Three founders of mission-driven companies — Adam Lowry of cleaning-products company Method and, more recently, of nondairy-milk company Ripple Foods; Mandy Cabot of Dansko shoes; and Kirsten Tobey of school-lunch provider Revolution Foods — share what they see as the best goals for growth, both of their companies and of the movement of impact businesses.
What follows are their responses to questions posed by B the Change Media CEO Bryan Welch during a panel on “Leading Toward Growth” at the 2016 Best for the World Gathering at the University of California, Berkeley. Prefer to watch? The full panel video is available at our Best for the World Photos and Videos page along with more about all of the Best for the World honorees.
Leading Toward Growth
Bryan Welch: It’s extremely exciting to be in the same room with you all and to be in the same room with our first set of panelists, including Adam Lowry, Kirsten Tobey and Mandy Cabot. … Mandy Cabot is co-founder and CEO at Dansko. Mandy, you started Dansko with about $7,500 of your own money.
Mandy Cabot: Correct.
Welch: Grew it to be about a $150-million company, give or take. … Mandy is one of the most extraordinarily genuine, authentic and lovely people that you’ll ever meet and you should sidle up to her if you get a chance at the social gathering later, because it’ll payoff for the rest of your life. It has for me.
Kirsten Tobey. Kirsten is one of the two founders of Revolution Foods … co-founder and chief impact officer at Revolution Foods. A Catto fellow at the Aspen Institute, former consultant to the McDonald’s Corp., so she’s back from the dark side. Has an MBA from this joint. She also teaches at The Food Business School, which is part of The Culinary Institute of America.
Adam Lowry, hero of mine for years, one of the geniuses behind Method, maybe the most revolutionary design-based retail product company of my lifetime in a lot of ways. I find myself carrying my Method soap container around the house, because it feels so good in my hand. It’s a really extraordinary thing. … You’re also a Catto Fellow at the Aspen Institute. Co-founder and co-CEO of Ripple Foods, a public benefit corporation that makes dairy-free drinks. He was the co-founder and longtime chief greenskeeper of Method. Before that, he was a climate scientist at the Carnegie Institution for Science. He has a B.S. in chemical engineering from that other school over in Palo Alto. Also a 2013 Clinton Global Citizen Awards winner, another really small select group.
Lovely to be with you all. I thought that the three of you would be ideal people to talk about scale. … It’s an assumption, an easy assumption, that the faster your business grows, the more wonderful everything is. You all have, all three, experienced extremely rapid growth in business … at times it might have even been sort of mandated to create extremely rapid growth because of your financial structures. I think for this audience what might be very interesting is to talk about the ups and downs, about the pluses and minuses, your personal experiences, and what scale of growth has meant in your career, your life and in your legacy in your businesses. Mandy, you didn’t have financial backers who were demanding growth, but your business took off like a rocket. What was that like and where did that lead you?
Cabot: Our business plan was really simple. It went something like this: If you’ve got something great to share — in our case it was what we believed to be the world’s most comfortable shoes that we found in a tiny shop in Denmark — if you’ve got something great to share, you share it, and if in the sharing you could reinvest in more to share, you do that, too, and the gift just keeps on giving. We started out giving pairs away [then] realized that wouldn’t be a very long-term, stable business model. We went to the manufacturer in Denmark, asked for … exclusive rights to distribute … started selling shoes to our friends and family, and it grew and grew and grew. With every year of growth, we reinvested back in the business.
Welch: What do you mean you sold them to your friends and family?
Cabot: We were professional horse trainers at the time. We were living a dream life. We didn’t intend to start a company. We found ourselves joyously pregnant with the opportunity as it were. When people talk about their businesses growing organically or serendipitously, we were certainly in that category. We were definitely standing squarely in the way of an unexpected opportunity, and we jumped on it. We knew something about importing — we were importing horses and horse-related gear and hard-to-find things and apparel for equestrians — and the shoes were what we believed were the perfect barn shoes. We started out that way, got rather quickly into the wholesale side of the business, but every year we literally put the profits that we earned back into the company for extended growth.
We reached a point in about 2005 when our mom-and-pop-quirky-startup-homeschool-your-kids kind of model was close to expiring, and I had a crisis of confidence, actually, that I could take it to the next level. We were at 100 employees and 100 million in revenue and I don’t know what they teach here but …
Welch: The homeschool model didn’t wear out for you until you were $100 million in revenue?
Cabot: Yeah. That’s right.
Welch: Wow. That’s a big.
Cabot: That’s that magic threshold beyond which entrepreneurs are destined to fail, right? That’s what they say. I bought that hook, line and sinker, and this was again mid-2000s, and there was a lot of merger and acquisition activity going on. We were courted by some of the biggest in our industry, and after 10 months of due diligence and within hours of signing a deal, I thought, “Holy crap! I am selling my baby down the river because I as a birth parent don’t know how to raise her? How lame is that?” I figured this was definitely not in the plan; this was not our destiny. We didn’t grow the business to flip it. We grew it because we loved it and we loved it like our daughter, so we needed to figure out how we could set up a succession plan for the business so that in an ideal world it would live beyond our lifetimes. We became 100 percent employee-owned and a Certified B Corporation, a founding B Corp, and that set us up with institutionalizing our values.
Welch: Wow. Kirsten, does your company feel like your baby?
Kirsten Tobey: It does, yeah, in many ways. My business partner Kristin and I met here at Haas and started the company right out of business school, literally at the same time that she was birthing her first child. She went into labor in one of our investor pitches in the early days. That investor actually now works very closely with us and is on our advisory board and actually runs The Food Business School: William Rosenzweig.
Welch: He’s not the godfather of the child?
Tobey: He considers himself the godfather of the company and the child, and we do, too. We literally started the business at the same time as starting our families. I had my first baby a year after we started the company. In many ways it’s felt like we’ve been sort of raising the company at the same time as raising our families. I think the idea of scale in the company has always been in the DNA of the idea, and the idea that we came up with when we were in business school was that we believed that every child in this country and every family deserves to have access to high-quality food. We realized that in many neighborhoods, in many cities and many communities, that’s not the case. We set out at first to make sure that in schools, healthy, high-quality food was just as accessible as the lower quality, less healthy food. We really set up our business model to be able to serve those kids who have the least access to high-quality food.
It was a very large scale idea. We couldn’t just do it in our backyard in Oakland or in the Bay Area. We really, from Day One, as we thought about the business, thought about how do we get this to every child in the country? I think for us that mission is what drove the kind of investment that we sought to then go out and raise the money, because we didn’t have money to start the company. We were in negative money territory when we graduated from business school, you know, in debt, and so we needed to raise money to get the capital to get the business off the ground. We looked for investors that would sort of match our vision and values with their dollars and say they wanted to invest in this idea and in this mission, not just in the idea of a return on investment but in the idea of putting some money to work to make an impact on the world and make an impact on kids and families.
… I guess one of the things that that did is it enabled us to scale quickly. We were able to access capital, to bring investors on board who were willing to support us and not being profitable initially so that we could continue to grow and invest in growth and invest in expansion and invest in impact. Then profitability would come later on, once we reached a scale that could get us to profitability. And that’s intrinsic to our business model … that scale is actually a very important element of our profitability equation, because we’re a low-margin business. Having investors whose values and vision matched our values and vision was incredibly important to be able to bring it all together and create a business that would be able to impact kids in our first year in a few schools in Oakland.
Now we’re serving schools in 14 states, and about 2 million meals a week are going out from our culinary centers to kids in largely low-income schools. About 80 percent of the kids that eat our meals every day in schools qualify for free lunch, and now we serve breakfast, lunch, after-school snack, after-school supper for kids that are staying for extended day programs.
Welch: Can you give us an idea of the speed of revenue growth?
Tobey: We started in 2006 and we had zero revenue. … This year we’ll be about 130 million in revenue. … The other piece of scale that’s been really important to us that we’ve worked on a lot more in the last few years is making sure that our products aren’t just accessible in schools, but that we’re also now in grocery stores with our retail products and really trying to solve this real, day-to-day challenges of busy families — taking ourselves as the first and foremost busy families that we know, really making solutions that moms and dads and caregivers can use in their households to make high-quality, healthy food quick, easy, convenient, affordable, and accessible and delicious for kids and families. We’ve expanded now into the retail world as well as the school world, so now we’re building both sides of the company to reach a meaningful scale.
Welch: What a great story. Any of your investors or former investors godparents to any children or anything like that Adam?
Adam Lowry: No. Arm’s-length, but a good way.
Welch: When you started Method, was the idea to be as big a thing as it has become?
Lowry: Well, I think scale is really important to what we’re trying to prove out. Your premise that you opened up with about business being a powerful agent of creating this more sustainable world that we want to live in, it was actually one of the big reasons why I made the transition from the scientific community to being an entrepreneur, and I believe very deeply in that. I also think that we’ve got a lot of work to do, to mainstream products, services that are inherently more sustainable, more fair, more fill-in-the-blank. Within the cleaning category, specifically where Method operates, about 4 percent of the products are the “green products,” which means that 96 percent of them aren’t. That’s the problem. I think most of the green business community focuses on the 4 percent because that’s the loud minority and they’re passionate and they’re advocates and that’s great. You can build a reasonable small mid-business doing that; that’s just not what I’m interested in doing.
I’m actually interested in getting the other 96 percent and bringing that sustainability to the mainstream through better product experience. Better can’t be just sustainable; it’s got to be the other things that make a product better, which in a cleaning product is the way that it cleans first and foremost, how it functions within your home, all that … the design, of course.
Welch: Sensuous bottles.
Lowry: That helps, and then within the non-dairy milk space, the reality is that the products … if you want to go non-dairy, you’re sacrificing nutrition and the taste and experience of milk massively right now. We’re doing very much that same thing with Ripple Foods by creating a product that’s got eight times the protein of an almond milk, it’s much creamier and more delicious, and so focusing that on how do we bring that towards the mainstream? We’re very focused. Method was and still is. My new business, Ripple Foods, is very focused on how do we build scale behind this because that’s what amplifies the impact, in fact, creates the ripple effect. Now you know where the Ripple brand name comes from, the effect we’re trying to have on business at large as well as at the individual level with our products.
Welch: I think everybody in the room … what we do want to do, is carve off great big pieces of that 96 percent. That’s why all of our businesses exist, to some degree or another…. What’s the linchpin? You described a sort of holistic, overall, high-quality product. … Do you think there’s one quality or another, one aspect or quality or another, that’s most important for the big market?
Lowry: I look at things from a product lens … from a product standpoint. I think that the sustainable products world is kind of coming a little bit full circle back to what’s always been important with products, and that depends a little bit on category. If you’re in the food space, taste is absolutely No. 1. Price is always a factor but there’s other things: nutrition and all of that. Our businesses are trying to create more demand and desire for things that are just a lot better for the people that are eating those things, as well as the manner in which those things are made, and are a lot more sustainable than the alternative products. What is creating demand? … I think the sustainability of a product is just another aspect of its quality. That’s it. I don’t believe in sustainable marketing; I don’t believe in any of that stuff.
I think that you’ve got to make a product that’s better, and in 2016 one of the aspects of better has got to be the sustainability of those products. Most consumers, it’s somewhere down the list, on how important that is. In the way that you market a brand or try to feed demand, you’ve got to figure out where you toggle that in the overall message of the brand. Ripple Foods, for example … it’s basically 10 times better on a carbon- and a water-basis than current almond milk or soy milk or dairy. It’s way better on those aspects. The way the brand’s positioned is dairy-free, as it should be, which is high in protein, lower in sugar and really delicious.
There’s nothing about sustainability in that brand positioning, because those are the things that matter. Now, the sustainability story is something that there’s lots of ways you can bring that forward … lots of different ways that you can toggle that as a part of the midst of how you build the brand and the desire for the brand. There’s a difference between making it a part of the quality and making it the primary position.
Welch: Is marketing your product, where Kirsten is, very different, because really you’re marketing, in a lot of cases, to government, aren’t you?
Tobey: We are marketing, really, to school decision-makers, and so that depends what kind of a school we’re talking with. We work with a lot of charter schools; we work with a lot of public school districts. The decision-making structures in those entities are very different. I wouldn’t exactly call them government. A superintendent you might consider a government official, but that’s kind of the highest level, or a school board in some cases. In many cases we’re talking with the business leaders of a school. It’s the CEO of a charter school network, or it’s the CFO of a school district, and they’re like a consumer. They’re looking at price, they’re looking at service, they’re looking at all these different things, and the product quality is essential, also, but it’s not always the No. 1 thing.
We all often have to educate the buyers that we’re talking to in schools about the benefits of healthier, fresh food coming into the back door. Because in many cases, in some cases, it’s a more difficult program to operate for their operators, for their cafeteria workers, for the people running the point of sale. If you’re having to keep things in the refrigerator instead of the freezer, there’s spoilage. There’s all kinds of different operational pieces that a school decision-maker has to wrap their head around in order to come on board with our program. That’s where we’re in sort of a product and a service business, where our product has to work, kids have to love the food, it has to taste great, but the service is the price of entry for us.
If our products aren’t fully reimbursable under the federal government codes, if they’re not delivered on time, if they don’t come with the proper paperwork and analysis — from a school’s perspective, the product won’t work, even if the kids love it. There’s a careful balance of having the product be amazing and pleasing to the kids and they have to eat it, but the customer relationship that happens with the school decision-maker has to be our No. 1 priority all the time, to make sure it’s operationally feasible.
Welch: It’s interesting: You really haven’t mentioned social or environmental impact at all, in the marketing strategy for your company. It’s obviously about the things it’s always been about.
Tobey: Yeah. For us it’s always been about high-quality, fresh food. Nutrition and food quality in terms of taste and the preferences, making sure we’re appealing to kids’ preferences, always has to be No. 1 for us. Because if the food doesn’t get into a kid’s belly, it’s not going to have the impact that we want to have, and the impact that we want to have is to build healthy eaters from a young age. We see that as having a long-term, social environmental impact in the world. Because if you raise kids who are going to be choosing fresh, high-quality food throughout their lives, and learning to cook that when they get older and serving it to their families, they’re going to have much lower rates of obesity, diabetes and heart disease and all of those things that will come back to haunt them later in life if their eating habits don’t start in a really positive way in their early days.
Welch: How important is that impact to you or to the decision-makers?
Tobey: In the 10 years that we’ve been operating, it’s become more and more important. … If I think about the conversations that we had with school leaders 10 years ago, there’s been a mindset change. I think some of this has been because of the leadership that Michelle Obama has brought forth around really acknowledging that what we’re serving to kids in schools does matter. Ten years ago, we talked to a lot of school leaders who were really focused on their financial impact and bottom line of the food that they were serving, and they weren’t thinking about the impact it was having on kids. Now we see superintendents who make it their leadership position that “I’m going to change the quality of food in my school district.” You didn’t see that 10 years ago. It’s become a hallmark of leadership for superintendents. Look at places like San Francisco and Newark and others; Chicago has had a lot of focus on this.
Many of the big school districts have actually started making this a part of their overall proposition as a school system, and it’s because they’re starting to see the impact that food has on their kids. It kind of bubbles up from teachers, right? Teachers that are saying, you know, “My kids are coming in at first-period class with bright-red fingertips because they’ve been eating Hot Cheetos for breakfast.” That has an impact on their ability to learn, and those connections are finally being made. … Then also just in the public perception that it’s become OK for parents and principals to look at food as a part of their overall educational program.
Welch: What I hear Adam and Kirsten both saying, I think, is that you both launched companies personally motivated by having a big social and environmental impact — through the way your companies work, through how they build product ingredients, in all kinds of ways — but you were prepared for consumers to sort of catch up with you. You were prepared to market your products and services on the basis of fundamental quality, traditional definitions of quality, and to scale on that basis, with that kind of marketing assumption — even though your personal motivation had a very different color.
Lowry: Yeah. In a lot of ways, it’s sort of a back door to creating a much more sustainable product universe. It would be a mistake to assume that everybody has the same motivations in their purchasing habits that we do or the people in this room do. You do that, you’re preaching to the converted, and what we’re trying is get more people into the movement. If you have that lens and your goal is change on a big scale, you’ve got to speak the language that the people you’re trying to get are speaking, and that is not the language of sustainability. … The role of management, the role of leadership is to make sure that our business’ interest is aligned with that consumer’s interest, and the interest of society and the environment, so that as you grow within that segment.
We’re doing our job as leaders that it’s good for their health, it’s good for the health of the environment, and it’s good for, of course, the bottom line. Because ultimately what we’re trying to do is prove that businesses like this in a financial sense are a much better investment than businesses that aren’t doing these types of things. That’s what’s going to accelerate the pace that we’re moving towards a more sustainable world.
Welch: Would Dansko be a bigger or a smaller company today if it hadn’t been a founding B Corp, if it hadn’t been founded on a sense of deep commitment to social and environmental impact? Do you have a sense of that, Mandy? Was that important to your marketing? Did it ever cause you to choose smaller scale in any case?
Cabot: Well, growth as I said for us was both organic and serendipitous. It was never purposeful. I thought about really what drove us, what drives us. I had a period where I had to really look inside and think, “Well what drives me? Why am I making these crazy trips abroad and developing shoes?” … I kind of had this epiphany. … I’m the fourth of five kids, my parents were very busy, and we had to grab whatever little bit of parental attention we could get. I wasn’t the joker and I wasn’t the rebel. I was the good one. I was the one who wanted to be loved, who wanted to be worthy of love.
I think about Dansko’s mission, which was really my mission, and that was to be our stakeholders’ favorite company. You play that out, and that means we’re not the only shoes in our customers’ closets, but we’re their favorites. We’re not the only company that our employees will ever work for, but we’re the most rewarding. We’re not the only shoes on retailers’ shelves, but we’re the vendor they most like to do business with. … Our goals were not quantitative. They were all qualitative. It was about quality of life. It was about the emotional connection that we had with a whole constellation of stakeholders. Through that, by wanting to be loved and their favorite, in the one hand you think, “Wow, is that narcissistic or self-serving or naïve?” It was for us.
Welch: Business people should never ask themselves those questions. It just leads us astray.
Cabot: It was very good distance for us. … It kept us on the straight and narrow. I must say, though, that when we turned 21 — I think of Dansko my baby as my daughter, so she came of age literally — that’s when we converted to 100 percent employee ownership. It was like she woke up and looked around and said, “Oh my God, I’ve got to be an adult now, and I have to look like everybody else out there and behave like everybody else out there and mind my Ps and Qs. I can’t be my rebellious young self.” That really changed things for us. We started looking very much at the bottom line. We now had real shareholders, not just myself and my husband. We had employee-owner shareholders. I thought, “This is going to be so great. I’ve got 150 employees that can now live over the shop with me and spend sleepless nights with me and take all my worries and make them less,” but in fact, quite the opposite happened.
I felt like I now had 150 families to worry about, and their nest eggs, and that was really tremendous pressure. … We took on outside debt for the first time in our history to kick start the ESOP (employee stock ownership plan) transition. We had people looking over our shoulders that were never looking over our shoulders before. When we were a mom-and-pop, all we had to do was make sure everybody was happy and looking forward and marching to the same drummer, and everybody got their Christmas bonuses, and life was good. We could ride out the tough times because no one was the wiser, but as an ESOP, everyone was the wiser. We had to come back, circle around and remember again, “Why are we here?” We are here to improve the quality of life of everyone our business touches. It wasn’t for us about scale; it was entirely about quality of life.
For me personally, I rather like being this size. At the end of the day it’s about how do you feel at the end of the day? We feel pretty good. We feel challenged and energized. We feel like we’ve made a difference in our employees’ lives, certainly, and in our consumers’ lives and our supply chain up and down. For us, that’s what success means.
Welch: Very good. Beautiful. That makes it for a very good final question for Kirsten and Adam then. For your success, is there a way of finding that and is there a scale that, once achieved, would be a metric for having sort of made it, based on your business plan, Kirsten?
Tobey: I think it’s a hard and an easy question to answer because I think that for us the goal has always been to make sure every child and family in America has access to high-quality food. Until that moment, I don’t think we’ll feel 100 percent successful.
Welch: How many children is that?
Tobey: It’s a lot. It’s over 50 million kids, but we’re now concerned with entire families, and so now we sort of think about the population of the U.S. Then, of course, once you start thinking about the population of the U.S., you can’t help but then think about the world beyond the U.S. We do stay pretty focused on this country, especially in our schools program, that’s very tied to the federal subsidy programs and federal support programs. I think that’s why we keep running as fast as we do and we keep building and we keep growing. … Everywhere we turn, there’s another city that wants us to come in and serve their schools, or there’s another opportunity that we see to solve a real family meal challenge. … That could sound a little bit like a treadmill, like we’re never going to get there, but I think it’s very contrary to that. It always feels like we’re so motivated to come back to work the next day, because there’s still so much more to do and so many more kids to impact.
Welch: What I’m hearing is, if your business plan is to make the world a better place, that you never really run out of track. Adam, is there a scale? Is there a number?
Lowry: Well, I certainly agree with the premise that we’ve got a long, long way to go. I think we’ll be working on it, all of us, for the rest of our careers anyway. … I think maybe what I’ll do is share a quick story that I think is an example of heading in the right direction. … Method was a venture-backed business started in 2000; we sold the business in 2012. Those investors made money. They actually made a lot more money than they would have had it not been a business that operated the way we did. Probably most importantly is the most significant achievements of Method in a market standpoint and a sustainability standpoint, especially, have come after the sale of the business.
After the sale of the business, we became a Delaware benefit corporation; we were a certified founding B Corp before that. … We started to self-manufacture and built what is, by objective standards, one of the best examples of sustainable manufacturing anywhere in the world. That happened after the sale of the company. The final chapters of that business are a long way from being written, but I actually think that that is the point. We’ve got to have more businesses that go through the very stages of scale, and by the way ownership, because that will change. It happens and you’ve got to plan for it and become better businesses over time — not just maintain or not just, “Things get eroded if you get bought,” the old cliché. I think that’s what we’re working for. I think that’s a decade-old time frame, and we’ve got to stay focused on those things to be able to achieve the sort of state of the world and the state of business we want to see.
Welch: Amen. Well said. Thank you. Well, thank all three of you. I’m afraid we’re out of time. This feels like a conversation that could go on all day and I would enjoy it, but we are out of time, so thank you so much.