An Interview with Bob Stiller, CEO of Green Mountain Coffee Roasters
Ann: Green Mountain‘s story really struck me — here they were working with the farmer in South America, teaching these farmers to grow organic, and to grow premium products, so that they could sell their product at a premium price, aka margin and profit, in a premium market. And it struck me that you rarely see a brand company or a manufacturer working with their suppliers and teaching the supplier how to make more money and profits. Lately, with the “Wal-martization” of the universe, it’s all about squeezing money out of your supplier –another 2% or 5%. Bob heads a company that exemplifies social responsibility (ranked #5 on Business Ethics Magazine’s List of Best 100 Corporate Citizens, 2004), sustainable practices, which expands the supply chain definition and has double digit growth!
BOB STILLER: Coffee is the second largest commodity in the world. There are 25 million families, maybe 100 million people that are directly involved in the growing of that, and there are millions more when you consider the transportation, the manufacture of equipment and so on. It has certainly fluctuated over the years, and has been a real crisis for a number of people trying to make a living with that.
Ann: So, how did you get started in the Coffee business?
BOB: We started in ’81. I had sold another company, I was in a coffee shop, I had a cup of coffee, and I really wasn’t much of a coffee drinker, but it was such a great beverage, I got into coffee.I grew up with my parents doing the instant coffee thing, and it was just not the same thing as a really quality coffee beverage. We started as a local shop that was roasting fresh quality coffee, which expanded into many different channels. We roasted the coffee. When you roast the coffee, that really is what imparts the taste to the coffee. And we really tried to roast it to a degree that really highlighted the difference of flavors from a Columbian coffee to an Indonesian to an African coffee. At the end of the day, coffee is a very personal experience.
Ann: And that created a real brand.
BOB: We help our customers have that ultimate coffee experience. You know, part of that ultimate coffee experience is also educating people about coffee – where it comes from. If you really like something, you want to know more about it, and that knowledge enhances the quality. Lately, with a lot of the social and environmental issues, people knowing from a social aspect what the farmers were paid, how the coffee was grown, has been extremely meaningful to them, and again, enhances the value.
Ann: The world certainly has gotten turned-on to differentiated tastes of coffee.
BOB: When we got into this, it really wasn’t a “Gee, you know we have to come out with a lower priced coffee. We were at the high end. In the last 25 years, the quality of coffee that has been generally available has improved substantially.
Ann: How did Green Mountain Coffee become such a big advocate of green supply chain?
BOB: One of the things that has come to us over the years is, you know, how we work with our customers. We try to really engage everyone from the coffee farmer to the end consumer. It’s really about how well you provide the needs of that process chain. It’s like I’m not really in the coffee business. I’m really in the business of execution –of getting things done through people.
Ann: And all of you are big into social responsibility (SR).
BOB: We’ve always engaged people in making this happen –our customers, our employees, our suppliers. It is one of the reasons we got into the whole SR mission. There were actually a number of things that happened with that.
We brainstorm with everyone about how we could become more profitable. We would come up with these lists of “Hey, we can do this and this and this,” and really not all that much energy around that. Then a group wanted to form an environmental committee. I said, “Sure, if you have a passion around that and you want to do something, sure, go right ahead. And about three months after this committee formed, we were cutting expenses. They were turning the heat down at night, they redesigned boxes that we were shipping stuff out with to reduce the waste and save the planet. All these initiatives actually reduced our expenses and made us a lot more profitable. And it was really done to save the world, not to make the company more profitable.
It was interesting, because I found that maybe three things had driven the organization over a number of years. One was quite compelling, which was survival. When we really had to make it happen. It was a question of staying in business or not. Everybody was pretty motivated on that. But when things were going great and you couldn’t say, “Gee, you know this thing is hanging over our heads, we really have to get motivated” — it wasn’t as compelling to people to be involved in the business. I tried different types of top-down “you’ve got to do it” type of approach. I discovered that the most effective means of motivating or engaging the group is actually having a compelling vision. Doing good
is a very compelling vision for a lot of people. That really enhances their self-esteem and causes them to go back and do more. And everyone realized that the amount of good we do is completely directly related to how successful we are as a company. If we had all these principles and went out of business, it really doesn’t give them much credibility. We have been always engaged with the employees, with our coffee farmers, with our customers.
Ann: And you took that SR approach into the supply chain.
BOB: We have, in the last several years, been using a process called “Appreciative Inquiry,” which was developed out at Case Western. It’s been around for maybe 15 years. One of the fascinating things about Appreciative Inquiry is that it really focuses on what works. In business, generally, it’s more what’s not working and where do we want to go. Like in golf, if you’re out there and you think, “I don’t want to hit the ball in the woods,” more likely, that’s exactly where it’s going to go. Like in sports, everybody visualizes and gets very involved in where you want to go and that’s what the energy is really focused on. And it starts from a very reflective place and looks to peak experiences
. If you really want to enhance the supply chain and you want to source something, when you have done that in the best way possible, when you reflect back on anything, what really was that most successful experience that you had and what were the elements that went into making that success?
We use these techniques. We will have a summit of maybe 200 people. Fifty of those will be from outside of the company. People from inside the company will be machine operators to executives. It is a mix – a complete mix – of functions and levels. We will have our coffee farmers there, our forwarders, our freight people, our software people; we have our customers. And it is a very dialogue-based process, where you involve people and you start talking. There is nothing more powerful than that to find creative solutions to processes. People went into this like, “Gee, I don’t know, can I talk to this person?” Then they started realizing that we are all so similar with the same anxieties, desires.
Ann: That’s true collaboration.
BOB: But often, you don’t see what those needs are when you’re dealing in a long, let’s say, supply chain issue. And you don’t know what the consumer might really want. It might not be “I’ve got to have this at $1 less”. It might be, “I’m willing to pay $2 more if I know that it will help these people or save the environment or have some other quality or aspect.” But how do you know what’s possible unless you have those people in the room? It’s been fascinating for me because when I started, I thought, “Gee, I’m creative. I know what needs to be done.” So often, when I started sharing it and doing it with anybody, they would come up with better ideas. And, you know, I really came to realize that it is how we work together and how we execute as a company that really was our competitive advantage in the marketplace.
Ann: So the market place actually values SR?
BOB: That is true of our customers.We’ve gotten a number of recognitions, as well, for what we have been doing. I think this year was our first on “The Best Place to Work for a Medium-sized Company.” Also, something that we’re very proud of is to be on the Business Ethics list. We moved from number eight last year to number five this year, which is based on a number of criteria, of which performance is one of them — Financial performance. And we have gotten into a number of accounts because of this standing of the company.
Ann: A lot of people don’t know about the coffee business — the coffee supply chain. Can you talk a bit about this?
BOB: We started working directly in the supply chain I think in ’89. We developed a coffee, Rainforest Nut, to bring awareness to the rain forest destruction, and did that with The Rainforest Alliance and Conservation International. We promote Fair Trade products in the chain. I don’t know how many people are familiar with Fair Trade. The organization guarantees, in the case of coffee, a minimum price. It has to be a co-op; the money has to be going to the individual farmer. For regular coffee, it’s around $1.26; for organic, around $1.46. And that compares to the price of coffee being as low as 50 or 60 cents a pound. You cannot produce coffee on an ongoing, quality basis for probably under 85 or 90 cents a pound. If the price isn’t there, then the process of growing and picking suffers. For example, they will do one picking. It’s a process that needs multiple pickings, but people can’t afford to do that, so they’ll just do one pass, and leave the coffee cherry on the plant, which attracts disease, other bugs, and ruins the plants. So the next year, you don’t have as much coffee, reducing yield. People aren’t willing to put the work in to producing the product unless they know they will get a fair price for it.
So we have been, for years, Ann, helping people improve the quality of the coffee that they do produce. That helps us to have a source of better quality coffee. It helps them because they can get more money for the coffee and hence, the communities are more stable. We have put drying patios in place where historically people would do the drying process out on a field, getting a lot of dirt and other impurities in there. We’ve helped build water stations. We’ve done community gardens. It’s really what is needed in the community. You don’t come in and say, “Gee, you’ve got to do this; you’ve got to do that.” It’s really a partnership, working with these people. We find that to be more effective than just paying a high price. I know some coffee companies are paying more for coffee, but they still have to build the infrastructure to support it.
We’ve also been very active in helping the industry as a whole to build the quality and sustainability. There are auctions now where these small farmers can sell their coffee on the web. It gives them access to markets that they’ve never had before.
Ann: I get worried when I hear all these marketing pitches — the web is full of firms using the sustainability term.
BOB: We started to develop a checklist in the early ’90s for environmental and social issues and grading and paying coffee. I think it’s similar to actually what Starbucks has done with Conservation International. We actually worked with them at that time, you know, for that, but felt that the credibility to the consumer wasn’t there. We really wanted third party organizations certifying the work and the standards
that we were talking about. Are you really doing it? So we really did welcome the Fair Trade movement, the Rainforest certification, and other industry groups that have built the infrastructure in the business. We find that to be much more effective than individual companies trying to sort of develop a competitive advantage by getting something that is proprietary to them. I think that the farmer often isn’t as secure in that environment, and that leads to maybe unfair negotiations or disadvantage in having their product being available to others.
I guess I could talk about more of these partnerships, but you know, it really does get back to the execution – the involvement – of the people. I think I mentioned before that maybe over 20% of our employees have been to the source because it really has changed their lives.
Ann: I was amazed to hear that many of the farmers had never tasted good, or brewed, coffee!
BOB: Yes, the whole bi-directional thing; it’s just as impactful with the farmers to know that somebody cares. When we go to a lot of these farms, too, we will bring coffee bags with the finished products. Some of these farmers had never even tasted brewed coffee! It really creates a sense of connection, but also a venue to explore what can be done better. I certainly would always encourage everybody to get as many people involved as you can. Get them out there!
Ann: I guess the same principles apply to any business, learning about your suppliers, and their communities.
Bob: I was speaking, actually, to somebody from (a very large retailer), and she does a lot of auditing of their plants, and she got the CEO to visit the plant. Actually, she was working with this plant for a couple of years, and all these changes that were needed – they were just dragging their feet. And he was coming to visit this plant, and when they got there, she hardly recognized it, because everything she’d been asking for got done. They were going to make this best presentation. So she discovered that their CEO was the best tool she had in initiating changes in a lot of these factories. It’s so true. Just get everybody out there to see everything firsthand. It’s miraculous what can be done!