Emerald Group Publishing Limited
Copyright © 2009, Emerald Group Publishing Limited
Think green: rapid growth in the hi-tech baby-carrots business
Article Type: 2009 ASP Conference report From: Strategy & Leadership, Volume 37, Issue 4
Jeff Dunn, President and CEO, Bolthouse Farms, “Transforming Pain into Performance and Purpose” – a keynote presentation at the eighth annual conference of the Association for Strategic Planning in February in San Diego, California.
The case of Bolthouse Farms (BHF) shows how a combination of “green” mission and operations and a culture that supports them can produce dynamic growth. BHF began as a family farm in 1915 in Grant, Michigan and is now a $750 million business, achieving record growth in each of the last five years. Madison Dearborn, a private equity firm specializing in leveraged buyouts of privately held or publicly traded companies, bought BHF from the founding family about three years ago for $2 billion in a leveraged buyout. Three core concepts guide BHF’s growth – building an ambitious future, building a sustainable future, and leadership consciousness.
Did you ever wonder who plants, picks and packages all those plastic bags of baby carrots? BHF is the fastest growing carrot producer in the world and one of the largest. Searching for an ideal location for the business, in 1952 it selected a farming area in the San Joaquin Valley near Bakersfield, California, which had the proper soil, skilled labor, plenty of water, and a warm year-round climate. Between 1985 and 1997, US per-capita consumption of carrots doubled from 9 to 18 pounds per person; in dollar terms, the company grew tenfold because of the value it added and because its Bakersfield location enabled it to farm carrots year round.
The baby-carrot business is a duopoly with numerous smaller competitors – BFH, which sells to companies like Green Giant, owns a 55 percent market share. In recent years, under the guidance of André Bolthouse, a third generation member of the founding family, the company’s line has been broadened to include carrot juice and other products such as salad dressings, smoothies, protein drinks, 100 percent fruit, vegetable, and blended juices, functional-health drinks, Acaí-berry drinks, and a premium refreshment line. The company today is organized into four divisions – juices and smoothies, fresh products, ingredients that go into other products, and logistics. The company’s operations are supported by world-class R&D, quality assurance, agriculture operations, and plant operations.
The company has built a fully vertically integrated business. It grows all its own crops, and picks, processes, packages, and distributes them. It loads produce directly on to rail cars. Rail transport has saved 2.4 million road miles of distribution (keeping the planet greener).
Exhibt 1 shows how BHF has slowly overtaken the industry leader, Odwalla, in the US super-premium juice market, by volume sold. Odwalla is owned by Coca-Cola and Naked by PepsiCo; POM is dominant in the West.
BHF’s agricultural operations plants seeds automatically by machine in circular patterns that use high-efficiency pivot-watering systems, fertilizer is applied in precise quantities, and crops are harvested automatically – picked, separated, sorted, inspected, bagged, and shipped. A carrot, for example, takes a mere 24 hours to go from field to a bag in a store. This highly automated process runs continually – 24/7 and 365 days a year.
BHF’s sustainability mission is “to enrich life in the present and enhance the ability of future generations to meet their needs.” In practice this leads to policy decisions such as, the company will not outsource to China because apples are picked there by children. BHF’s ultimate vision is “healthy foods and beverages from field to you with net zero footprint and sustainable benefits to all stakeholders.” The company’s innovative irrigation methods use 20 percent less water and are monitored by remote control. Irrigation pumps that water the fields and motors used in pivot irrigation are solar powered. And carrot tops and peelings are used as cattle feed instead of being discarded. Every part of the carrot is used to make useful product and less energy and resources are used to produce and ship them. The company is also committed to using recyclable packaging – including the plastic bags – for all its products.
The last of the three core concepts for the company, leadership consciousness, really addresses how to think about change. It includes:
Strategic integration of innovation (having one innovation directly affect all parts of the company) and creating critical work streams (programs) that support it.
Believing in the creative capability of employees.
Grooming the next generation of leaders to share key company values.
The inherent presence of (“being bracketed by”) values and culture.
The company’s success is proof that using sustainability methods is not only good for the environment, but increases shareholder value by reducing costs. The firm’s decision-making is driven by its values and three categories of goals:
Environmental – being good stewards of the planet and consuming less resources.
Financial – keeping costs down, making profits, using assets productively, and reinvesting in the business.
Social – serving the needs of its stakeholders, including its customers and employees.
Stan Abraham(firstname.lastname@example.org), Professor of strategy and entrepreneurship at Cal Poly Pomona and a Strategy & Leadership Contributing Editor, has reported on the annual Association for Strategic Planning conference for S&L every year since 2001. He is the author of Strategic Planning: A Practical Guide for Competitive Success (Thomson South-Western, 2006). More coverage of ASP’s 2009 Conference, Planning for a Sustainable Future, will appear in a future issue.