13.5 Stonyfield’s Strategy and Execution

Stonyfield provides an example of a company that embodies many of the best practices in sustainability and business. The company’s partnership with Danone illustrates how a business can focus on sustainability as a business model and meet planet, people, and profit objectives and that it can do this not only locally but also globally. Globalization and sustainability may often be considered as contradictory, specifically in the context of buy-local movements and the energy required to transport products across the globe, but Stonyfield’s experience suggests otherwise.

The Stonyfield “story” is not one of straight line success. There have been a lot of bumps in the road and there are challenges that will have to be addressed in the future. Throughout its history, Stonyfield has had to carefully analyze and consider business decisions that have sustainability implications. They have constantly had to make choices and consider tradeoffs that may not be the “sustainable ideal” but reflect the operational practicalities of doing business in the world as it exists today. To accomplish this, Stonyfield has created and used emerging tools and techniques of sustainable business (discussed throughout this textbook), including carbon foot printing, life cycle assessment, and supply chain analysis.

Stonyfield has always stuck to its sustainability compass as embodied in its mission statement but has sometimes had to take different paths than its founders may have idealized. This is seen right from the beginning when Stonyfield switched from organic milk to “natural” milk as their production needs in New England outweighed the ability of the local market to supply it. What is noteworthy is that Stonyfield never accepted this alternative as the way things are and invested considerable resources in strengthening supplies of organic milk so that in 2007, almost two decades later, the company was back to 100 percent of what it believes to be the most healthful option for people and the planet—organic milk.

Supply chain dynamics will always be an area of challenge and opportunity for Stonyfield. While Stonyfield has the desire to combine organic with local family farms, it is not always possible for them to source organic from local sources. Stonyfield currently sources from multiple locations as part of its business strategy to avoid supplier failures in any one area. Although all organic milk for its US operations currently comes from family farms in the United States, Stonyfield must source from elsewhere also. Some ingredients—such as cocoa, banana, and vanilla—simply do not grow in the United States, so those must be sourced from other countries.

An example of a more recent action the company took that again showed its constant balancing of business reality and sustainability ideals was in 2010. Stonyfield switched their multipack cups to PLA (a plant-based plastic). While this may seem like a “no-brainer” win for the environment, as the cups previously had been made from a petroleum-based plastic, it actually was not that simple.

In the United States, the only current manufacturer of PLA, NatureWorks (a division of Cargill), uses corn, which has many other sustainability issues to consider. Table 13.2 "Plant-Based Plastics Use Considerations" illustrates some of the potential issues and Stonyfield’s considerations in choosing the product.

While PLA is not a perfect “sustainable” packaging, Stonyfield carefully considered a broad array of issues and decided that the environmental benefits from switching to PLA outweighed the negatives. The benefits being that it reduced the carbon footprint of their multipack packaging by almost 50 percent, which will save 1,875 metric tons of CO₂ per year and reduced their overall packaging carbon footprint by 9 percent. To help further mitigate some of the drawbacks of PLA, Stonyfield has committed to not only offsetting the current impact but also learning from the use of the packaging to make it a more sustainable in the future.

The business relationship between Danone and Stonyfield provides an example of a strategic alliance focused on sustainable business objectives and capabilities. It provides one model for how a large and small business can strategically interact to achieve singular and collective sustainability and profitability objectives. It also suggests how business sustainability efforts can involve large multinational corporations seeking to enhance their sustainability efforts with acquisitions and, in this instance, a particularly creative and collaborative acquisition. It is interesting to note that this was not an example of an “unsustainable” company purchasing a sustainable one to transform its entire business model but an example of a good fit between two companies that had congruence on social mission.

Danone was not a stranger to the concepts of corporate social responsibility. In 1972, founder and CEO Antoine Riboud stated, “Corporate responsibility does not stop at the threshold of the company’s factories or offices. The enterprise creates and provides jobs that shape people’s entire lives. It consumes energy and raw materials, and in so doing alters the face of our planet. The public is charged with reminding us of our responsibilities in this industrial society.” This statement formed the basis of the Danone model: economic performance, attention to people, and respect for the environment go hand in hand. In fact, Danone had a history of social and environmental initiatives long before it acquired Stonyfield.

The Danone-Stonyfield relationship is an example of a win-win partnership. As discussed previously, Gary Hirshberg needed to provide a buyout, a return for his many investors, but did not want to “sell out” and have the company acquired by an organization that would use Stonyfield as a brand to be exploited and have its values compromised. The Danone deal allowed Hirshberg and Kaymen to pay off their original investors and gave Stonyfield access to a strong distribution network, financial capital, marketing muscle, and the global market.

The partnership was of benefit to Stonyfield in that it not only provided financial resources but also provided strategic resources and knowledge to allow Stonyfield to expand its operations globally and, in the process, further spread the mission of healthy food, people, planet, and business.

For Danone, it was a “win” as well; the company was committed to sustainable agriculture but did not have expertise in the organics market. The Stonyfield partnership allowed Danone to acquire a valuable business asset with its growing revenue and profits. But more importantly it gave them access to knowledge about the organics market and Stonyfield’s sustainability-focused manufacturing expertise. As a result of the Stonyfield acquisition, Danone is now the world leader in organic yogurts with a 7.4 percent market share. It is important to note that organics are only one part of Danone’s sustainable agriculture portfolio as its other business lines promote integrated farm management (which limits the use of pesticides and fertilizers) and other programs that integrate nature with agriculture (such as the Bleu-Blanc-Coeur program).

At the time of the acquisition, Gary noted, “Anyone with enough money can buy a company, but it takes a real commitment to our core principles of organic farming to nurture it and make it work.” His statement was in response to some who believed that Stonyfield’s mission and way of doing business was threatened by Danone’s ownership. Gary disagreed with his critics, many of whom were former friends and business associates.

Bloomberg News reported that it was not coincidental that Kaymen decided to retire in 2001 when Danone first invested in Stonyfield. According to the report, Samuel was against any large conglomerate owning Stonyfield.Meg Cadoux Hirshberg, “Brother, Can You Spare a Dime? Family Money Can Be a Lifeline: At the Very Same Time, It Can Be the Most Expensive Money in the World,” Inc. Magazine, November 2009. Critics questioned whether “big businesses” could be trusted in buyouts of “eco-conscious” brands. Can a new corporate parent be trusted to continue the ethical and environmentally sustainable practices that earned its new subsidiary a loyal following? Especially while these large corporations generally preserved the brand names and folksy advertising styles, how do we know that “the stuff inside the box, bag or carton hasn’t changed”?Christine MacDonald, “Big/Green: Eco-Conscious Brands Are Increasingly Being Bought Out by Giant Corporations. Can We Trust Them?,” Sacramento News and Review, July 21, 2011, accessed August 2, 2011, http://www.newsreview.com/sacramento/big-green/content?oid=2838435.

In contrast to critics, Gary Hirshberg believed that working with big companies was an imperative for all sustainability-focused companies. To combat global warming, pollution, and other environmental concerns, large business involvement is essential. He stated, “The happy news is that we’ve got a $23.5 ($26.7) billion industry. The sad news is that we’re 2.6 percent of total U.S. food. If we’re going to make the change that we need to make in the time we need to make it…then we need to work with companies like Groupe Danone because they’re not going to go away.”

Furthermore, Gary noted that being part of a large conglomerate had only advanced his career-long effort to support family farmers and challenge giant agribusiness. In many ways only big business could achieve the economies of scale and harness needed resources to address society’s most pressing environmental and social problems.

Still others felt that the entry of large companies into organic-focused markets brought other problems, such as trying to feed the masses in an industry where supplies were vulnerable. Even Walmart and Costco were having difficulty finding adequate suppliers of organic ingredients, especially given their low-priced business model. Critics saw it as an “organic ethical paradox.” That is, the organics movement succeeded beyond the proponents wildest dreams, but success had imperiled their ideals. To the organic traditionalists it “simply wasn’t clear that organic food production could be replicated on a mass scale.”

One of the most transformational ways that Danone and Stonyfield are contributing to sustainability may also be one of the least apparent. It is their investments in sustainable agriculture and local organic farming. The two companies are providing programs and resources to help farmers through the difficult and costly transition from conventional to organic and sustainable farming practices. This can be seen in the Danone Ecosystem Fund, particularly with its Molay-Littry plant in France (Reine Mathilde project), which is working to transition local farmers to organic in the region. It is also seen in Gary’s decision to open a 3,800-square-foot Stonyfield Café at Chelsea Piers, New York City’s major amateur sports and entertainment complex. In addition to the café’s dairy bar, parfaits, and frozen yogurts, the menu featured macaroni and cheese, salads, and flatbread pizzas with ingredients purchased from farms in New York State. This was not Gary’s first effort to expand Stonyfield’s mission into restaurants. In 2001, Gary cofounded O’Naturals restaurant in Falmouth, Maine, to further support local farms and to promote healthy foods and healthy living. His restaurant vision was to free people from the world of junk food by providing families with quick, natural, and organic meals served by staff passionate about the food they served.

While on the face of it this could seem benevolent, it is also strategic. Stonyfield has consistently run into challenges with regards to the limited supply of organic ingredients. By developing a stable supply chain that can keep up with their growth, this can be addressed over time. When viewed from a sustainability perspective, it is beneficial for the environment (a less harmful means of agriculture), beneficial for society (local farmers can generate higher income from organic), and beneficial for business (stable supplies reduce costs and enhance profitability).