Top Food Entreprenuers Dish 

on How the Business Has Changed

 BY BO BURLINGHAM  @BOBURLINGHAM

Honest Tea's Seth Goldman, Stonyfield Farms' Gary 

Hirschberg, and others debate what the food revolution 

has meant for culinarily inspired entrepreneurs.

 

 

 

Left to Right: Seth Goldman, Steve Hindy, Matt Salzberg, Danny Meyer.

Back in 1995, CEO Gary Hirshberg told Inc. about a "friendly note" on every yogurt container Stonyfield Farm sold that encouraged customers to contact his company. Today, the channels of communication may have changed--along with nearly everything else in the U.S. food and beverage industry--but the importance of tapping into consumers' experiences and expectations hasn't. Inc. discussed these makeovers with the industry's veterans and newcomers.

In a conversation with Bo Burlingham.

We hear a lot about "the food revolution." Has there really been one and, if so, how would you define it?

Gary Hirshberg: No question there's been one. When we started selling organic yogurt in 1983, nobody knew what we were talking about. I often say, we had a wonderful business back then; we just had no supply and no demand. But the world has changed. People want a high-quality product, whether it's in a restaurant or by a processor or from a farm. They want it produced by somebody they trust. And they are demanding transparency. One study shows 90 percent of consumers are choosing local, at least occasionally. It's no longer just in the top foodie markets like New York and San Francisco. Now, it's everywhere.

Danny Meyer: I think one sign of the food revolution is that people like us chose to get into this business. None of our parents would have said, "My son, the future lawyer, should really open a restaurant, or a brewery, or a tea company."

"It's not hard to start a company. But it's hard to scale, because distribution is so consolidated and shelf space is so limited."Seth Goldman

Myra Goodman: I look at it a little bit more from the consumer perspective. When my husband and I started Earthbound Farm in 1984, our choice to go organic really came from learning about the chemicals used in farming. We were just personally afraid to use these chemicals and eat food grown with them, and we didn't want to sell this food from our roadside stands to our consumers. People thought we were pretty crazy. But over the last three decades, people have become so aware of the connection between health and food. They realize you can really improve your health with your diet.

Ari Weinzweig: Yes, but remember, there are whole parts of the country that wouldn't know what we're talking about. Many of us live in a bubble. In our world, without question, people are much more interested in traditionally made foods and food that tastes better, and they don't mind spending money for it. The cheeses that were really high-end when we opened in 1982 are now supermarket offerings. The stuff we had back then that was pretty good, we wouldn't even carry anymore, because our market has evolved so much.

Steve Hindy: When I started selling Brooklyn Lager in New York City in 1988, a lot of people almost spit it out. They said, "My God! It's so dark and bitter. Why don't you make a beer like Heineken?" Today, Brooklyn Lager is considered a mainstream, entry-level craft beer.

Seth Goldman: I see people connecting the dots. They want to understand who's involved, all the way down to picking the tea leaves, and then all the way to the other side: What happens to the package? As Gary likes to say, "There's no such thing as 'away.' " So where does it go once it's done? We're now owned by Coca-Cola, and they have really embraced this change. They have to, because it's going to happen with them or without them. I don't think Coca-Cola is intrinsically a company trying to create more demand for organic beverages, but they're supporting Honest Tea's distribution and growth. As a result of what we're doing, when we become larger, we are helping to create more demand for organic beverages.

Weinzweig: Yes, and you have companies like Chipotle coming into the middle of the market. For fast food, it is very high-end. That raises the bar as well, which is great. I think people will continue to eat better food because it tastes better, and you feel better. The challenge is that most people haven't really experienced it.

"You can start a little brewery today, and everyone you want to reach will know about it before it even opens."Steve Hindy

Meyer: And remember that McDonald's owned around 90 percent of Chipotle at one time. I'm not sure Chipotle would otherwise have had the fuel it needed to become the independent company that has, more than any other company, changed what America expects from fast food.

Matt Salzberg: Food is just more fun now. You look at the Food Network and the rise of celebrity chefs, and food is a lot more aspirational, from a consumer perspective, than it used to be. Our customers at Blue Apron are actually a part of our product. We deliver recipes and ingredients, and then they cook at home. A lot of what we sell is that experience of cooking and being closer to your food and having fun while doing it, trying new things, trying new recipes, trying new ingredients. People find that variety to be fun, and I think that's also what's driving a lot of the innovation in food products. There's just greater interest in food than ever before.

How has the customer experience changed?

Meyer: People are interested in customizing their experiences in life, whether it's on a mobile phone with their apps or what they ask for in a restaurant. It's almost like, "Yeah, I see your menu, but here's how I'm going to eat." The whole experience has changed. It used to be that when someone reserved a table for four at 8 o'clock, you could expect four people. Today a table for four is really a table for eight: four people plus their cell phones, for taking photographs. It's almost unusual if people are not photographing their food and then sharing it in real time with someone else who is not physically present.

Hirshberg: I'm not sure how many people are photographing my yogurt, but there's no question that the consumer has shifted on us as well. People switch to eating more organic for two reasons: having children and having a health event, usually cancer, which is not a good thing but does work in the favor of organics. These shifts create opportunities. Look at Greek yogurt. It wasn't even here five or six years ago, and now it's 50 percent of the category. On the yogurt shelf and the tea shelf, we're seeing far more diversity, far more choice, and I think social media has had a lot to do with it. We producers are now able, without expensive market research, to get a sense of what our consumer wants, in real time.

"People will give you one shot. If it's not yummy, they're not coming back."Danny Meyer

Hindy: I agree that social media has had a huge impact. You can start a little brewery in the middle of nowhere today, and everyone you want to reach will know about it before it even opens.

Salzberg: Our business probably wouldn't have existed without social media. Blue Apron is an Internet business. We have a direct relationship with our customers every week. A huge percentage of our new customers come from referrals from friends, from photos on Facebook, from the constant communication that we have back and forth with our customers on our website. In the process, we're building up trust, which has been really important from a marketing perspective, because there's so much competition and so many choices. A lot of consumers now are looking for a curated experience, and that's one of the things that we built into our model. Every week we offer some choice and some preferences, taking into account people's dietary restrictions and the like. But for a lot of people, it's actually a liberating experience to say, "Hey, we trust your brand. We believe you will do a good job managing our refrigerator and helping plan our meals." The constant communication is one of the things that really drives the emotional connection and the affinity that people have for our business.

Meyer: Let's not forget that discovery has always been a huge part of the joy of eating. In the old days, if I discovered a dish I had never heard about before, I had to work really hard--without the benefit of a GPS or a language translator--to find the recipe somewhere, bring it back, and figure out how to get the ingredients to cook it the right way. Today, it's harder and harder to discover something that the rest of the world has not already discovered and broadcast via social media. That's a challenge to the people who are bushwhackers in the field. They take all the initial wind in their face and establish a brand, and the thanks they get is 25 upstart competitors who actually benefit from being new.

"There's just greater interest in food than ever before."Matt Salzberg

Is it harder or easier to start a food business today?

Hirshberg: Much easier. Most of us were thought of as crazy people when we started. Now, people demand the kind of craftsmanship we're all bringing to the table. And with social media, you can get the word out much more easily.

Goodman: The opportunities are there with social media, with people looking for the discovery Danny's talking about. Also, small companies are so much more agile, and they can create custom products. There are the people who have allergies or are sensitive to gluten and don't want to eat certain grains. There are so many custom diets that food companies can respond to and develop a little niche in. You also have big companies looking for entrepreneurs to do their innovation.

Goldman: I guess it's easier, but in my industry it's all about distribution, which is really challenging to break into. It's not hard to start a company. Today there's money, a lot of ideas and opportunities, but it's hard to scale, because distribution is so consolidated and shelf space so limited. We see a lot of companies get up and running, but then can't figure out how to cross over into profitability and scale their supply chain.

Hindy: The beer industry is different, though. Today, big beer distributors from coast to coast are very aggressively pursuing craft brewers, and that's a sea change. We had to distribute our own beer and a lot of other craft beers here in New York City for 15 years, because the big distributors wouldn't give us the time of day.

Salzberg: Before starting Blue Apron, I was in the venture capital business, and I spent a lot of time looking at people starting companies. It's without a doubt easier today than it's been in the past. Capital is available, and you need less of it to get started. Food is actually a little more capital-intensive than the typical business, but capital costs are coming down. And there's more risk taking in the work force. In the past, it was difficult to attract people to an unknown young company. Today, it's often an advantage for early companies, because people are excited to join you if they care about your cause.

"Over the last three decades, people have become so aware of the connection between health and food."Myra Goodman

Meyer: When I first got into business, there was a statistic that two out of every three restaurants would fail in the first six months. Why? Because it took at least a year for people to figure out that you were there. Today, you could get photographed looking at a vacant store and read that night on some food blog that you're opening a restaurant. That leads to the opposite problem for us. When we launch a restaurant, we are not nearly as good as we will become. So it's easier to launch, but there is so much early attention that you're at risk of exposing yourself more quickly than you like. Because people will give you one shot. If it's not yummy, they're not coming back.

Hindy: Beer drinkers were very forgiving to the first wave of craft brewers, who didn't yet have it right. Today, people know what craft beer is, what it's supposed to taste like. If it doesn't, they're not going to buy it a second time. So the bar's a lot higher for quality, but people keep pouring into this business. What's interesting is the success rate. If you take all the production breweries from Day One, 70 percent of them are still in business, and 50 percent of the brewery-restaurants are still in business. There will definitely be a reckoning one of these days, but I think it's going to take a while.