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13.5 Stonyfield’s Strategy and Execution

Learning Objectives

  1. Understand the importance of an organizational commitment to and focus on strategy in sustainable business.
  2. Describe how sustainability strategy can guide business decisions and help sustainable businesses achieve environmental and profitability goals.
  3. Explain how successful implementation of sustainability strategy requires strong execution that includes finding the right balance between achieving environmental goals and economic and business realities.
  4. Understand that a sustainability-focused strategy is about constant innovation and change and doing things significantly different from traditional ways of doing business.

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.

Table 13.2 Plant-Based Plastics Use Considerations

Issue Stonyfield’s Consideration of the Issue
Corn is a food, and by using corn to make containers instead, it can make food less affordable. NatureWorks only uses a small fraction of the overall US corn supply and does not change demand significantly enough to alter the price of corn.
Corn can be genetically modified and grown using pesticides and synthetic fertilizers. In other words, it’s a nonorganic cup that embodies all the industrial practices that Stonyfield stands against.

Stonyfield considers the corn only as a stepping stone as PLA can be made from other plant sources. They plan on switching as more environmentally sustainable products appear in the market place.

In addition, to help address some of the harm from the agricultural practices used to produce the corn, they purchase offsets called Working Landscape Certificates (WLC). The money from these offsets go to farmers who agree to follow strict sustainable production standards so that non–genetically modified organism (GMO) corn is produced equal to the amount of GMO corn used to make Stonyfield’s packaging.

Is the PLA packaging recyclable or compostable?

PLA can be composted, but in the form used by Stonyfield, it is not. PLA can be recycled, but currently, the infrastructure is not in place to do so.

Stonyfield considered this but through using Life Cycle Analysis, found that the disposal of the product is a very small contributor to its impact; the materials going into producing the product have much bigger impact. Stonyfield has pledged to make their use of PLA a closed-loop system.

Is PLA safe? PLA is approved by the US Food and Drug Administration. Stonyfield has contractually obligated its supplier for the PLA not to contain any harmful additives (including carcinogens and reproductive toxins), and it routinely tests for compliance.

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.

Sidebar

Considerations in Using Plant-Based Plastics

Watch the video at http://vimeo.com/15674301 to learn more about the process that Stonyfield undertook in considering PLA as a packaging material.

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).

Sidebar

Gary Hirshberg’s Advice on the Role of Business in Society

Gary shared his journey and the lessons he learned in his 2008 book in what he called his “hard-headed” conclusions:

  • It’s going to take a lot more than moral rectitude and virtuous principles to set us on a truly sustainable path.
  • Business is the most powerful force on the planet; it got us into this mess and is the only force strong enough to get us out.
  • Most environmental problems exist because business has not made solving them a priority.
  • Only when the solutions to our environmental problems are accompanied by profitable, commercial (business) strategies for enhancing them will the business world get on board.Siel Ju, “Interview with Stonyfield CEO Gary Hirshberg: ‘Everybody Can Win,’” Mother Nature Network (blog), June 16, 2010, accessed August 2, 2011, http://www.mnn.com/lifestyle/responsible-living/blogs/interview-with-stonyfield-ceo-gary-hirshberg-everybody-can-win.

Key Takeaways

  • Managing a successful business based on a sustainability-focused mission and business model requires the deep and passionate commitment of founders and leaders.
  • Sustainability-based business ventures need to be creative enterprises that balance competing business, social, and environmental demands.

Exercises

  1. Discuss the relationship between Stonyfield and Danone. Are the guiding principles of what is important to Stonyfield’s sustainability mission and strategies at risk under Groupe Danone’s ownership?
  2. List three to five main contributing factors in Stonyfield’s success. Discuss how these factors led to Stonyfield’s success. What, if any, specific aspects of Stonyfield’s contributing factors, sustainability mission, strategies, and approaches have the greatest potential for transferability to other businesses?
  3. Throughout the case there are several examples where a sustainability action has positive and negative implications. Discuss the powdered milk and PLA cup decisions in terms of features and benefits.
  4. Are Gary Hirshberg’s “hard-headed” conclusions little more than moral platitudes or are they really hard-earned, practical, positive (e.g., what is), and normative (e.g., what should be) lessons on how to globally scale sustainable products benefit of the plant, people, and profits? Find two or three examples of how other companies have applied Hirshberg’s conclusions on a global scale to benefit the planet.
  5. Corporations are important elements of the communities in which they operate. As a corporate citizen, an organization should be moved to interact with and contribute to its local, regional, national, and global communities, especially as related to environmental, health, and business issues. Describe Stonyfield’s resulting corporate partnerships. Note operational strategies, tools, or methods used to foster corporate citizenship within the local and extended corporate community. Explain how sustainability principles are demonstrated by management and encouraged throughout the organization.