News Item

“Business is the most powerful force on the planet,” Gary Hirshberg, president and CEO of Stonyfield Farm, told students and alumni at Columbia Business School’s second annual Social Enterprise Conference on October 24. “Most social and environmental problems exist because business has not made the solutions our priority.”

In 1983, Hirshberg and Samuel Kaymen, Stonyfield’s now retired founder, set out to educate consumers about the environment while providing healthy, high-quality dairy products. At the same time, they aimed to prove that running a successful business and promoting a social agenda are not mutually exclusive pursuits.

“I’ve learned over these 20 years that this whole notion of doing well by doing good is in fact a powerful business strategy,” Hirshberg said. “It’s an absolutely powerful brand building strategy.”

Stonyfield, the world’s largest producer of organic yogurt, has had a compound annual growth rate of 23 percent over the past 10 years. With $150 million in 2003 sales, it now occupies the No. 3 spot in the U.S. yogurt market.

Eighty-five percent of Stonyfield’s ingredients are certified organic, meaning that they are produced without the use of antibiotics, synthetic hormones or toxic pesticides and fertilizers, and Hirshberg plans to increase that ratio to 100 percent by 2005. The New Hampshire–based company buys milk only from family farmers who have pledged not to use rBGH, a synthetic bovine growth hormone.

Hirshberg said that using high-quality ingredients creates customer loyalty, which allows his company to spend less money on advertising. “Loyalty is the holy grail for the consumer products world,” he said. “Coke and Pepsi don’t have loyalty, which is why they spend millions of dollars fighting for tenths of a point of market share. They make the product as cheaply as they can, and then they put all the extra margin into advertising.”

He noted that although using organic ingredients puts his gross margins at a disadvantage, his net margins equal or exceed those of his competitors because he has lower selling costs. “The by-product of loyalty is word of mouth, probably the most powerful force in advertising.”

Hirshberg has tried to make his company a model for other socially conscious entrepreneurs. “We’re only going to make real change happen by proving that we can be profitable. No one has ever shown a negative correlation between mission branding and financial performance,” he said. “Encoding your mission into your branding and your practices does create a valuable, defensible niche.”

Stonyfield generates buzz through community-outreach activities that have the double benefit of building brand awareness while educating consumers about health and environmental issues. A “We Salute Your Commute Campaign,” in which the company distributed free yogurt to Chicago mass transit commuters to thank them for using public transportation, increased Stonyfield’s market share from 0.8 to 3.8 percent in three days.

In Houston, Stonyfield gave commuters branded tire gauges with a flyer explaining that if all U.S. drivers kept their tires properly inflated, the resulting increase in fuel efficiency would eliminate the need for Arctic oil. Stonyfield is now No. 2 in the Houston market, partly as a result of that campaign.

Hirshberg stressed that mission branding, which is based on building a relationship of trust with the customer, requires candor, disclosure and consistency. “It really means delivering on your promises,” he said. “It requires that you leave no stone unturned in an effort to improve performance toward achieving your mission.”

He noted that the organic food industry, which has grown at a compound rate of 22.4 percent over the past five years, is now a $13 billion industry in the United States. “There isn’t a food retailer in America that doesn’t have an organic and natural section.”

Hirshberg said that while retailers have embraced organics because they have a higher profit margin than other food products, the organic premium is declining. He cited a recent survey in which 71 percent of consumers said they would pay more for foods produced through environmentally safe practices.

“The best news of all is that consumers are in charge,” Hirshberg said. “Corporate America is spending billions of dollars to tally up the votes you make every time you shop. A checkout counter in a supermarket is nothing but a voting booth. Don’t even think about it in any other way.”