This is a sidebar to Marc Eisen's "Organic Valley at the Crossroads," which ran in our latest issue. Click here to read Marc's full story.
Because Organic Valley began as an insurgency against corporate farming, you might think that CEO George Siemon would criticize Walmart. You would be wrong. Instead, he says that selling coop-branded milk through the retail giant has helped Organic Valley.
"It's like going through a masters program in business," he says. "They force you to be damn good business people, or you're not in there," he says.
He explains: "You can have the best mission statement in the world, but if you don't have the right pallet size and your packages get smashed in storage, you got a problem with these big retailers."
Activists aren't happy with what Siemon describes as the coop's "good relationship with Walmart." But in the coop's self-published history of its first 25 years this "pragmatic realism," as the book calls it, has clearly been part of Organic Valley's operating philosophy from the start.
"Our mission is to serve farmers and consumers--not to stomp on big boxes," Siemon told me this spring. That 2001 decision to supply Walmart, according to the coop history, angered staff who denounced it as "the antithesis of everything their company stood for." Walmart quickly became the coop's third largest customer.
But in December 2004 when surging consumer outstripped supply and shortages loomed, the coop board swallowed hard and suspended delivery to mass-market accounts like Walmart and kept the spigot open to the smaller stores that first embraced the Organic Valley product line. When supply caught up, Walmart came back on board.
"Walmart was never negative to us," Siemon told Inc. Magazine in 2007. Siemon, 62, was among the coop's organizers in 1987. The son of a Florida businessman, he earned a degree in animal science from Colorado State University and as a long-haired pilgrim settled in southwest Wisconsin to try his hand at dairy farming. By 1993, he became coop board president and then CEO in 1994. In 1997 Siemon sold his dairy herd to lead Organic Valley fulltime.
"A coop like ours would be very hard to start now," he says, acknowledging that the founders stumbled around in the early years finding their way. "Now you have to play at full speed right at the start."
Farmers setting the pay-price for their goods, rather than passively riding the ups and downs of the market, has always been at the heart of Organic Valley's mission of serving family farmers. But holding a steady price requires a savvy management of supply based on anticipated demand for organic milk 15 months from now. (Unlike retail clerks in a big box store, milking cows can't be ordered into production on a few hours notice.)
After being knocked down by the 2008 recession, consumer demand for organic has gone crazy, Siemon says. "The big-box stores want to out out-organic each other. That's great, but they didn't have a supply plan. Hello, now!"
That's why organic farmers are seeing their milk bid up. That's also why Organic Valley has lost dairy farmers to processors offering better pay. "These are the same buyers who abandoned farmers two years ago" when the market was awash in organic milk, Siemon says.
A note of exasperation enters Siemon's voice when he talk about Organic Valley's critics on the left. "Some of us on the inside are befuddled by it. We are a mission-based business. We not only look at the bottom line, we look a the mission bottom line." Those critics, he adds, sometimes "cast a dark shadow" on the organic market by scaring consumers with their claims.
When I ask him about succession, Siemon says he's in year-three of a ten-year plan to retire. He's upbeat about future prospects for the coop, saying it has the wherewithal to be independent and free of Wall Street investors. (In 1996, the coop board rejected a bid by its corporate rival, Horizon, to buy the Organic Valley label.)
"The definition of a coop is that we already know what we want to be in 50 years--an honest marketing vehicle serving family farms," he says. "You cannot get any simpler. It's very comforting."