“The jury’s still out.” That’s what Gary Hirshberg, CE-Yo of Stonyfield Farm, said in "Food, Inc.", about the buyout of smaller, green-minded companies by big food companies with few environmental creds. Gary said this after Stonyfield, an organic yogurt company that gets all its milk from family farmers, had itself been bought up by French food giant Danone.

Gary’s statement stayed with me — so when I got to meet Gary at the 2010 Natural Products Expo West earlier this year, I had to ask Gary if the verdict had come in yet [Full disclosure: Stonyfield sponsored my trip to BlogHer '09]. After all, that scene in "Food, Inc." had actually been filmed during a Natural Products Expo West a couple years earlier, and quite a few more buyouts had happened since then as the natural and organic food market quickly expanded.

Watching "Food, Inc.", I had thought Gary was still trying to evaluate his decision to sell his company to Danone. But when I asked Gary about his quote, Gary clarified he was actually referring to other corporate buyouts, not his own company’s. As for Stonyfield, “The verdict is in — it’s been a great deal,” Gary said.

Why? For one, while Danone owns about 80 percent of the company, Gary still has 60 percent majority control. That means for the most part, Gary makes the decisions.

“They [Danone] have controls over three things. Otherwise they have no say. I set agreed-upon growth and profit targets that we both agree to. I agreed that I wouldn’t expand into any other segments other than yogurt without their approval. And also, any capital improvements over $1 million, I need their approval. But otherwise, I’m free to do whatever I want.”

Plus, before Danone’s investment, Stonyfield had 297 shareholders. About 100 of these were employees, but the majority were friends, family members, and other people Gary knew well — some of whom he had near-begged for money when Stonyfield was going through tough times. “I needed to get them an exit,” said Gary.

Danone’s investment didn’t put money into Stonyfield, but bought out those shareholders — and also gave Stonyfield the knowledge to make its business more efficient and to launch in other countries. Education went both ways, with Stonyfield lending Danone its carbon metric for measuring its environmental footprint, and showing that working on reducing methane emissions can also mean healthier cows who produce more omega-3 rich milk.

While allowing Gary to retain majority control of the company may seem “anti-capitalist,” Gary says Danone’s decision not to interfere is a good business practice because “they don’t really understand our business model.”

“They don’t really know anything about organics. They know about yogurt, but we have a much more expensive product than them. And while we charge more than them, I can tell you my gross margin is much, much poorer than theirs. Organic milk costs 70 percent more than conventional milk. I can’t charge 70 percent more for a cup of yogurt. Organic sugar can be at times a 100 times more than conventional …. But yet my net margins are actually the same as or better than theirs, at bottom line.”

For Gary, working with big companies is an imperative, because change needs to happen now to combat climate change, pollution and other environmental concerns through business. “The happy news is that we’ve got a 23.5 billion [natural and organic food] industry. The sad news is that we’re 2.6 percent of total U.S. food,” Gary said. “If we’re going to make the change that we need to make in the time we need to make it … then we need to work with these companies because they’re not going to go away.”

“The real reason I did this deal was because I wanted to take this to the next level. They [Danone] are out there feeding obviously a lot more people than we are, and what I’m trying to do is show other companies — the acquirer and acquiree — that everybody can win.”

Of course, Gary’s quick to point out that many of these business deals are not win-win situations. In fact, he considers Stonyfield’s deal with Danone uniquely successful. To that end, Gary’s often called to consult with both green companies and large food corporations about pending mergers and buyouts.

Corporate buyouts of smaller green companies may leave you enthusiastic, hopeful or skeptical, but Gary’s perspective on using business to elicit environmental change is certainly one worth thinking about. For more of Gary’s thoughts, watch "Food, Inc." if you haven’t already, or pick up his book, "Stirring It Up: How to Make Money and Save the World."

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