues with the Forest Society, working, for example, on Northern Pass. At the national level, my main focus these days is trying to push for a labeling law for genetically engineered foods...Our major trading partners, China, Russia, all of the EU, give consumers the right to know [if their foods are genetically modified]. We just don't have that law here in the US, and I think it's high time for that.
Q: Could you delve a bit more into your national roles, including your work as a presidential advisor?
A: The president also appointed me as an adviser on trade. That is, to look at ways that the notions that Stonyfield has advanced–promoting organic and sustainable agriculture, more regional agriculture, and supporting fair trade and good ecological practices–[can] become part of the fabric of US trade policy. And to be perfectly honest, as I've been running the company, sitting on a couple of these boards, it's been very difficult to put the kind of time in. I've really been pulled in multiple directions. So by hiring Walt Freese [as Stonyfield CEO], and moving into the Chairman's role, I'm opening up time to concentrate on these larger issues.
Q: And why is knowing whether food is genetically modified important?
A: The promises of GE foods have not really been delivered, but the problems have. What we've seen since the introduction of genetically engineered foods in the mid-1990's is an explosion of hundreds of millions of pounds of herbicides now being used across this country. The net result of that is that we have an explosion of herbicide-tolerant weeds that are no longer affected. We've been overusing these herbicides. So now what farmers are being forced to do is spread, literally, defoliants, like Agent Orange chemicals, like 2,4-D and Dicamba. So now we have over half the states in our country, as a result of this over use of genetically engineered crops, literally spreading the very toxin that has caused hundreds and hundreds of thousands of birth defects both here and in Vietnam and around the world. In fact, in late December, Dow Chemical introduced a proposed corn that is now resistant to Agent Orange chemicals. Which means if it goes through, we'll have corn spread around this country that allows the use of Agent Orange. I think we've just gone a little too far down that road. But more importantly, the average consumer really does deserve the right to know and choose whether to be a part of that food system.
Q: How has Stonyfield as a business–and the larger organic foods market–changed since you started out?
A: It's a funny question, and I'm laughing, of course, because back when we started with seven cows in 1983, you couldn't use the words 'organic' and 'industry' in the same sentence. I often joke that we had a wonderful company back then, just no supply and no demand! Nobody knew what organic was, very people were eating yogurt. Today, of course, we're a nearly $400 million company, one of the largest brands in America, and the largest organic yogurt brand in the world. But we're also a part of an industry that has just exploded. Organics is about a $30 billion industry across the US. It's been growing double-digits steadily now, for over a decade. In fact, organic consumption grew right through the recession. That means millions of jobs are out there now, and we're adding tens or hundreds of thousands each year. It's really one of the healthiest economic sectors in America, not just in terms of domestic production and consumption, but also in terms of balance in trade, where America's exporting a huge amount of organics now. So organic food in general is about five percent of US food, but there's no question it's well on its way to double-digits, and we believe, and folks in the industry believe that as more and more food scares come out.
Q: Describing this change from seven cows to the top organic yogurt brand in the world, what's key to moving up so dramatically and rapidly?
A: I think our strength has been, first and foremost, we produced something back then, and still today, that really does taste better...We have extremely loyal customers who just simply don't buy anything else. On top of that, I think consumers, especially nowadays, with the focus on local and family farmers, are interested in food that's not just less bad for us, but actually good for us. Organic food is exactly that. It's free of toxins, it's proving to have higher antioxidants, and a wide variety of nutritional and health, as well as ecological, benefits.
The main thing I think that we've been able to do is prove it's possible to create a win-win-win kind of food system. Our farmers earn more money, they don't put toxins on the land or water, they improve the quality of their own farmscape. Consumers get more healthy food, which ultimately reduces their health care costs. It's obviously been very good for our employees. We've added jobs every single year. In fact, we've grown every single year of our existence. And in fact, our stockholders have done very well as well. This myth from the 20th century that there was somehow a tradeoff between doing green and making money, I think we're finally able to say, 'Let's put that one to rest.'
Stonyfield, as an example, has generated over $18 million to our bottom line from carbon footprint reductions in the last five years. That's 84 New Hampshire jobs that we've been able to fund just by reducing our greenhouse gas output and reducing our waste ... I also think that what we can really take away from this is that this is an example of the kind of commerce that we'll absolutely have to have to have a healthy American economy and global economy in the 21st century.
Q: How did greenhouse gas reduction fund those jobs?
A: We've created something at Stonyfield called our MAP program, our Mission Action Program. These are teams, cross-functional teams of employees that have attacked literally every aspect of our operation to reduce greenhouse gas emissions. So for instance, all of our yogurt that ships to the West Coast now goes out by train. It used to go by truck. Well, it turns out [shipping by train is] 1/16 of the carbon footprint [of shipping by truck]. And by the way, it's 1/15 of the cost.
There's really been hundreds of examples: Taking the heat out of wastewater that leaves our plant, changing over our lighting, improving the efficiency of our equipment, segregating our yogurt waste and putting it into a bio-gas digester on our site that actually not only treats waste, but produces energy. The kinds of things that future generations are going to take for granted when we finally start to charge ourselves the real cost of energy and the real costs of the kinds of polluting practices of the past.
Q: What do you think is the biggest challenge now facing the organic market looking ahead?
A: First and foremost, I think there's a lot of confusion among consumers about organic versus natural. And we've really got to work harder at helping people understand, simply, what organic is. It's nothing mystical, it's not voo-doo. Simply put, it's agriculture without toxins. Agriculture without hormones and antibiotics and chemical fertilizers, pesticides, and otherwise.
The other, and equally challenging problem, frankly, is supply. We've had a difficult time keeping supply up with demand. As I mentioned before, organic has been growing well into the double-digits, every single year, even through the recession. And yet, it takes three years to convert a farm over from conventional to organic. You have to be able to make the commitment to the consumer that this land and this food is free of toxic chemicals. You have to wait three years. And so that lag-time has been very difficult.
[Higher prices for organic] is a supply and demand problem...For example, organic sugar used to cost 100 percent more than conventional. It now costs the same, and sometimes less than conventional. Because there's been more and more demand, we've created more and more supply. We don't have any [federal] subsidies of organic food. If we can develop sound policy, where we level the playing field—we're not seeking subsidies, by the way, in the organic world—but if we get rid of subsidies of unproductive, or less productive practices, less sustainable practices, level that playing field, you can easily see that that price premium will go away, organic will be about the same cost as conventional, and then, I think...you'll see it become a much, much greater percentage of the American mainstream.
Q: At a state level, there's been a lot of talk among New Hampshire legislators about changing the business environment, making it better, especially for larger businesses, which sometimes feel like they're carrying an out-sized corporate tax burden. What is your assessment of the business environment and if, or how, it could be made better?
A: New Hampshire has a wonderful business environment. I'm not just a 30-year manufacturer. I'm a third generation manufacturer. My father and grandfather ran shoe factories here before this. But what has made the New Hampshire business environment solid has been things that I don't think our current legislature is frankly, placing as much value on. Infrastructure, good roads, good bridges, the ability to quickly clean up after weather conditions. But also excellent education, well-trained folks in our local universities and community colleges...I think many decisions that are being made are sending us down the wrong path in terms of the business environment.
The tax climate is good, of course. But I like to take a different view of this, and I think this is the way New Hampshire and the country have to think. I mentioned earlier, Stonyfield has generated $18 million dollars from carbon footprint reductions. If you look at that on a statewide level, we spend about $6 billion a year on energy. And everybody, I think knows most of that money leaves the state. We send it to Venezuela for coal for the Merrimack Station scrubber, we send our money out of state to the Middle East or elsewhere for oil and natural gas. And studies show that if we were to...focus on a comprehensive statewide conservation program similar to what Stonyfield has done, we would get a four year payback. In other words, if we concentrated on improving our housing stock, improving our buildings, municipal and state, but also our residential and commercial buildings, in year five, we would generate $1.6 billion that would be staying in the local economy. All the while, of course, creating jobs. So I really believe that our legislature, our policy makers, our citizenry need to take a different look. Not focusing on taxation, but really focusing on plugging the leaks. Stopping the export of money out of our state. Create more jobs locally, and keep those dollars in local circulation.
Q: What is the biggest challenge of running a large business in New Hampshire?
A: The biggest challenge that we have had over the years has been finding the kind of professional talents that we need to compete. Keep in mind, as a consumer products company, we're selling nationally, we're even selling a little bit internationally. And so whether it's from the software or the dairy tech point of view, we're constantly needing to upgrade and train and develop our own people, but also attract high quality folks. And these are folks who come here, obviously, look to whether New Hampshire's a great place to raise a family or not, and it is. And that's been one of our great assets. But again, when you look at some of the challenges, for example, the excessive burdens of the property tax system, for example, it becomes a hurdle for folks.
Q: There's been a lot of speculation following your announcement about stepping down as Stonyfield CEO that maybe you might be considering a run for governor. Is that something that's on your radar?
A: You know, you never say never, but this time around, as you can tell, I've got an awful lot of irons in the fire, and there's still the business of adequately transitioning my successor, who, after all, is following in the footsteps of someone who's been there 28 years. That's going to take some time. So I will say, quite clearly, not this time.
Q: Is there anything you'd like to add?
A: Here on the heels of the primary, which, let's face it, was a pretty negative affair. You didn't hear as much of the positive visions as I think New Hampshire-ites would like, more this kind of negativity and certainly we see the failure of partisan politics. We're not even having civil dialogue. We not even having dialogue. And I think that there is a lesson from Stonyfield and many other wonderful companies in the state, and that is that there's really something quite hopeful here. People say the manufacturing economy is dead. Far be it from dead. Take a look in Londonderry. Take a look around. You'll see the ingenuity, the hard work, the drive, the innovation is very, very strong. What we've got to do is protect and take care of the state.
*Stonyfield actually employs 395 people in New Hampshire, with the remaining 75 people working at the Brown Cow brand facility in Antioch, California.