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Scaling Stonyfield Yogurt

| Wednesday April 18th, 2012 | 0 Comments

Gary Hirshberg and Duncan Mac Naughton chat onstage with Marc Gunther at Fortune Brainstorm Green

Stonyfield Yogurt is a hallmark of the sustainable business community. Founder Gary Hirshberg transformed a farm with seven cows into a national brand with products on store shelves throughout America. How did he get there? And what sort of challenges does a small company face when it comes to working with the big boys?

Gary Hirshberg and Duncan Mac Naughton, Executive Vice President, Chief Merchandising and Marketing Office at Walmart took to the stage at Fortune Brainstorm Green to share their insights with the audience.

“In 1983, we had a wonderful business, just no supply and no demand, no one knew what organic was, no one ate yogurt.” – Gary Hirshberg

The key to growing this brand was a focus on quality ingredients and customer engagement.

Product differentiation

Hirshberg was quick to share that the ingredients in his yogurt are much more expensive than those of his competitors, and he’s not going to substitute lower-priced inputs, because the quality of his product is core to it’s success.

“Our margins are 10 gross points worse than Dannon or Yoplait, but my net margins are better due to customer loyalty.” Customer loyalty means a massive savings on advertising because customers stick with the brand and sing its praises. The product sells itself.

“The flip side is that if we break that trust, we’re toast,” says Hirshberg. Because the business model is dependent on customer engagement, quality ingredients, and trust, if Stonyfield deviates from this path to make short term gains, the result will be a swift, strong response from customers that directly impacts the bottom line.

Customer engagement

Stonyfield uses a variety of tools to connect with customers – many of them based online. The company’s website has a detailed accounting of the ingredients in the products and how they are sourced. For the environmentally minded, the website also contains comprehensive analyses of Stonyfield’s environmental impact. Hirshberg and his wife both blog, as do a number of employees.

Customers can even watch videos of Stonyfield’s cows happily chewing their cud. Those who are local to the New Hampshire Headquarters can attend tastings and visit with the company’s representatives at community events large and small.

Stonyfield’s success is based on the passionate loyalty of its customers. It is, quite simply, what keeps the company running.

“The holy grail of consumer products is loyalty. We get there with transparency and sustainability in the supply chain. When you have an authentic supply chain and a real connection with farmers, customers will reward that transparency with loyalty.”

Hirshberg was even approached by a customer in the dairy aisle in a Florida grocery store. She didn’t recognize him – she wanted to tell him not to buy that other yogurt brand. She encouraged him to choose Stonyfield since it’s made with whole foods, organic fruit, and no strange shelf stabilizers. Sadly, he didn’t hire her to head up his customer engagement team, but he did send her a much-deserved pack of coupons.

Supply chain, scale, and working with Walmart

It’s quite a challenge to maintain that personal touch when your brand reaches national scale and the shelves of Walmart, especially since the big brand retailer is notorious for pressuring its suppliers to lower costs.

Says Duncan Mac Naughton,

“The key for us is creating access to great products, while being an advocate for the customer on affordable pricing. Good food shouldn’t cost more. The challenge for us is that it can. We manage that with scale and partnerships. Stonyfield is a premium brand. We’ll price it aggressively but appropriately for the values and the product quality.”

Walmart also looks at other opportunities to reduce costs that don’t lower the quality of the ingredients. “We work together in a transparent manner with suppliers to take costs out with logistical efficiency and packaging savings.”

What’s Next
Hirshberg recently transitioned out of the day-to-day management of Stonyfield to focus on other pursuits, but he remains the chairman of the board.

It’s a relief to see that one of those pursuits will be using his considerable experience to teach others how to successfully run and grow businesses that are sustainable to the core.

[Image credit: Stuart Isett/Fortune Brainstorm Green]


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