By Gary Groff
The organic and Fairtrade food company Alter Eco has boosted revenues by more than 40 percent annually, from $7 million in 2012 to a projected $14.5 million in 2014 — while actively advancing its mission. How did the company do it?
A key factor for any sustainable business is getting financing right. That means not only choosing the right mix of financing — equity, debt, nontraditional alternatives — but also choosing funders that understand opportunities in your sector and support your mission. The following examples show how three mission-driven companies that have used this strategy successfully.
For example, Alter Eco buys cocoa for its chocolates from the Acopagro Cooperative in the Peruvian Amazon, paying a Fairtrade price plus a premium directed to meeting community needs, such as medical coverage for farmers. Alter Eco also supports the co-op’s reforestation projects: Along with several other companies, it has helped finance the planting of 2 million trees and expects to help fund 8 million more in the next five years. As a result, Alter Eco can claim carbon-negative operations.
Alter Eco’s business model carries costs that other packaged food companies don’t face, and that added to its start-up challenges. For the first two years, Rollet and CEO and co-founder Mathieu Senard lived and worked in a one-room San Francisco apartment, with a couple of beds beside their desks. The company grew with investments from individuals and social enterprise funders Good Capital and Renewal Funds, which were as interested in Alter Eco’s mission as in its business prospects.
When the company broke even, it obtained asset-based debt financing from New Resource Bank, which has helped Alter Eco to pay quinoa farmers at the time of harvest and to buy raw materials for its innovative compostable packaging. Additional debt financing from New Island Capital, a values-based investor focused on community and environmental sustainability, is also funding increased quinoa purchases. Alter Eco expects to maintain its growth pace over the next few years.
Since 2002, Blue Bottle Coffee grew from one man roasting coffee in a converted potting shed in Oakland and selling it at farmers markets, to seven Bay Area locations, six in New York and more cafes under development.
“It’s nice to have a plan, but I didn’t,” founder and CEO James Freeman told the audience at a New Resource re:think event last year. “I meet people who are so into their plan they lose their product. We just grew every year. We do a lot of things that spring out of my desire to have them.”
People organized around a clear purpose is one thing that allows spontaneous ideas to take off successfully. Challenged by his managers a few years ago to come up with a mission statement, Freeman boiled it down to three words: deliciousness, hospitality and sustainability. “Any question that comes up we can basically answer by appealing to those words,” he said.
Another key factor: “The investors and bankers I’ve chosen to work with haven’t said, ‘Well, James, you have to open 6.2 stores in the next year,’ and put me in a position where I had to do something that didn’t feel right.”
Veritable Vegetable is a trailblazer in many ways. It was founded in 1974 as a worker collective — a part of the People’s Food System, a group organized to create an alternative food system. Over its 40 years as a dedicated distributor of high-quality organic produce, the company has helped drive demand for organics throughout California (and parts of Arizona, Colorado, Nevada, New Mexico and Hawaii), influenced organic certification standards, advocated for sustainable food and agriculture legislation, and advised other organic distributors on successful business models.
Veritable Vegetable’s revenues have grown from $45,000 in 1975 to close to $50 million in 2013, and it now serves a network of more than 600 farms, grocers, cooperative markets, restaurants and schools.
The company’s original credo, “food for people, not for profit,” is still core to its operation and translates into transparency in pricing, ethical business practices and wages, support for local food banks and wellness programs, policy-reform advocacy, and other sustainability initiatives. For example, a 2007 loan from New Resource allowed Veritable Vegetable to expand production capability while conserving energy with state-of-the-art cooler systems, heavy-duty doors and specialized lighting. A 2008 loan funded the solar panels that now supply 70 percent of its energy.
Veritable Vegetable also applies its mission standards to choosing financial and other business partners, said Daria Colner, director of marketing communications. “We make business decisions based on our values and take a long-term partnership approach to our business relationships.”
While each of these companies followed a different growth path, there is a common theme here: They’re all guided by a clear, powerful vision, and they all found funders who share their vision.
Gary Groff helps sustainability-oriented businesses obtain growth capital and make key connections. An avid surfer and environmentalist, he’s senior vice president of commercial banking at New Resource Bank and has worked with Alter Eco and Ritual Coffee, among others. Learn more about New Resource and its planet-smart banking at: www.newresourcebank.com.