How to Make Money and Save the World
Gary Hirshberg shares his experiences and examples about how we can all think differently about harmonizing positive business and environmental outcomes. He also describes his work as chairman and co-founder of the Just Label It campaign, which advocates for mandatory national labeling of genetically engineered foods, and explains how this campaign fits into a larger sustainability context. Gary Hirshberg is chairman of the board and former CEO of Stonyfield Farm.Related Events: How to Make Money and Save the World
Arizona State University's Global Institute of Sustainability, and a generous investment by Julie Ann Wrigley. Wrigley Lecture Series-- world renowned thinkers and problem solvers engage the community in dialogues to address sustainability challenges.
Nancy Grimm: Gary Hirshberg is the chairman of Stonyfield Farms, the world's leading organic yogurt producer. And I might add, that is fabulous yogurt. It's on my breakfast table every morning. I like the Greek nonfat yogurt. Stonyfield Farms-- fantastic stuff. If you haven't had it, you need to have it. So that's a little advertisement for you.
Gary is also the managing director of Stonyfield Europe, with organic brands in Ireland and France. Gary serves on several many-- probably too many-- corporate and nonprofit boards. I have the same problem serving on too many things.
But here's a few of them-- Applegate, Honest Tea, Peak Organic Brewing, Late July, Quantum Design, Glenisk, the Danone Communities Fund, and the Danone Livelihoods Fund.
In 2011, President Obama appointed Gary to serve on the Advisory Committee for Trade Policy and Negotiations.
This sounds like really fascinating work, talking to people about trade policy and all of the many aspects of the global food agricultural industry that bear on that trade policy.
He's co-chair of AGree-- do you call it AGree or AGree? AGree-- OK, an agricultural policy initiative formed by the Ford, Gates, Kellogg, Rockefeller, and Walton and other leading foundations. He's chairman and founding partner of Just Label it, We Have the Right to Know-- the national campaign to label genetically engineered foods, and is co-author of Label It Now-- What You Need to Know About Genetically Engineered Foods.
He is the author of Stirring It Up-- How to Make Money and Save the World. It's fantastic. Gary has received 12 honorary doctorates and numerous awards for corporate and environmental leadership, including a 2012 Lifetime Achievement Award by the US Environmental Protection Agency. So as you can see, we are really, really lucky to have Gary join us here to tell us about his experiences.
Before I turn it over the podium to Gary, I want to just add a little bit of personal introduction. I met Gary when we were college students at Hampshire College in Massachusetts. I was a budding scientist, and so was Gary. But he, even then, had more of an entrepreneurial sort of approach to science than I did.
And I remember that he got involved while he was a student, and then later became the director of an institute called the New Alchemy Institute that was in Woods Hole, Massachusetts. Gary actually, in working with New Alchemy-- I think I heard a story tonight that was pretty amazing to me-- the initial selling of the yogurt was intended to raise money for a school that they were actually doing associated with New Alchemy, which is pretty fantastic because look at what it has grown into. It's pretty amazing.
The other thing about Gary and my association as students at Hampshire College is that we played on the Ultimate Frisbee team. This is one of the very first Ultimate Frisbee teams in the world because the game of Ultimate Frisbee-- how many people here know what ultimate Frisbee is? Excellent.
OK, so the game of Ultimate Frisbee was actually developed or designed by a bunch of students at a prep school that then fanned out mostly over New England and New York into college and started teams. And Hampshire was one of those places where a team was started. So we were on one of the very first Ultimate Frisbee teams.
And so I think it's fitting-- and I was going to do this after his talk, but I think I'll do it now-- for us to present to Gary a gift, which is a Frisbee from the ASU Ultimate Team. And this comes compliments of the ASU Ultimate Team. Very grateful to them, in particular Dylan George-Sills, who is the president of the Ultimate Team, who donated this for us to give it to Gary.
And so this is going to be a memento. Actually, he still plays. I don't anymore. My knees don't work anymore. But Gary still plays. And so I would like to welcome Gary to the podium, present him with this gift, and thank him very much for joining us tonight.
Gary Hirshberg: Thank you.
Nancy Grimm: It says ASU.
Gary Hirshberg: I love it. So I've gotten a Frisbee and an advertisement out of that introduction. I'm ahead of the game. I'll just take your questions and then leave. Thank you, Nancy. That was very sweet.
I should tell you. I'm older than her. So I actually played in the first ever intercollegiate Ultimate Frisbee game, for those who know the sport. It was a lot of fun-- Mother's Day, 1973.
I have the honor of speaking about sustainability issues in a lot of forums, a lot of corporate forums, and a lot of public forums. And I have to tell you, my favorite philosopher is Lily Tomlin. She has a great line. She says, no matter how cynical I get, it's hard to keep up.
And that's often how I feel when I hear discussions about sustainability. There's an awful lot of lip service given to the topic. And I'm going to try to delve deep. But I want to say that I had a thoroughly exciting day here at ASU.
The Global Institute here is nothing short of phenomenal in terms of the depth of commitment and the integrity of the science and the research and the education work that I've seen today. It's really been amazing. And I'm grateful to
Nancy for getting me here. And I'm only sorry it took this long. But I will certainly be back.
What I'd like to do with you is talk about this issue of sustainability in the context of my own career in business because it's my view, and it was my view back in the 1970s, that unless business embraces this idea of being accountable for our footprints, being accountable for the consequences of our choices, I don't think that we're going to see the kind of change that we need to make in our lifetimes, and certainly in our children's lifetimes.
And I've come up with this title-- Win-Win-Win-Win-Win Future because what I've come to enjoy, and I hope I'll persuade you of this tonight, is that it is absolutely possible in business to leave a much more positive-- not only to do less damage but actually to do restorative work, and still make more money in the course of doing it.
And so I'll just jump right in. And again, I'm humbled by the expertise I shared my day with. And so I know that much of what I'll share in my introduction here is pretty well known and understood around here. But I think very clear to most of us that the future is full of all kinds of challenges.
As I said before, we have enjoyed a bountiful existence where we've been really very unconscious of our footprints, unconscious of the consequences of our choices. And we've really been, I would say, pretty much immature or stymied in our maturity as a species because these are all the consequences of choices that we've been making over the last 40, 50, 60 years. Some would argue hundreds of years.
And the essence of this roots very deeply in some fundamental myths about the way that we treat the planet and the way we think of our role on it. I have not found a single instance of humanity's interactions with nature where you don't see signs of this kind of failure to see the consequences and to ameliorate our lasting impacts.
So you can look at every natural resource. And you'll see the same kind of data I'll share with you here. Water now is being talked about as the oil of the 21st century. And certainly, you know this better in the Southwest and, obviously, California.
I was on the phone yesterday with one of the state's largest organic growers, who now sees an actual end to his business potential over the next five years if the current trends continue.
And again, I won't belabor the points. I think this audience, you probably know what some of the causes are here.
But effectively, we've thought of water as a infinitely replenishable resource. And it just simply isn't.
You can look at top soils. And the story of American progress is of course remarkable in terms of our 200 years.
But the legacy is remarkable in the sort of negative sense. Something close to 40% of the top soils that were here in this country when Lewis and Clark made their way across are gone.
They're not actually gone. They're in the bottoms of lakes and rivers and oceans. But we've failed to take care of this legacy that really made the American economy possible. And again, you see statistics like this all the time.
And of course, when you're over-using soils, then what ends up happening is that you become dependent on external inputs to replace that fertility. And so typically the chart-- and this is a chart of global fertilizer use-- that you see in my lifetime, let's say from the mid '50s to the present, looks very much like the chart that you'll see with almost every resource, every mineral that is out there.
This sort of enormous spike, post-world War II, of consumption and usage and no attenuation whatsoever in even recent decades. The consequences show up in all kinds of ways.
There's resource depletion. There's obviously pollution. There's the runoff of excess nitrogen from our bounty in the Midwest here through the tributaries out to the Gulf of Mexico.
The zone that you're looking at here, I just realized I last showed this slide in Canada, so I was using Lake Ontario as a reference. This is a dead zone that some of you may know about. I need to tell you, I'm not the most depressing guy you're ever going to meet. I just need to sort of establish some foundations here and I'll come to the solutions.
But just to put this in a context that you'd understand-- it's about the size of New Jersey. And it's a zone where there's literally low to no oxygen, meaning you can sit at the surface and you can see to the bottom. And sometimes that's 130 to 40 meters. It's a zone where there's no living things. There's not even plankton and algae.
And this is a direct result of not just the fact that we've overused chemical fertilizers to replace the natural fertility that was there, but we've also failed to prevent topsoil erosion, which means that the nutrients that we've been dumping in our Midwest have also been flowing off. And these hypoxic zones, as they're known, are now quite common. There's some 300 around the world.
The San Francisco Bay is hypoxic. Chesapeake Bay is hypoxic. And again, it's preventable. It's just that no one is really paying attention to this. And again, these consequences-- and as I say, you can see signs of this sort of fundamental lack of thinking about consequences and externalities not just in how we treat the global ecosystem, but how we treat our own ecosystems, our bodies.
And indeed, the feedback systems really come home in my world of food. All of you are familiar with the obesity crisis that we've got in this country. Now we have a situation where actually the percentage of obese and overweight people is now about two-thirds of our country. And actually, obesity has now passed overweight-- obesity defined as 25% or more body mass index over what should be your weight. The percentage of obese people actually exceeds the percentage of overweight.
And you can see these incredible statistics for a fifth grader who, in my era, was a 50 pound kid-- 50 to 55 pounds.
And so you can see that the kind of development. And again these are just consequences of how we have lived. And we're getting the feedback now.
And of course you can see there's lots of causes. There's skyrocketing increase in sugar consumption, mostly due to sodas. Again, you can see the spike kind of like that fertilizer curve from roughly post-world War II to the present.
The sister of obesity is diabetes. And this is a pretty horrifying statistic, as far as I'm concerned. And by the way, that number is 1 in 2, if you're Hispanic or African-American. And again, utterly preventable but extremely expensive to us and directly parallel to obesity.
This is the price tag that you and I are paying to pay for America's diabetes crisis. And that number is growing.
Estimates from NIH, or that number, is growing at roughly 10% to 15% per year. In other words, much faster than inflation.
The obesity crisis itself is-- again, there's the overweight and there's the obesity. So again, we think of the moral issues here. We think of the health issues. But fundamentally, this is just financial lunacy here. And of course, paying for health care after we've become sick is the most expensive form of health care there is.In my world of organics, of course, you see these consequences really revealing themselves in charts like this. And I could really depress you, if I haven't already. No one has left quite yet.
But I could just show you dozens of studies. This is the kind of stuff I read every day. It used to be about 6 foot 5 until I got into this business. But look what has happened. And no gray hair, then, either.
But in all seriousness, this was a study done looking for women, looking for 163 different compounds. A quarter of them were found in 99%. In other words, essentially all the women. And you go down this list. And this is clearly serious stuff. Many of the chemicals that were found in the bodies of these women were banned before they were born.
We all, every one of us, walking around, even a child born today has DDT in her tissue. We of course banned it in this country, but it's still being used in many parts of the world. But also, these are highly persistent OP, or Organophosphate Pesticides, in many cases, that really stick around for a long time.
Here's another study this was looking at newborns looking for 413 different chemicals. Again, 287 found. Half of them are known carcinogens. And again, the scientists aren't saying that this means that these are kids are going to get cancer or that these are at carcinogenic levels.
But part of the problem of our failure to understand consequences, just our whole failure of thinking systemically, is we have no idea what the cumulative impacts are. We have no idea what the synergistic impacts are. We have no idea what the safe thresholds are for children at the maximum time of cell development.
And so again, we have these fundamental blind spots. And this has started to come home. Ronald Reagan convened something called the President's Cancer Panel in 1982. The very first panel came out and reported to the president on the state of cancer in this country. These are among the most prestigious leading oncologists in the country.
And at the time when Ronald Reagan convened the first panel, the predictions were that roughly 20%-- it was actually just under 20%, 19% plus-- of Americans would be diagnosed with some form of cancer in our lifetimes.When Barack Obama took office, he inherited the Bush panel, who reported in his first two months in office that that number has now jumped to 40% of Americans.
So in one generation, we've actually doubled the percent. And they were very blunt. These are oncologists, not ecologists. But they were very direct and very clear that the primary causality here was inadvertent exposure to toxins in our everyday life, not just in our food, of course. We have fire retardants and sanitizers and so on and so forth, body care products. But primarily, food.
And the report was very pointed in asking the president to use the power of his bully pulpit to really actively reduce the percentage of toxins in American society. The very same week that the President's Cancer Panel Report came out, out came this report in the Journal of Pediatrics.
And I rather guess that most people here now know a child who's been diagnosed with ADHD. But in my childhood, I can tell you there were no diagnoses of ADHD. But what we're seeing now is some correlative behaviors where now it's quite clear. We've seen now brain development studies. We've seen quite an eye opening array of linkages now to pesticide exposures.
And it's no wonder, if you start down this road of understanding this stuff, why we're seeing these results because, for example, if you had a non-organic banana this morning, you should probably close your eyes for a second because this is what is used in the production of non-organic bananas. You can actually titrate for many, if not all, of these compounds and find them.
And of course, this idea that you can wash the fruit. And it has long since been debunked. This stuff is in solution.
It's osmotically transferred into the cells. These compounds are present in the cells throughout the banana. Just to go a little bit further down this depressing road, and I promise I'll come back out of this shortly, pull you out of your seats, I guess.
Again, the blind spots continue. And they really are at the foundation of our modern food system, which we are so proud of how cheap our food system is. And yet, there's a reason that it's cheap. We're paying for it somewhere else. It may be cheap at the cash register, but we're paying for it elsewhere.
As you're well aware, most of our meat and much of our poultry is grown in these kinds of environments. These so-called confined animal feed lots. And leaving aside the fact that there's nothing natural going on there, these animals are often in manure up to their knees. They're eating only corn.
These are not carnivores, they're herbivores. These are animals that do need plants. But we've learned that we can pump them up pretty fast with corn. But one of the consequences that we've never really paid much attention to is the absolute decline in omega-3's. And some of you may be up on this.
This is Data Gary telling you right now you need to be eating your omega-3's. What we now know, about there's an omega-6 to 3 ratio that we need to keep in balance. And we should be at a balance of around 1 and 1/2 or 2 to 1
We need a certain amount of omega-6's in balance. But again, it should be a rough proportion of 1 or 2 to 1.
But yet, we're walking around now, most of us, at somewhere between 18 to 25 to 1. In other words, what's happening is, and you can see the evidence here, the animals in the feed lot, the omega-3's, which are anti-inflammatory-- and we now know cancer is an inflammatory disease-- and so omega-3's are thought to be highly important in helping to regulate cancer and other diseases.
But as you can see here, by the time the animals are ready for harvest in a feedlot, there's no omega-3's left because they haven't been eating anything natural whatsoever. And so what happens is that the butter, pork, beef, and eggs that you and I might have had as children, if you were my age, are really quite different today than they were back then.
You now have ratios of 6, 10, 15, and 20 to 1, where we really should be, like I said, down in the 2 to 1. And again, this is because back in my childhood-- even in my childhood, a couple generations ago-- animals were eating, getting access to grass. They were having access to pasture, they were eating things of nature, as opposed to process.
And now of course, we're feeding corn to fish. I mean, I don't know that they evolved that way naturally. But that's certainly the way we've evolved. This really comes home in an area that Nancy mentioned I'm pretty active in, which is promoting the labeling of genetically engineered foods.
And this to me is one of the ultimate expressions of our lack of consciousness about consequences, our lack of thinking in any long-term. You can see in this chart where most of the GMOs are produced in the world. And no surprise perhaps to folks here-- 64 nations around the world were labeling GMOs, but they're not labeled here.
And I think there's an inverse correlation here between our production level and the fact that we don't allow individuals to choose whether or not to consume these products. They have been extremely successful. Genetically engineered foods were first introduced in 1996. And the very first two crops were, one was a corn with insecticide built into it called BT, a bacterium. The other is a herbicide-tolerant corn.
And the promises that were made back then-- and again, these are patented crops. We have a fundamental disconnect in this country in that, on the one hand, over at the US Commerce Department, specifically, the Trademark Office, we've awarded dozens and dozens and dozens of patents because these are unique new organisms that have never existed before.
And yet over at the FDA, the policy is that they are materially the same, that they are materially equivalent to their conventional counterparts. And that's why labeling isn't required. And in order to ensure that this policy would be in effect-- this policy of not labeling, of not disclosing this to us-- the biotech industry in the '90s, starting with the Dan Quayle commissioned Council on Competitiveness began making promises to Congress about these crops.
And one of the promises that was made, in the case of the BT corn, for example, was that we would see a decrease in insecticide use. And that has actually come to bear, as you see by these USDA data here. We have seen a decrease in insecticide applications for corn rootworm, for example.
But that's because we're actually using more of it in the food. But the second promise that was made was that the insecticide would never pass through our digestive system, get past our saliva, let alone through our gastric juices and into our bodies. And a couple of consequences have happened. Again, unintended, but they've happened nonetheless.
One is that we're now seeing corn rootworms, in particular, here in the West, that are now developing a resistance to what used to be a very effective insecticide. In fact, there's nothing particularly harmful about BT in the concentrations in which we used to use them. It's even approved by organic standards.
But now we're using them or consuming them, I should say, and they're in our bodies at much higher concentrations.
And we actually have no idea what those consequences are because there's been no long-term studies.
But in fact, what has happened in nature, the bugs or the insects, in this case the rootworms, when they're under assault, they don't wait around to do focus groups like we do to figure out what's next, they actually evolve rather quickly. And indeed, the corn rootworm-- one of the great concerns now is that you have this entirely resistant species now and many more in the pipeline.
And again, that other promise that was made was debunked about three years ago in research. It has now been repeated on multiple studies, on multiple continents showing, in fact, that these proteins are actually now in our bodies and getting through, unlike the promises that were made.
The second major trait that was engineered into these crops, where there's even I think greater long-term concern is the herbicide tolerant trait. This of course has been very, very effective. Some herbicide tolerant corn and soy now make up roughly 90% of the corn and soy that we consume, roughly 80-something percent of the cotton.
And these crops were engineered to be herbicide tolerant, that is, to handle as much herbicide as we could put out there so that they would have an advantage over the weeds. And the net result has been, again, this chart is starting to look familiar, isn't it. It looks a lot like that fertilizer chart I showed you.
Specifically, we've seen an increase of now over a half a billion pounds. And that's just through 2011. The 2012 data is just coming through now. And it's expected, again. The increase continues.
Where we were promised that herbicide usage would decrease, we've seen the exact opposite happen. And indeed, the applications per acre or per hectare are now through the roof. And this has been a major sea change in agriculture.
The promise, as I said before, was that we would see less. We've seen the exact opposite. But furthermore, what we're now seeing, similar to the insecticides, that is, were showing data like this. In Iowa now, which is obviously a corn area, you're seeing between 60% and 100% of rainwater samples now showing glyphosate or Roundup, as we would all know it because of this overuse.
An even further result of this kind of manipulation and consequence, and the one that is I think quite frightening, is this one because we now have over 28 weed species that have evolved, like that corn rootworm I showed you earlier, to becoming resistant.
And what the chemical companies, the patent holders, who own these crops are now recommending across the country, and it's happening everywhere in every state of the country, is mixing-- farmers, when they have resistant weed, I was testifying on this in Arkansas, and a soy farmer came forward and said he had a pig weed that was 12 feet tall. It was the diameter of his wrist. And he said it will stop my combine in its tracks.
He said the only way that he can actually take them down is with either machetes or chainsaws. But what has happened is the patent holders have come up with a better solution for him. They've said mix in a 10% solution of 2,4-D, which, again, for anybody of my vintage or older, you know what 2,4-D is, it's 50% of the compound known as Agent Orange.
And there has been severe health consequences. And we're now using two 2,4-D in most of the agricultural states in this country. There's some 60 plus million acres that are now infested with these resistant weeds. And sure enough, we're now starting to see some 2,4-D resistance, as well.
In fact, Dow is now about to get approved a 2,4-D resistant corn so that we can use more 2,4-D. So now, have I depressed you enough? I think I've probably done my job. Oh, I should mention, it goes without saying, the feedback loops. Don't think of this as just human impacts.
We're now seeing the pollinators, we're seeing soil compaction studies because we're finding out that this over use, again, this sort of avalanche of chemical application now is resulting in die off of soil microorganisms, which is resulting in soil compaction. And this is being reported in the ag literature, as well.
So let me get off all of this and say, if you want to know more, I doubt that you do after what I've told you. But this is the book Nancy mentioned. You can look at it. You can go at stonyfield.com or you can download it.
But this is why in my work I'm chairing this campaign. And despite everything I've just told you, I want to be very clear, I'm sure this will come up in the Q&A, so let me be right up front. I'm not opposed to the idea of genetic engineering. There's a million diabetics alive in this country due to advances with genetically engineered insulin.
But we need to understand consequences. We need to think systemically. We need to do more research off farm.
And we need, in the meanwhile, while science sorts this out, we as citizens need to be able to vote.
And as I'll explain now in Stonyfield's story. This is really the story of my business and the entire $30 billion organic industry is that while we pay attention to voting at the voting booth, which we get to do every two or four years in this wonderful country, we actually vote many, many times a day or per week in our shopping.
And our view is that we deserve the same rights as citizens in really progressive countries like Russia and China and Saudi Arabia have where labeling is allowed. So let me try to summarize what I've been blasting at you here because it was all with a point, which is that a lot has changed since the middle part of the last century.
You had the rise of a sugar consumption. You had this sedentary lifestyles as we began to sit-in front of screens more and more. And of course, no more so than today. This is actually an ad from Life Magazine the year I was born.
We've certainly seen a dramatic increase in chemicals.
People think organic is this new thing, but all food was organic before 1945. In fact, every famous person in history ate only organic food. George Washington, Mozart, Jesus Christ ate only organic. It's us who've been on this experiment with our bodies and the planet.
And then of course, the omega-3, omega-6 issue that I mentioned before. And when you put these four together, you realize why we have the most expensive health care in the world. That is an absolutely direct consequence.
And so what I hope I've persuaded you is that there's a problem in not just how we act, but really how we think.
And changing how we do business, changing how we're going to relate to the planet, changing how we treat our bodies really means changing how we think.
And a wonderful illustration of this that was provided by the World Wildlife Federation is this one. If I asked you how much water was in this cup of latte that you might have had this morning, you would of course, being sophisticated coffee drinkers like my friend here, you would say, well, it depends, was it a tall or a grande or what have you for the number of ounces.
But we could agree that maybe it's somewhere between 12 and 16 ounces. Let's call it a pint or a liter of water, but actually when you do the math, you find out that the water footprint of a cup of coffee, one single cup is far more dramatic than we think. It's roughly 208 quarts of water. There's of course the water that goes into the growing of the coffee, the water that goes into the cows, that goes into washing the dairies, the water that goes in the sugar production.
But then there's all the industrial needs over here on the left that also use water. And we don't think in these terms.
We think reasonably the water that's in the cup is about how much water went in. And really this business about thinking is that we need to understand that there's a footprint. We're starting to get into the vernacular now to talk about our carbon footprint. But we have a water footprint, we have a toxins footprint, we have all kinds of footprints.
And until we understand the ramifications that for everything we buy and we own there's a far larger footprint in our supply chain, we don't have a chance of reversing many of these trends. And so I sort of summarize all of this by saying to my mind these are modern day myths, as I mentioned in the intro, that have really governed our modern existence.
These are not things that we would say consciously. I think people might be embarrassed to even say this, that the earth is a subsidiary of our economies. But it is actually how we behave. We behave as if the earth is ours for the taking and ours for the dumping. It's sort of this god or naturally given right to dominate, to take advantage of her.
And of course, the exact opposite is true, where this is precisely the reciprocal of reality. The reality is all human economies have been made possible by a bountiful earth. And if we take care of her, there's no reason to believe that we can't have bounty for a long, long time. But this fundamental myth prevents us from getting there.
A second and related myth is that we have this belief that the earth is infinitely resilient and productive to meet whatever we need. And as you've seen from the data here and as you well know here at ASU, there's all kinds of evidence that this is not so, that that resilience is absolutely in jeopardy and productivity is actually in decline.
And these are really subsets of, to me, the most fundamental myth of all. And that is this idea of externalities. And if you slept through economics 101, like I did, then let me just remind you. Externalities are the direct consequences of our behaviors. They are things that actually happen as a result of choices we make.
But in economic terms, because we don't measure them-- I'm not as a business person held accountable for my carbon footprint or my water footprint or my toxic footprint-- because of that, they're not on my profit and loss statement or my balance sheet. In economic terms, they don't actually exist. I mean, it is fair to say they are thoroughly invisible.
And the problem is is that nobody is really accountable. If you're not measuring, we're not accountable. And so this central myth, this idea that, yes, there are consequences, but we're not even counting them is really, I think, the challenge.
And so back in 1983 with our farm and our really intelligent cows who were thinking thoughts like this in New Hampshire, this is actually Stonyfield Farm where yes, it is quite a bit colder than it is today. In New Hampshire, we often say we have 11 months of winter and one month of bad sledding. It's a pretty different environment than here.
But we were asking the question back then, is it possible to create a win-win-win system of commerce. As Nancy was explaining, we actually started the yogurt company to fund our farming. We had an organic farming school where people would come up on weekends to learn about all kinds of organic methodologies and so forth. But really it was to fund the school. But as she said, things have really taken off since then.
But the question that as ecologists that we were asking is, is it possible for business to be part of the solution, not just part of the problem. And as you can see, it's been quite a run here. The company does around $350 million in sales now. I could show you the curves of most of those companies on whose boards I sit. Most of the organic companies have enjoyed curves like this.
For the astute folks, the numbers folks, here I will confess right up front, you'll note that I told you we started the company in 1983. But I start this chart in 1990. And that's because we had no clue of what we were doing in the first seven years-- were just a nightmare. Every single thing that could go wrong-- did. And it took us all of eight years to get to $4 million in sales. But once we started to figure out things, things took off.
And what I want to share with you now is some of the solutions. By asking that question that the cow was thinking there a moment ago-- some of the solutions that have helped us to absolutely answer yes to her question. Because my background is in climate change, my undergraduate work was on the causes of alpine tree line, I brought that consciousness to the business.
And we convened early on in our careers these nine teams. We called them Mission Action Program Teams. But these were teams of diverse employees. So you would have on a team, you might have an engineer, you might have an accountant, you might have a sales person, somebody in manufacturing.
And these teams were constituted to look at our footprint in each of these fundamental areas of our work.
Probably the only one you wouldn't recognize is the one in the upper right. SWOT means Stonyfield there's Walking Our Talk. So that was looking at our commuting miles and the food that we fed our employees on site.
But the others, I think, are probably pretty well known to you. And what we did was we created a bonus structure so that with each of these teams, we would set goals, objectives, to reduce our footprint in these areas and then incentivize people with financial rewards.
And in the time here tonight, I won't take you through every one of the panels. But I will just come to this punchline right here, which is that these teams have been responsible for almost $31 million worth of net profitability to us. And some of the dramatic ones here, for example, our transportation costs, you can see, is about two-thirds of that number.
That was not that complicated. We stopped shipping to the West by truck and we started shipping by train. And by train, we get to a 1/16th carbon footprint and a 1/20th cost per pound of shipment.
And so we have enjoyed benefits of that sort, but others as well, by packaging efficiencies and reductions in our energy use and reducing waste. Again, sort of basic 101 stuff that you do to start the process of achieving efficiency.
The punch line is clear. It's been highly profitable, it's far more than paid for the cost.
And of course, this has really been my venture capital. This has been my growth capital to develop our new Greek yogurts and other kinds of things. And I'll just give you a couple of graphic examples of how this has happened.
Out of those three myths that I showed you earlier, you'll see those myths expressed in our day-to-day lives. And in waste treatment, it's expressed with this sort of notion that the way that we treat our wastes-- as cities, as in our homes-- is we use this hypothesis that the solution to pollution is dilution. We take our waste and we dump it into some body of water somewhere and then agitate it or oxygenate it, and then send it to this another myth, which is this mythological place called Away where we send all of our waste.
And of course, that's why we're warming the planet. And in this case, I had to build a waste-water treatment plant because the BOD I was producing, we have to wash our tanks once every 24 hours. And there's a fair amount of waste from the fruits and the milk and so forth.
And so I went to the local authorities and they said, well, you've got to build one of these aerobic treatment systems. You've seen them-- the big circular agitators and oxygenators. And I knew that in building one of these systems I was going to produce a truckload of sludge every single week.
And I went to the local authorities, and I'm in New Hampshire. I said, what do I do with the sludge. They said, it's really easy. You send it to Vermont. That was their definition of a way. And so I was picturing Ben and Jerry's shipping it back over to New Hampshire and maybe thinking we could have a sort of a sludge swap on the Connecticut River.
But rather than go through all of that, we decided to go for a different kind of approach. And we built something that has now become quite well known-- an anaerobic system. That is, a system that breaks down in the absence of oxygen. I won't read you all the bullets off on the right, but the net result is that this thing is producing net energy for me, and it's making money for me.
As a matter of fact, the break even point in this was about 20 months, which means that at month 21, this was now a profit center. So I took a cost center-- and by the way, a truckload of sludge every week, I don't care where you send it, it's a cost to you. So I took something that was going to be a cost and turned it into a source of profit.
And by the way, we produce electricity and heat from this same unit. Interestingly, just for you in Arizona, in New Hampshire, we actually have to heat-- some of the heat that we are producing we have to use to keep this up because the bacteria are only functional at 70 degrees Fahrenheit. Here, of course, you have an entirely different situation.
And to me, this is a no-brainer. I mean, every city in the country should be doing this. It's extremely profitable. And the one truckload of sludge or so that we do get about every 18 months or 20 months or so, instead of once a week, is an excellent source of fertilizer and certainly totally compostable.
So that example illustrates this basic point that I want to make here tonight, and that is that as we look at sustainability-- and I opened by talking about my sort of cynicism sometimes when I hear companies talking about this stuff-- there's a four step approach to sustainability, to moving our way through this dilemma.
Step one, if you have a facility, whether it's a university or a yogurt company or your home, is to get yourself into compliance. I think we'd all agree with that one. If you don't get fined, you don't get sued, if you're in compliance, that's a good place to start.
Step two is really where we focus on the facility itself. So a theater like this, we would focus on our heat. We would focus on the waste-water that leaves the facility. In my case obviously, I've talked to you thus far about our facility management. And this is a very important step to reduce, plug the leaks, stop the outflow.
But really, it's just warming up on this process because, until you look at your supply chain, you're actually nowhere. I can tell you that the supply chain that you saw in the dollars that I showed you a moment ago, getting my facility into compliance and trapping the waste heat that goes out the back of the building and so forth, it's important and it has some consequences, but nowhere near the consequences of dealing with my supply chain. In my case, my fruit, my milk, my sugar, my cocoa, and so forth.
And you will find, whether you look at your home, your business, a place like this, that the supply chain-- so in this case, the carpeting, the seats, the electronics-- that's actually where the much larger footprint is. Remember that water example I gave you before. And when you start down the supply chain, you just find there's all kinds of fruit to be harvested.
That's all great because that's all about reduction. But frankly, when it comes to climate change, when it comes to water, when it comes to toxins, we're not going to be able to slow or reduce our way out of these problems. We're past that now. We've got to get to a more restorative place.
And that's where step four comes in. To me, truly sustainable systems means restorative. It means cradle-to-cradle. It means no waste. It means waste as food, just as happens in nature where there is, of course, no waste.We're the only species who thinks it's OK to have our waste go off to that place call Away and dump and toxify.
Now my point about cynicism is that there are many, many, many companies who are focused on steps 2 and 3.
And I don't mean to demean them at all. They're critical steps. You've got to plug the leaks. There's no point in putting solar heating on in my part of the world until you've insulated first and kept the heat that you're producing in.
And so this is basic physics. But honestly, until we get up here into step four, I don't think that we can begin to address the stuff that I depressed you with in the first few slides. So while up till now I've shared with you steps 2 and 3 at Stonyfield, let me take you into some examples of step 4.
Here is one that I'm very excited about. If you buy any of these products, and I hope that you do, my tuition bills hope that you do, then you'll be happy to know that actually you're no longer consuming plastic. These products are now completely made from plant material. Now to be fair, right now, it's made from corn. It's something called polylactic acid.
And we do GMO offsets, which I'd be happy to talk about, if you like. So I ensure that I'm not supporting the whole GMO pipeline. But in fact, PLA, Polylactic Acid, can be produced from agricultural waste, actually can be produced from methane, from the methane that's coming out of our waste water treatment plants. And we're moving towards that.
Well, what's fascinating about this is that when we first switched over to the PLA-- we were the first yogurt company in the world to do this-- we discovered that the resin was even stronger than normal plastic. As a matter of fact, it was dulling the knives used to cut these cups into sixes and fours, these packs into sixes and four. So it's quite durable stuff.
This is what you see on the bottom. And now more and more yogurt companies are adopting this. And the main reason they're adopting this is because consumers are saying, yeah, this is a good thing, this is the kind of thing I want to support. So this has been one great example of starting to move towards a more biological polymer.
I mean, that's exciting and it's progress, but I've always said that success will be when you finish eating the yogurt you'll eat the cup. And I'm pleased to tell you that one month from next Tuesday, we will introduce our first ever product in an edible package. It's something and a technology which you're reading about here called WikiPearls.
These pearls, literally, they can be the size-- think of a grape, that's kind of what they look like. You can have it from grape size, but you can have it all the way up to grapefruit size. In fact, there's nothing that would restrict size.
These skins, so-called, are made of food particles and calcium ions that are held together electrostatically. That's all a bunch of fancy words. But what it really means is it's literally like a grape.
And what's cool is it's a barrier to moisture. So all you get is water on your hands. If you have chocolate yogurt inside, or you could imagine ketchup or mustard, all those throw away containers. I'm on the board of this company now.
And it's extremely exciting technology because what it means is, you can imagine, for example, in these lunch packs that kids get, kids will be able to just pop a little grape in their mouth and eat the yogurt. And the skin itself is actually nutritive. It has a lot of calcium.
But what's interesting is while the membrane is impervious to water, it's permeable to other nutrients. So you could add nutrition. So you could actually put your vitamins in the skins. You could put your omega-3's and you could put your calcium or your vitamin D or what have you.
You can actually make cheese balls and put herbs in them. This is actually a peach frozen yogurt with a coconut exterior. And that's what we're going to be launching at some Whole Foods tests a month from next Tuesday.
It's a really exciting product. Now again, it's all evolutionary. I will tell you right off the bat, if we went shopping together and I said, would you mind picking up a peach or a pear or an apple, you would think nothing of picking them up and putting them in your bag. Maybe you brought your canvas tote bag.
But to walk over to the yogurt aisle and pick up a pearl and put that in your bag is something that we have not found consumers ready to dive into. So what we've had to do is we've come up with two delivery systems.
One is an actual bar. We call it a wiki bar, where you'll walk up and, kind of like a chocolate bar, we'll have a little egg carton, and then you can put them in the egg carton, or you can put them in your own bag or whatever.
But we also have a prepackaged one, which is using cellulose. It looks like cellophane. Original cellophane was cellulose. It's actually a starch. And actually, the cellulose bag will, if you put it in your garden, it will be gone, literally disappear, in about 20 days.
So we're working on that sort of education process. And when I come back to see you in two years, I'll tell you how that's going. But that's really the question, is will people adapt to this.
Now this whole idea of fourth stage for sustainability really expresses itself with organics. To me, there's a lot of lip service given to natural and I hope you all know that there's actually literally no definition of natural out here. There's ice creams that don't change shape when they melt, but they still say natural on the label. You'll have to judge for yourself.
To me, the real natural is organics. And here is the place where, as a restorative company, is a company dedicated to that fourth stage. I think we've been able to make the greatest impact to the discussion. Again, I won't read you the bullets, but this is just the results of milk purchases for one year. I could show you the same data for our fruit purchases and so forth.
It's extraordinary the footprint of the results from a true organic production. While most of us think of organic as being the absence of antibiotics or the absence of hormones or the absence of pesticides or herbicides, in fact, you've got all these other impacts. It's ultimately carbon sequestration. It's really preventative health care. It's so many things.
But what I'm also here to tell you is it's profitable. This chart, which I know is a bit of an I-chart, shows you two price curves. The bottom line there is the milk price. If you're a conventional farmer in the Northeast, it's the price you've been getting for every 100 pounds of milk back to the early 1990s. And you can see it's a bit of a roller coaster. Here it goes up and down up and down. And there's a lot of reasons for that irrationality.
The top line though is the price that we pay our farmers at the farm gate-- literally, the price that they get in their check once a month for their milk. And you can see it's a considerable premium over the conventional price. And that's because one of our missions, and when we're talking about sustainability, altogether too often the sustainability discussion focuses on nature and the animals and leaves out entirely the human component.
And in our case, we think it's antithetical that one of the results of modern agriculture is the absolute decline in the number of farmers that are out there, where there's less farmers and they're smaller. We believe that our supply chain needs to be healthy and growing and needs to be intact.
And so we fix that price to a level that we know will keep the farmers farming, keep them profitable, keep their kids coming back, and so on. And I have dozens and dozens of examples where farmers who had either gone conventional, who were going under, have switched to organic. And they not only stayed in the business, but they've been able to grow. But also, their kids have come back to farming.
And it's simply because of this price. So if you're wondering what's the price premium of organic, understand where it's coming from. Understand that a whole lot of it has to do with the fact that we believe that farmers have to be a necessary part of the equation.
And studies-- this is one done at the University of Vermont-- have backed us up, that over time, starting with the higher price, of course, but the net farm revenue-- just go to the bottom line-- is actually improved for the farmers. It's not so in the first year. It's not so in the second year. Often, it's not so in the third year. But it's years four, five, six. If we can get the farmer through that startup phase, they can really make more money.
People don't know this, but organic cows live twice as long as conventional cows. And while that is cute and warm and fuzzy and all that, from a farmers point-of-view, that's extremely valuable. Your primary asset living and being productive twice as long is an incredible ROI.
Now organics is much more than just the avoidance of negatives. It's also switching and enabling projects like this one. This we call the Greener Cow Project. We know now in a study which was just published in a scientific journal two months ago that shows that when animals are on pasture, you get not only-- and that research began with Stonyfield-- not only do you get healthier animals, but you get actually get healthier milk itself.
And what we discovered, I can tell you, our largest footprint, our largest contribution to global warming, is actually the cows. And it's not the end that you think. It's actually the burping. Cows are burping methane. And methane, as you probably know, is 24 times more impactful than carbon as a global warming catalyst as a gas.
And so we set out to try to reduce the largest part of our footprint by moving our cows to not just more pasture, but looking at their feeding regimen and actually introducing flax, which is a high omega-3 fatty acid feed. And the net result of, in this case, a 90 day study with the cows was that we got their actual burping emissions down by 12%, which is enormous for us.
We also improved the omega-3 in the milk by almost 30%. So those of you who I told before to take your fish oil, just get your organic milk and you can get it that way. Of course, the cows love this. They're much healthier.
Remember, these are, again, herbivores, not cornivores. The farmers love it because their animals are healthier.
And of course, we all benefit as well.
And this thinking systemically about this, to be fair, what has happened is our farmers now are making more money on less cows, which means they don't need to go to such large farms, which means that in my part of the world, where land is obviously precious and difficult to come by and it tends to be more marginal, my average herd size of the 800 farms that supply us is something like 70 cows, 72 cows.
We have farmers making money with 40 cows. And that was thought to be impossible and unheard of across the country. But the study I was referring to has shown now that you get much, much higher omega-3's in the milk, much better carbon management, and, again, healthier animals all the way around.
The last and best example of this sort of fourth stage thinking is our sugar operation. You're looking here at about 30,000 acres of organic sugarcane, which happens to be in Brazil. If you know anything about sugarcane production, the normal tradition, it obviously involves a lot of photosynthesis. So you have a lot of leafy matter to get that one little stalk of sugar cane out.
And farmers traditionally would go in and burn the fields before harvest because it's just easier to harvest the cane with all that leafy matter gone. And of course, the net result of that is a huge carbon release. And if you've ever flown over-- and I have-- these areas, I've flown over in Florida and in Brazil and seen the burning-- it's just an incredible rush of carbon into the atmosphere.
But if you stop and think about it, again, in the ways that I've been talking tonight, it's just systemically bankrupt. Any nutrients that were built up in the topsoil, underneath any topsoil whatsoever, is also oxidized, is also burned when you do that. So that means that next year, you've got to go back and replace that fertility that you built up naturally with something chemical and synthesized.
And so our colleagues in Brazil in 1997 said, this is crazy. Actually, to be fair, the fourth or fifth generation grower in this family went off and got trained in ecology. And he came back to the farm and said, dad, this is nuts that we're sending our nutrients to that place called Away. Let's stop burning.
And so they began green harvesting. And in the course of doing that, now they're up over-- actually, it's close to 50,000 acres now. And I'll just show you what that has entailed. What they've done is they harvest, they crush up, or shred the leafy matter. And they've had all these net other impacts, as well, by focusing on eliminating their waste streams.
They've introduced biological pest control programs. They literally are incubating and growing parasitic wasps and lady bugs and all kinds of natural fauna. And then they've also focused on reducing or preventing soil erosion.
Remember what I told you earlier. And so here's an illustration of what I'm talking about. What you see in the upper left is the shredding that goes on. So the sugar cane itself is being chopped and dropped into that dump truck.
And the shredded material-- you see me grabbing a clump of it-- it's about a meter deep.
And, I mean, everything has been thought of here. The tires on those dump trucks are low PSI tires. They can literally drive right over your foot and you don't feel it. I didn't dare try it but the farmer did.
And he showed me and because they don't want to compact the soil, they actually want to grow the soil. And there's an adage in nature that it takes 100 years to produce an inch of topsoil. They're producing inches per decade-- inches.
And they're building this incredible life in the soil. And so the net result is just an enormous number of predators and wildlife, as you see in the bottom here. You're walking around out there and there's eagles and raptors. I mean, it's an agro ecosystem.
Well, here are some of the findings, the results. They've actually dramatically increased the biodiversity. First of all, since converting to organic, they've had a 90% reduction in pest damage since going this way because they've introduced pest controls, which is this entire food chain-- 312 species of animals are there.
There's literally cats, cougars, bigger than me, wandering around in these fields out there. They've improved not only their groundwater quality, but actually, their quantity. They've actually brought up their water table because the carbon in the soil is now retaining moisture that would otherwise be evaporated away.
You can see the topsoil carbon content. That's what I was mentioning earlier. But here's the economic punch line-- they've had 10% yield increases since going this way over when they were non-organic. And you can find their sugar in the markets. It's called Native, or native, as we would spell it.
If you see their stuff, you should definitely support them. But this is 100% of our sugar. This is the other punch line, is when we first began buying their sugar, it was 100% more expensive than conventional sugar. And of course, I couldn't pass that on, I couldn't charge twice as much for our yogurt cups, no matter how delicious it tasted or how much Nancy bought. I had to subsidize that cost.
But now, we've had 50% premium decreases, even to the point where our organic sugar right now, at this very moment right now, it's at exactly parity with conventional. But last year, it actually was less than conventional.
And the reason for that is it was a bad drought year in Brazil. And there was higher productivity in output from the organic farms than from the non-organics because of the moisture. The limited amount of rainfall was actually being retained for agricultural productivity. And so it oscillates up and down. But the point is it's at scale. It's a classic perfect example that at scale organic really can pay.
And speaking of organic, people say, well, gee, is organic really proven. Well, I really believe future generations are going to say, it's the chemicals that were not proven. I think future generations are going to look back and say, what were you people doing, you were dumping toxins into your air, water, and soil, and onto your food.
And there's study after study after study. This is John Reganold's research at Washington State University showing nutritional improvements. I already mentioned the plus one study on the omega-3's and milk. But this idea that we are insufficient or unable to meet the productivity requirements to feed the world is just this mythology that's spread by sources who frankly haven't figured out how to profit from it.You can make money selling chemicals and seeds that require more chemicals. The suppliers haven't figured out a way to make money from organics, but that doesn't mean that the data isn't there.
At Iowa State University, they've been doing research now for going on 16 years. And they've shown-- you see the findings here, side-by-side-- average economic returns are either similar or higher while improving soil quality all the while.
So again, I'm not being pollyannaish here. I'm not telling you that when you pull that chemical IV out in that first one, two, or even three years, that you're going to get an immediate bounce back. In fact, you tend to get a drop. In fact with dairy cows, I can tell you right now, the first generation of cows, when you convert, do not do as well as their offspring when they were born and raised on organic pasture systems.
No less than the UN Human Rights Council and other UNEP and UNDP have released reports saying, there's no way we're going to feed Africa in the 21st century without organic and sustainable methods, mostly because a lot of these regions can't afford the higher costs of these patented seeds and so forth. But also because this stuff can be done at an economical scale for the average sustenance farmer.Rodale Institute ran side-by-side studies of corn-- organic versus conventional. It's going on now 31 years. And they've shown higher yields. And this isn't a parallel control plot with third party verification and so forth and so on.
And especially in drought conditions like you see in those pictures.
So again, this is about thinking differently. This is about thinking systemically. And I'm going to bring this to a close and get your questions. But I want to bring it all the way back to us because the reality is that everything I've been able to stand here and talk to you about tonight-- and we have dozens and dozens more examples-- actually is all made possible by you.
It's really made possible by Nancy because she's out there buying our stuff. And I made this point earlier, I want to really drive it home. We vote all the time. I know that our political process is frustrating and the money in our political system is especially frustrating. But the reality is we're buying all the time, we're voting all the time. Every time we buy something, we're voting.
And believe me, in my 31 years in business, if I've learned nothing else, it's that corporate America spends billions, not millions, billions to tally your votes. If you want organic or not, if you want GMO-free or not, if you want antibiotic-free or not, believe me, commerce is there to deliver what you need. And you see this expressed in policy.
The Farm Bill will hopefully get voted in tomorrow. And we are so broken in our political process. Here's what the federal nutrition recommendations are in terms of what we're supposed to be eating now-- the latest food pyramid.
And you can see, we're supposed to be eating a whole lot less sugar and meat.
But here is the subsidy system, the federal subsidy system that at least up until the present is precisely the inverse of what we're supposed to be doing. And fortunately, this Farm Bill is actually a break from the past. We are going to get a reduction in subsidies. It's going to be transitional. You're going to see them show up in the form of crop insurance assistance and so forth. But we are starting to move away from direct payments.
But the reality is that we need to get our federal government focused on the future, not just on patching the present. And we need to get our tax dollars working to be spending money on the most expensive form of health care there is, which is after we're sick, how we're going to be treated. When the cheapest form of health care is not getting sick, right.
I mean, that's thinking systemically. We have got to really rework our ways of thinking. And so this gets into campaign finance reform, which is the next lecture, and I'll spare you that tonight.
But my real point is that we really have much more power than we think. At Stonyfield and my $30 billion organic segment exists because a handful of consumers-- and admittedly it's a handful, it's 4% of US food. A handful of consumers have said, you know what, it's more important to me to eat right than to suffer a little bit higher cost.
We do this hand-wringing in this country about inflation. And to be fair, we have a huge proportion of our populace who cannot afford more expensive food. And I understand that. There's 1,000 reasons to eat organic food. There's only one reason not to. And it's a good one. It's more expensive. But you don't have to buy everything organic. Buy one thing. Those votes-- if everybody in this audience and everybody in America tomorrow went out and bought one organic item, we would be revolutionizing the world. And believe me, the retailers pay attention.
And those votes count. And those votes ultimately move us towards subsidizing the right kinds of stuff and not the wrong kinds of stuff. Look at vegetables and fruits. It's just extraordinary. No subsidies whatsoever and yet this is what we're supposed to be eating.
I want to wrap up by talking about one other quick dimension of what we do. Because it's one thing to bring this ecological way of thinking to the business and to thinking differently and thinking systemically. But honestly, all the analytics and all the science and all the research gets you half way down.
But you've got to be able to communicate this stuff. In other ways, to get the votes to start to go our way, we've got to figure out how to talk. And so we've come up with some interesting strategies for communicating. Because one thing you should know-- for the business people in the audience-- about my business is that my gross margins, that is, my cost, my margins after my cost of my ingredients, my product, is about 10 points worse than my natural competitors.
So in other words, I'm way down here. I have much less money to work with than they do. But my net margins are about the same as theirs. And the reason for that very simply is I just don't spend as much on advertising, what's called below the line spending.
Instead, we've had to find gorilla strategies for communicating because the good news is we've got something to talk about. So as an example, I talked to you about what's happened with moving product by rail. But this discovery of the efficiency of rail was just mind numbing.
And so to introduce our products to cities around the country, we started going to rail stations. Here we are in Seattle and Chicago. And people would get off the trains and we would hand them a cup of yogurt and a spoon and a coupon and thank them for their commute, thank them for riding the train because, again, when you take the train to work, you avoid the production of 45 pounds of particulate per capita per year into the atmosphere.
And these poor bewildered commuters would get off the trains and be handed a yogurt. And The TODAY Show came down and filmed the crazy yogurt people doing this. But this has really worked for us. It helped make the connection.
We even went to Texas where, as you know, they don't really believe in passenger trains. And here in Houston. We know that if America kept our tires properly inflated, we could get a national MPG increase of about two to three miles per gallon. So we stood on the sides of the road in San Antonio and Houston with a big sign saying we support inflation.
And people would pull off and we'd inflate their tires and give them a tire gauge and a yogurt and a spoon and so on. And so it's important to have some fun, it's important to have some laughs. But my point is that there are ways to communicate that if you give people all the bad news all day long, they're just going to get depressed.
Early on in the very earliest days, we went in to see one of our supermarkets. And he said, well, what are you going to do for advertising. We had no money for advertising. But we went back and on the way back thinking about it we realized what we do have is cows.So we put cows up for adoption. And what would happen is if you sent in five yogurt tops, you would get a certificate naming you the co-owner of one of our cows. You would get a photograph for your cow. And then in those days, the cows would send you two letters per year.
And it was amazing. The cows talked about stuff we were interested in. They talked about carbon footprints and methane. Well nowadays, there's no more mail. It's all email. They're blogging, they're tweeting.
But we have hundreds of thousands of people who have adopted cows. People give them out for wedding gifts and anniversary gifts and so on. So again, it's been a great way of getting this across many, many hundreds of thousands.
If you go to our website stonyfield.com, we have our Farm Camp where the farmers are out carrying-- we put these flip cameras in their hands and they go out and talk about what's going on on the farm. We have our version of YouTube, which we call YoTube, where you can see the whole supply chain made transparent and you can learn.
So I just make these points to say that it's not enough to just do it. You've got to actually find a way to communicate this stuff. One of the classic examples-- and I'll wrap up with this-- is of course we use our lids, the yogurt tops, for all kinds of messaging.
And this has been really effective for us in communicating our pointed difference. But I have to tell you that I had one backfire in my 28 years of doing this. And that's the lid-- here, this lid right here. As you know, I started a petition on campaign finance requirements. So this lid came out and said, in politics, the cream doesn't always rise to the top, which is my point of saying that we shouldn't have to be millionaires to run for Congress.Well, unfortunately when Nancy Pelosi became the House Majority Leader in the last cycle, she had demanded to get more organic food onto Capitol Hill. And they said we need some healthier food. So we delivered.
Unfortunately, it took months and months to get it sort of worked through the federal bureaucracy. And when we finally got it, the very week-- wouldn't you know-- that my yogurt was being delivered was the week that that lid was on the cups.
So this is the return receipt that came back. They rejected all the product. I loved that the letter said it was my yogurt was too political for Capitol Hill. I thought that was just great.
I sent an op-ed in to The Wall Street Journal once about the profitability of fighting climate change. And the head editorial writer wrote back. He said, dear Gary, I love your yogurt. I eat it every day. I just can't stomach your views on climate change. And he rejected my letter. But nevertheless, these people don't have a sense of humor. But we'll get them there.
Let me close by summarizing all of this. And this is a slide from a woman named Hunter Lovins. If you think back to the history of human evolution, particularly in recent centuries, you realize that we seem to advance through these technological waves.
The first big wave was obviously the Industrial Revolution. And then harnessing iron and water power and so on led to all kinds of opportunities. And then the second wave, which enabled us to move out here and so forth, was steam power and the railroad and so on and so forth.
And you can see, obviously the nanotechnology wave, which is certainly still here. I would suggest to you that the next wave is really right there. That's what I call the fourth stage.
And the students who I met today, who were so impressive to me because you're really teaching this next wave.
And you're really doing it. I mean, these are terms that people would have looked at me with their eyes crossed 10 years ago.
But the students here today were talking about biomimicry and so forth, notions of cradle-to-cradle that are really going to be the fundamental ways that we think. Not just because they're cool and neat and they're ecologically and morally correct, but really because they're more profitable. Because again, if we're not spoiling this bountiful place that we've got, then there's no reason it can't keep on providing for us.
But we have to recognize that we are part of nature, not above nature. We are of it. Anybody who comes to organic comes for two major reasons. One, they've either had children. And I cannot tell you how many focus groups I've been in where moms are sitting there drinking diet soda saying, I would never give diet soda to my kid. Glug, glug, glug.
Or they've had a health event, they've had cancer or someone in their lives have had cancer. And you know, nowadays, everybody knows somebody dealing with cancer. This was not the case even a generation or two ago.
And so this is one of my favorite pictures. This is a rough commute. But I use it to just say simply this, that we really don't have impossible. We cannot think systemically is actually no longer an option for us. I mean, really, honestly, the best way to predict the future is going to be to invent it.
And that's what you're doing here at ASU. And I'm so honored and impressed to be able to be here with you. So thanks for listening. Thank you.
Rob Melnick: Here we have some time for some questions here for Gary. We have two microphone setups, one on this aisle over here and one on the other side. If you have questions for Gary, just come on down, get in line.
And I'll call on you.
I would just simply ask that you do ask him a question instead of giving a speech. That would be appreciated, I think, by everybody. Any questions? We have some people coming over here right now.
AUDIENCE: Before you get this microphone set up, I think I'm loud enough. Those YoBaby containers, are they compostable?
Gary Hirshberg: Yeah, so they are compostable, but we don't say that they're compostable because they require pretty high heat. So they would be industrially compostable. And if you run a really good compost bin, they will go in your system.
But the real focus here is really source reduction. That's what we're interested in. The primary driver here was to use less upfront materials.The next generation that we have, which will be, I think, from the methane I mentioned, the PLA, that should be able to be broken down in your backyard. But we're probably two years away. Yes, sir.
AUDIENCE: Glad to hear you talk. Thank you. I noticed on a couple of slides, it said Stonyfield, Inc.--incorporated. I assume you're not a publicly traded company?
Gary Hirshberg: No, no.
AUDIENCE: Do you serve on any boards of publicly traded companies. And could you describe what that must be like as you sit there and they have to make decisions to take care of shareholders?
Gary Hirshberg: Yeah, it's a great, great, great question. There are two fundamental disconnects here, and this is one. I have and do sit on boards of public companies. And you should know that Stonyfield is now part of Danone, which is a large public company. Danone is the owner of Dannon and Evian, among others.
And I sold the company to Danone because I had 297 shareholders. Remember those first eight years of red ink, I accrued a lot of individual shareholders during that time. And I ultimately had to get them an exit.
Danone was willing to do a very interesting deal with me. I did this sale in 2001. They bought ultimately 80% of the company in two phases but still left me with majority control, which was sort of almost anti-capitalistic.
But they recognized that we had a different model, that our gross margins were way below theirs yet we were making the same net profit margins. And so they became fascinated by that. And as Nancy mentioned in the introduction, I've actually launched some other companies now under them in Europe.
So the disconnect that you're referring to-- and it's really valid-- is that in a public environment, you're really judged by short-term returns. You're judged by those quarterlies and harshly. I mean, you can have enormous swings of net worth change with just minute changes in stock price.
And obviously, what is behind your question, and I concur with you, is many of these things don't reveal themselves instantly. You don't get that instant ROI. It takes time. And the higher cost of goods is really tough for these public companies.
But if you look at, for example, Annie's-- are you all familiar with Annie's, the pasta company? Anybody who's got a little kid knows Annie's mac and cheese. I was on their board.
Annie's went public a year ago. And their stock has been one of the Wall Street success stories, with a much higher cost of goods. Horizon Organic-- WhiteWave, it's now called. It's had the same thing. WhiteWave just bought Earthbound Farms, you may have seen.
There's a long list of very successful public companies, not the least of which is Whole Foods, of course. UNFI, the major distributor-- you have a few strikes against you as a public company because of the higher cost of goods.
Nevertheless, where they've made it up is what I told you, is with consumer loyalty.
In general, you'll see these companies spend much less on marketing than their non-organic counterparts. So that's one of the disconnects. The second one that I mentioned is more complex and it relates to the supply chain.
And that is this idea that I just touched on. I mentioned the study that is now coming out. We're having a big public release of it. You'll see it in the news in two weeks. And that's the study on pasture, that the animals are healthier, the milk is healthier, and so on and so forth.
And this has been all third party verified and peer reviewed and published and so forth. There's nothing in that study that necessarily lends itself to profitability. There's nothing there to sell. It's hard to sell pasture.
In fact, what's known as the savory method of intense grazing on a plot of land where the animals really bring the stock right down to the ground level and intensively fertilize, and then move on, not to return to that site for another two weeks, or in some cases two months.
That's not a technology there that you can sell and profit by. And therefore, no one is going to go public on that strategy. And at the same time, it's certainly more profitable for the farmers themselves.
And so as a species and as a society, I think we've got to really think about the reward systems and think about our measures, our metrics. This whole idea of measuring externalities, I don't think anybody would disagree with me, but it has no place in the public marketplace. You're telling companies you're going to burden them with measuring their footprints, adding an extra burden.
But I again come back to my point. These companies, whether they're public or private, they depend on you and me. They actually work for us. And I know we all feel like we're the victims of or the recipients of whatever these companies will sell. But my 30 years in commerce has told me, actually we consumers, are in charge.
You don't think of it that way. I'll tell you a quick story. I was standing in Florida one time. I was looking at two yogurt cups on the shelf. And I was holding a competitor's cup. I'll tell you, it was a Yoplait cup.
And this little old lady came up to me and tugged me on the elbow and said, young man, somebody your age really should be eating the Stonyfield instead. Really said that. And I said thank you, mom. No, it wasn't my mom. And I said, well, why. She said, well, do you know that they give 10% of their profits to environmental causes and they measure their carbon footprints and they pay farmers a higher price.
I said, well, how do you know this stuff. And she told me this story that was really heart rending. She said that her husband had died of colon cancer about six months earlier. And she and the girls in the bridge club-- she was telling me she had a granddaughter, she wanted to see her grow up and graduate and go on to college at ASU and get married and all of that.
But all kidding aside, she said, I want to stick around for my granddaughter. And so now we're reading labels. And the girls and I, her bridge club, they're talking about what product to eat and what not to eat.
So consumers do control. And by the way, the dairy manager knew this woman cold because she's always in there. Stonyfield consumers are the ones who open the doors and go out back and say, where's my yogurt. They're not coming to buy yogurt, they're coming to buy Stonyfield. And it's true with the other organic goods.
So what we need to translate to these public companies-- this is a long answer to your question-- is the idea that they can get there with higher cost of goods but with more loyalty, less marketing spending, that the consumer who I've got, who's loyal to me, is the least expensive consumer I'm going to get because not only does he or she stick with me, but the most valuable net result of loyalty is word of mouth, right.
You're not going to tell somebody something from an ad that you saw, you're going to tell them to eat something or not to eat something because of something that's touched you viscerally. So I hope that answers you.
AUDIENCE: Hi, Gary. I just want to say thank you for all your work on the Just Label It campaigns. And I want to say, too, that I worked in California behind Prop 37. And sorry to say that it did miss by a very small margin.
Gary Hirshberg: Yes.
AUDIENCE: And same in Washington State. And we're about ready to run. The Just Label It campaign is endorsing the state of Oregon next. It's the next charmed state to get the blessing of the Just Label It campaign. And I'm curious if the Just Label It campaign is going to embrace a different message, maybe one that's a little deeper than it's just your right to know.
And I'm wondering with that deeper messaging, if you will be working with the grassroots organizations in a more productive, collaborative, and equitable manner going forward?
Gary Hirshberg: Sure, so just for everybody else, since you're obviously well-informed, let me quickly explain. So the Just Label It campaign actually is promoting federal mandatory labeling. We want the same rights as the other 64 nations that I mentioned.
But as it turns out, there's all these state initiatives. In fact, there are 26 states were in one form or another of looking at labeling this past year. It's expected it'll be 30 states in 2014. And as was mentioned, Oregon is going to be a citizens referendum. But in a lot of cases, these are legislative battles.
My state in New Hampshire just had a big legislative fight. Vermont is about to have one. Maine and Connecticut, by the way, have passed labeling. And there's an interplay between the grassroots, as you call it, the state efforts, and the federal. And Just Label It is completely a resource for every one of the state efforts.
We have people who show up and support. We were in Washington, we're in California. We've been in many of the states. I'm out speaking for each of the state initiatives because ultimately it helps to educate the public, even if the individual states do or don't pass.
The key here is that we're quite disciplined in our message that it is your right to know for the very simple reason that there is no value in getting into the safety argument with GMOs. It's just you cannot win. The research is, A, one-sided. It's all been done by the patent holders.
In fact, if you do research on a genetically engineered crop without permission of the patent holders, you're in violation of the patent. And you will be prosecuted. And this happens. But also, there's a lot of political forces at play that make it very, very difficult to do objective research on this stuff, even if you do get a hold of seeds.
But more importantly, we're not going to know for a generation what the impacts are. And there's plenty of science on both sides. And again, it's been brilliantly managed by the patent holders themselves. So we don't think you can win that and we don't think that's the point.
Because in fact, we have the rights as citizens to have lots of things labeled that have nothing to do with safety. In fact, if safety was the issue, if we knew something was unsafe, we wouldn't be arguing to label it, we'd be arguing not to have it in the food at all.
But I'll just give you one quick example. I don't want this to go on too long. But irradiation-- you have the right to know whether your food has been irradiated or not. This is a case where there's no proven safety impact of irradiation one way or the other. That's not why it's labeled.
Its labeled because citizens said it was material. They want to know. In fact, in this case, the irradiation folks were proud. They believed that their technology helps with food safety and they wanted people to know about it. They wanted to educate folks.
We have country of origin, orange juice from concentrate, wild versus farmed, we have all kinds of labels made available to us. But in this case, there has just been a very concerted effort to stop it.
So we do believe it's as simple as your right to know. We believe that you have the right to choose. And we also believe that it's hard for the other side to argue with that. So from a federal point-of-view, that's what we're sticking with.
And keep in mind, at the federal point, we're up against huge lobbies. So we've got to really have it be bulletproof to be able to make our case in those wonderful bureaucracies there. So I hope that answered you.
Rob Melnick: We have a reception outside you're all invited to. I wanted to also remind you about the table we have outside here for the Sustainability Solutions Festival. I want to thank Nancy for bringing Gary here. And please join me in thanking Gary again for his presentation.
Gary Hirshberg: Thank you.[APPLAUSE]
This presentation is brought to you by Arizona State University's Global Institute of Sustainability for educational and non-commercial use only.