Stonyfield Farm, Inc.

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Stonyfield Farm, Inc.

10 Burton Drive
Londonderry, New Hampshire 03053
U.S.A.
Telephone: (603} 437-4040
Fax: (603) 437-7594
Toll Free: (800) 776-2697
Web site: http://www.stonyfield.com

Private Company
Incorporated: 1983
Employees: 170
Sales: $90 million (2002)
NAIC: 115200 Manufacturing of All-Natural and Certified Organic Yogurt, Ice Cream, and Tofu Products

Stonyfield Farm, Inc., a privately held company based in Londonderry, New Hampshire, is the nation’s largest and fastest-growing organic yogurt company. Stonyfield Farm manufactures all-natural and certified organic yogurt, ice cream, and soy products that are distributed nationwide; it is the only leading yogurt company to incorporate six live, active cultures in its products; it ranks first for yogurt sales in natural food stores and fourth for sales in grocery stores. Stonyfield Farm also leads numerous environmental education programs for children and adults. The company was America’s first dairy processor to pay farmers for refraining to treat cows with the synthetic bovine growth hormone known as rBGH. Each year, to promote sustainable agricultural practices, the company awards grants to the farmers who produce the organic milk used for its products.

1940–82: Organic History and Company Origins

Development of the organic industry was in large part a reaction to the devastation caused in the 1940s by the use of synthetic pesticides and herbicides in agriculture. Chemical biocides were so effective in destroying foliage and disease-bearing insects that “they were used during World War II to protect troops from malaria,” according to Stonyfield Farm’s booklet A Practical Guide to Understanding Organic. Farmers and other producers were so impressed by the wartime success of the new technology that they rushed to profligate use of biocides. The emergence of more resistant strains of insects and weeds brought about the use of more powerful chemicals resulting in the destruction of much wildlife and the degradation of formerly healthy ecosystems. “Pesticide use in the United States increased ten-fold from 1945 to 1989, yet total crop loss from pests nearly doubled in that period from 7 percent to 13 percent,” according to A Practical Guide.

Fortunately, information about the relationship of healthy soil, healthy food, and healthy people began to surface with suggestions for repairing the ongoing damage. For example, in 1922, Austria’s Dr. Rudolf Steiner introduced biodynamic farming, a practice that avoided all forms of biocides and consisted in working with the energies that create and maintain life. In America, J.I. Rodale’s experiment with methods of growing organic food resulted in his 1947 establishment of the Soil and Health Foundation, forerunner of The Rodale Institute—a worldwide organization dedicated to bringing about a regenerative food system that renewed environmental and human health. In 1962 Rachel Carson published Silent Spring, a seminal book in which she emphasized the hazards of chemical agriculture, initiated the move to ban DDT, and spurred revolutionary changes in laws affecting our air, land, and water. In Brooklyn, New York, Samuel Kaymen studied biodynamic agriculture and was active in regional groups that advocated pesticide control and soil conservation; he established the Northeast Organic Farmers Association.

In 1971, Kaymen and his wife Louise founded The Rural Education Center (TREC) as a nonprofit organization in Wilton, New Hampshire. By teaching rural and homesteading skills with an emphasis on organic food production, the Kaymens wanted to revitalize the struggling New England dairy industry and halt the decline of family farms. Their long-range goal was to produce healthy yogurt and educate consumers about the ways business and industry could be both financially and environmentally successful.

In 1982 Samuel invited New Hampshire-native Gary Hirshberg to join TREC’s board of trustees. Hirshberg had channeled his passion for safeguarding the environment into working as a water-pumping specialist and then joining the nonprofit ecological advocacy group known as the New Alchemy Institute, dedicated to spreading information about organic agriculture, aquaculture, and renewable energy systems. However, a 1982 visit to Disney World’s Epcot Center modified Hirshberg’s thoughts about the role a nonprofit enterprise could play in educating the public about environmental issues.

In a 1999 interview, Hirshberg told writer Courtney Claire Brigham of Londonderry’s Eagle-Tribune that at Epcot he saw 25,000 people walking through the Kraft artificial cheese exhibit. Struck by the daily attendance at the Kraft exhibit compared to the 25,000 annual visitors of the work done at the nonprofit Alchemy Institute, Hirshberg wondered if an environmentally and socially responsible business could also be profitable. He concluded that “he would not be as effective in spreading environmental awareness in the nonprofit world as he could be in business,” Courtney Claire noted. Hirshberg soon had the opportunity to test his conclusion.

1980s–90s: Financial Survival, Ecological Concerns, and Creative Marketing

In April 1983, Kaymen founded Stonyfield Farm in Wilton, New Hampshire, as a TREC nonprofit project; he hoped to expand the farm and make the production of yogurt both an educational and a profitable venture. With his wife and their six children he milked seven Jersey cows and produced a tasty, all-natural yogurt based on a family recipe. From the start, the Kaymens used only the highest quality, all-natural ingredients; their yogurt, made from the premium milk of their own cows, was certified kosher.

Hirshberg agreed to prepare a business plan, and in September accepted the full-time position of president and chief executive director; he obtained a $35,000 loan (which included $30,000 from the Sisters of Mercy) as a start-up fund from the Institute for Community Economics. In September Hirshberg accepted the full-time position of president and executive director of the new company. During 1983 Stonyfield Farm produced 150 cases of whole-milk plain yogurt and realized annual sales of $56,000.

In 1984 Hirshberg drafted the new company’s first business plan and—thanks to the fact that his mother, family members, and friends agreed to co-sign loans—secured much needed funds. The production of yogurt in six different flavors propelled 1986 sales to $658,000, but the Stonyfield Farm had outgrown its Wilton facility (an old barn that came with the original property). In 1987 the partners attempted to solve this problem by working with a packing company that shortly fell into bankruptcy. The bank closed down the co-packer, and creditors attached its assets: equipment, cups and lids, ingredients and finished products. Kaymen and Hirshberg spent over $400,000 to recover everything and re-open production. For a whole year—taking turns at working without sleep every other night—they ran the plant three shifts a day, seven days a week. In spite of a weekly loss of $30,000, they managed to keep the company alive, but their troubles were not over. A Vermont dairy firm that had agreed to invest in Stonyfield Farm changed the terms of its offer to what would essentially be a complete takeover of the company.

Refusing to be bought out, Kaymen and Hirshberg began to raise money for a new site for a facility that could not only house their small company but also allow for future growth. Hirshberg obtained a loan guarantee from the U.S. Small Business Administration and won several other investors. The intrepid partners found a landlord willing to give them a lease for 21,000 square feet of land in Londonderry, New Hampshire—a considerable improvement over the 1,500 square feet of the Wilton plant. Construction of the new plant began in 1988; in December the manufacturing and shipping staff relocated to the new custom-designed Stonyfield Farm Yogurt Works in Londonderry, New Hampshire. After many hours of intensive marketing, including distribution of free yogurt in office buildings and supermarkets, the partners knew that the company was still heavily in debt but believed that, with 1988 annual sales of $1.4 million, Stonyfield Farm was finally on its way to better days.

In 1989 Stonyfield Farm launched the Adopt-a-Cow Program (later renamed Have-a-Cow Educational Program) to educate consumers about the value of supporting family farming. The tens of thousands of people who agreed to sponsor a dairy cow were mailed a photograph of “their” Stonyfield Farm cow, updates about life on a modern-day farm, news about farmers’ problems, and notes on the value of sustainable farming methods. Moreover, Hirshberg alerted consumers to the dangers of global warming by using the lids of yogurt cups as small billboards. On its yogurt lids, the company printed the slogan “Let’s Put a Lid on Global Warming. To find out how, look inside.” The underside of each lid carried a printed offer of a free global-warming kit and a suggestion for sending an e-mail to the president of the United States.

Stonyfield Farm significantly decreased the amount of energy needed to produce yogurt by retrofitting the manufacturing process and installing energy-efficient lighting fixtures and hot water heat-recovery systems to capture “waste” heat. The company recycled all cardboard, paper, aluminum, and many plastics. Through recycling and re-use, Stonyfield Farm saved over $70,000 annually and reportedly kept hundreds of tons of waste from going into landfills and incinerators.

Company Perspectives:

Stonyfield Farm ‘s five-fold mission is: to provide the very highest quality, best-tasting all natural and certified organic products; to educate consumers and producers about the value of protecting the environment and of supporting family farmers and sustainable farming methods; to serve as a model that environmentally and socially responsible businesses can also be profitable; to provide a healthful, productive, and enjoyable work place for all employees—with opportunities to gain new skills and advance personal career goals; to recognize our obligations to stockholders and lenders by providing an excellent return on their investment.

After 17 years in the yogurt-making business, co-founder Kaymen retired, retaining a seat on the company’s board of directors. Over and above the introduction of manufacturing and packaging efficiencies, Stonyfield Farm continued to research green packaging and reduced its direct contributions to climate change by investing in carbon-offset projects that either absorbed greenhouse gases from the atmosphere or prevented their generation. Investments since 1997 included the reforestation of riparian habitat in Oregon; construction of an insulated straw-bale house in China to demonstrate how this insulation reduced use of coal by 80 percent; the capture and use of coalmine methane gas in Ohio and other states; and boiler upgrades in public schools. By offsetting 100 percent of the carbon dioxide emissions from its plant’s use of energy, the company became the nation’s first “zero-emissions” manufacturer and proved that businesses could decrease the impact of their operations on global warming.

More New Products at the Turn of the Century

Stonyfield Farm carried on its environmental activities in tandem with the roll-out of many new products. Among others, these new lines included Yo, Baby! organic yogurt available in six packs of four-ounce cups for infants and toddlers. The company was surprised to find that Yo, Baby! also appealed to grown-ups. For older children, Stonyfield Farm marketed Yo Squeeze (later renamed Squeezers), which consisted of five flavors of fruit blended with yogurt packaged in eight, two-ounce tubes per box; and for grown-ups: nine flavors of organic superpremium (that is, full-fat) ice cream. Such products kept the company on a continuing growth curve. Prepared Foods, an industry research and marketing company, named Stonyfield Farm the 2000 New Products Company of the Year.

In 2001 Stonyfield Farm introduced Yo Self, a yogurt that increased calcium absorption. Next, with the introduction of certified organic Drinkable Low-Fat Yogurt in five flavors, Stonyfield Farm entered the beverage category. The ten-ounce bottles contained six live active cultures, calcium, protein, and inulin.

For lovers of soy, particularly consumers looking for a non-dairy soy product that didn’t taste “beany,” Stonyfield Farm introduced O’Soy soy yogurt in strawberry and peach or chocolate and vanilla flavors. O’Soy was the only cultured soy that contained no saturated fat, cholesterol or lactose and offered 30 to 50 million lactose-intolerant Americans a lactose-free alternative to traditional yogurts.

According to Julie Rose in the December 2001 issue of Fortune Small Business magazine, Stonyfield Farm moved solidly into the black in 1997, and Hirshberg began to look for a way of giving a return to his 292 stockholders. Mindful that a company’s mission and social concern could dissipate under acquisition—as was the case with Anglo-Dutch conglomerate Unilever’s acquisition of both Ben & Jerry’s Ice Cream and Slimfast—Hirshberg did not want to go public, sell, or lose control of the company. “Under Hirshberg,” Julie Rose wrote, “Stonyfield had tied its fortunes to improving the environment, providing a healthy and enjoyable workplace, educating consumers, being profitable, and yes, giving investors a return.” Meanwhile, the mission-minded entrepreneur co-founded O’Naturals—a Falmouth, Maine-based “natural” fast-food restaurant that he envisioned as the first of a chain.

For months Hirshberg mulled over the possibility of selling Stonyfield Farm equities but when his wife, Meg, was diagnosed with breast cancer, he felt the urgency of coming to a decision about a deal with France-based Groupe Danone SA, owner of Dannon Yogurt in the United States. After many weeks of negotiations, Groupe Danone—the worldwide leader in fresh yogurt products and bottled water—formed a strategic partnership with Stonyfield Farm.

Under the agreement, Hirshberg was to continue as Stonyfield Farm’s chairman and CEO. Initially, Danone could buy up to 40 percent of the shares held by the nearly 300 friends and employees whose crucial financial assistance helped Stonyfield Farm during its start-up phase. In 2004, subject to a successful mutual realization of numerous business synergies, Danone could gain majority ownership by purchasing all of Stonyfield Farm’s remaining non-employee stock. Moreover, Danone was not to make any changes affecting Stonyfield Farm’s employees, operations, or the facility. Stonyfield Farm was to continue buying all its milk from organic dairy farmers; focus on increasing the number of organic family farms in this country; and continue its “Profits for the Planet” program.

Hirshberg set aside his initial skepticism about traditional forms of commercial advertising and decided the time had come for his company to solidify its position as a top player in the $2.3 billion national yogurt market. He employed Boston-based eFlicks Media to run a multi-media campaign highlighting Stonyfield Farms’ corporate philosophy, products, internet address, and tag line (“Stonyfield Farm: Yogurt on a Mission.”)

By year-end 2002, federally set milk prices had dropped to levels nearing those of 1970; however, for New England dairy farmers, operating and living costs had grown dramatically in these 30 years. In an effort to save New England dairy farmers, St. Albans Co-Op Creamery sent a call-to-action to Stonyfield Farm and its other members. Hirshberg responded immediately with a five-figure contribution and sent a matching appeal to his customers.

Key Dates:

1971:: Samuel Kaymen and his wife, Louise, establish The Rural Education Center (TREC) in Wilton, New Hampshire.
1983:: TREC spawns Stonyfield Farm, which produces all-natural yogurt; Gary Hirshberg becomes a full-time partner.
1986:: The company manufacturers yogurt in six different flavors.
1988:: The company relocates to a leased site in Londonderry, New Hampshire.
1996:: The company buys the site it had leased.
2000:: Stonyfield retrofits its manufacturing processes and minimizes waste through recycling and re-use.
2001:: France-based Groupe Danone acquires 40 percent of Stonyfield Farm.
2003:: Stonyfield acquires California-based Brown Cow West Corp.

2003 and Beyond

Stonyfield Farm began its 20th anniversary year by replacing the plastic lid and plastic inner seal of its small cups of yogurt with a new durable foil seal. This change was estimated to prevent 106 tons of plastic from being thrown into landfills annually. Other savings included the use of 16 percent less energy for manufacturing the foil seals (enough power for more than 180 U.S. households), and the use of 13 percent less water, a saving equal to over 800,000 gallons of water.

Next came the purchase of Antioch, California-based Brown Cow West Corporation, another family-owned producer of natural yogurt. Both Brown Cow and Stonyfield Farm were committed to supporting family farms; they shared similar philosophies about producing yogurt and using only milk from organic dairy farms. Stonyfield Farm planned to set up agreements with western family farmers and to process organic yogurts in California for its western customers. Steve Ford remained at the helm of the new subsidiary. Stonyfield Farm expected that combined 2003 revenues would be about $130 million.

GreenMoney Journal referred to Stonyfield Farm as “one of the top companies in the world reaching toward sustainability.” Regarding the company’s future, in Leader to Leader magazine, Hirshberg wrote, “Stonyfield Farm will continue to inspire individuals, CEOs, and entrepreneurs alike for many years to come. We have often been looked upon as a leading business model that has managed to maximize the company’s bottom line while indeed tending to the health of our planet. And yet,” he added, “I feel like I am just getting to the starting line.”