Last month, Co-op America hosted its fifth annual Green Business Conference in San Francisco, bringing together innovators from businesses of all sizes to share ideas and experiences about the greening of business. Betsy Rosenberg, host of radio programs Eco-Talk and Green To Go visited the show and filed this report for GreenBiz Radio.
Betsy Rosenberg: I have with me two people who just spoke to our conference attendees. They are telling us about where the market is right now for growing green businesses. Danny Rubenstein and Janet DiGiovanna. They are both principals with Dash Advisory Group, and they have been tracking natural products for more than 20 years, and this is a great green moment, is it not?
JD: Yes, as I had just remarked in Danny's and mine's presentation, for me and Danny, this is harvest time because we have been a part of this industry for 20 years, tilling the soil, and so we were the early settlers, and so for us to see the growth of this industry, especially in the last two years, is just so gratifying.
BR: And even month by month in the last year, it's been -- it feels exponential in terms of growth and interest and talk. And I imagine there's a lot of new green businesses sprouting up or trying to.
Danny Rubenstein: What's happening is that not only are the people who were sort of pioneers in the industry now able to grow their businesses successfully and profitably, but there are many, many people in a whole variety of industries that are recognizing that green is going to be the cost of entry going forward. That they need to be competitive on all levels, but if they don't have this component in their mix, they're gonna probably be passed over.
BR: And what about those pioneers? I was doing green media ten years ago, and nobody was listening, it seemed, for the last nine years prior to this past year. Are pioneers always at an advantage, or you mentioned something about there can be actually a decrease in value if you are an early adopter?
JD: Well, you know, I mean, if you're someone who is the innovator, certainly with that territory comes a certain degree of what I would call disadvantage because you're a light in the darkness. And so that's just the nature of the beast. I mean, that's what it is. And so you have to generate your own light in order to sustain that. However, because you are the early, early adopters, it's the most exciting time. And so for us, when we were just getting started, and when Danny was developing Naked Juice and the supermarket industry just said, "Well, this is a fad, and it's never gonna work," you know, it takes that own individual light to say, "Well, that might be your truth. But it's not mine."
BR: That's why this is such an exciting moment, because for those of us who have known that the future was green or not at all, it's now becoming evident to the mainstream -- the masses.
DR: Yeah, I would say, to follow on your point, that the awareness level has simply been rising, and with a greater awareness, people can reflect and say, "Well, I value these things more. If given a choice, I would prefer this," and now it's convenient. And now it's available, and now it's affordable. And it's cool -- I mean, there's no reason not to.
BR: You give a talk with a great title, "How to Rise with the Tide without Getting All Wet." The tide is rising, and I think the eco-tide will lift all boats that are willing to get in the water. What percentage roughly would you say of businesses in America are starting to put their toes in the water?
JD: I would say it's still very small. Even though we're in a very exciting conference here, and keep in mind, we are in San Francisco...
BR: The Green Bubble.
JD: ... the Green Bubble, and so in a bubble, it looks like everybody that you speak to knows something about this and is wanting to get into a portion of the business that has a green application. But the truth be told, the average person in America is just beginning to even know what does that mean. So we're in the earliest, earliest stages. I would say if it's -- and I'm being conservative -- but, you know, 5 percent maybe -- very, very small.
DR: And it's how you measure it. I mean, people who make a choice to bring a cloth bag to a supermarket instead of plastic, I would give them some credit. If they choose to buy organic strawberry one time because they understand now a little bit better about pesticides, I give them some credit. But on a large scale, people aren't making major wholesale changes.
I think one of the things that's really going on that a lot of smart businesspeople are going to recognize, it's the business-to-business money that is gonna be enormous. Sure, the consumer trend is there, and there's gonna be consumer demand for more green and organic and natural products. But if you offer a product or service that goes from a business to a business, then your impact is multifold...
BR: ... because you can impact your vendors as Wal-mart has done in a big way.
JD: Exactly.
BR: Let's get down to some specifics. What was your role in developing Naked Juice?
DR: I joined a high school friend of mine in the earliest, earliest days and we basically built the business together starting by selling juice per glass on the beach for $1.00 a glass. And we started in Southern California with the vision that people wanted to eat more healthfully, and starting with juice, they just didn't know where or how. So we wanted to bring healthy, fresh food to consumers through conventional retail.
BR: What's "naked" about your product?
DR: Well, at the time, everything was made to order. It was made only from fresh ingredients. No concentrates. No purees. Made and delivered to the store within 24 hours. That model doesn't really exist anymore, but at the time it was really revolutionary.
BR: What about organic?
DR: We had organic products. Now, here's the -- to the point of where you are in the curve, we had about 25 items. Ten of them were organic. Consumers in the '80s were not willing to pay the price differential. We ended up settling on two, and the rest were all natural. But only two of the 10 organic actually made it.
BR: Consumers were not ready to pay extra eight months ago. That's how quickly things are changing.
JD: And keep in mind that what Danny just remarked to is that we did really get down to those small numbers. But we believe, and I think most people you speak to who come out of this long seed-planting side of business, we believe that two was better than zero. And so we were okay with that. We were like, "Okay, if we are going to do this, we are going to be happy with that number, and we're gonna -- we're not gonna be stupid.
We're gonna actually understand that in order to get a foothold in those market centers, we're happy to have the majority of it be conventional. But we're willing to pay the price in order to get those two on the shelf."
DR: Right, and my partner, who was the visionary and the founder of Naked, Jimmy, he's stayed in the juice business and has a company called Evolution where he offers fresh organic fruit and vegetables and juice in Southern California now.
BR: Okay. So you probably learned a lot growing that company. If you could summarize what you did right and what you did wrong, and then we'll get into specifics that will apply to a more general business owner.
DR: What we did right is that we believed in ourselves. We had a strong commitment to our vision, and we didn't take no for an answer, and we had the youth and energy to support that. So that was some things we did right. Some things that we could have done better is we didn't have the right gray hair around. We didn't have enough people with seasoned experience to help us through some challenging times that all businesses face.
We picked the right market -- Southern California was obviously a hotbed for healthy foods, and a large enough population, and close enough to the supply line.
BR: So the green tide is definitely rising as we speak, as the glaciers melt. How can companies take advantage of this shift and this hopeful beginning to this change?
JD: I think how they can most specifically take advantage, and we've talked about this in our talk, is that they have to really identify who they are, what their values are, because that's really going to be what's the rubber on the road is if you know who you are and you know what your values are, those values should align to the products or services that you are trying to offer. And I think that's really from a very basic, fundamental point of view, if you were going to go into a business like this with the kind of rise in the tide and with competition coming in, your values, who you are, what you believe in, and align those values with a product or a service that you know that you can market successfully, I think that's the beginning of a good idea.
BR: And is all the competition -- no doubt, it's good for the environment, but is this a good environment to start a business or because the consciousness is just being raised, are there just gonna be a few leaders who are really going to be the winners for the next year or two?
JD: I think there will be breakout companies, which is the case in any industry -- you see those great industry leaders breakout. But I think we're so early in the curve, and as we remarked to, that it's such a small percentage of the population that is even aware at this point. I think this is a wide-open big opportunity, and at the same time, the bigger the opportunity, the bigger the responsibilities.
BR: You said something about knowing if you want to be a niche product or service or scale; why is that important, to know where you're going?
JD: Well, the basic reason for you to actually have done your homework on that is capital raising, and at the end of the day, this really becomes a very compelling moment in a businessperson's life that if they are going to be a niche player, then those needs, those capital-intensive needs can be a little less stringent. But if you are going to be a broad-line player and you're really going to launch a national company, then of course, those constraints are going to be capital.
BR: And because the timing is good, and if timing is everything, a lot of players are jumping into the water. Forget putting their toes in. How can they avoid getting all wet, as you said in your catchy title?
DR: Well, we've talked about cash, and that's a critical element. Also, being clear on what product or service you offer and being able to communicate that both -- if it's a consumer product, that's one thing. But I'm gonna go back to this business-to-business model because I think a lot of people aren't aware of just how much opportunity there is in helping another company do a better job fulfilling their vision of wanting to become a more responsible or green business.
And simple and obvious and minor, but still important examples are some people in the hospitality trade -- the hotel business who are switching, for instance, the shampoos and soaps that they offer in the hotel rooms, or the food on their menu, or organic cotton sheets on their beds. All of those things, those companies can sell to the Marriotts and Hiltons and Hyatts and get them onboard.
BR: And you say advances in technology can be both positive and negative because things are changing so quickly. That opens up opportunities, but it can also make you also oh-so-last-century in a couple of months.
JD: So in a rapidly evolving industry, it goes without question that this is really the backbone, a lot of times, especially for a small business, so all your internal reporting and information systems and so forth have to be really, really professional. That requires money, of course, because if you were going to go out and buy a software package to manage your finances, that can be costly. So it's really important to understand that even for a small business owner to compete, those kinds of things have to be best in class and it has to be organized in the budget.
BR: One of your topics was "Problems or Opportunities," and I love the example of Terracycle, because they're taking something that was waste -- it's just like the old french-fry grease from the fast food restaurants becoming fuel for somebody's car -- looking at waste and turning it into something productive.
DR: Right, yeah, Tom, who owns Terracycle and started with his partner, says he's in the worm poop business. And he's an ex-Princeton guy, and basically they took a product that was coming out of the cafeterias and either going into landfill or possibly into compost. And they were paid to take this waste, and then they started composting it with worms, and they found that they had a very effective organic plant food. And then they developed this amazing recycling or reusing program collecting PET bottles, regardless of the manufacturer, washing them, cleaning them and putting this wonderful organic plant food in them, and then convincing the retailers across the country that they, too, can be a greener retailer by offering this cool product.
JD: And I'd say this is just the absolute example of what it takes, this entrepreneurial spirit -- because most of us, of course, we might look at something and say, "Oh, that's a terrible problem," and just walk away. And entrepreneur will look at it and say, "That's a terrible problem, and I'm gonna find the solution." I think that's the dividing line when you're talking about great entrepreneurs. They just don't see it that way. They see it very differently: as an opportunity.
BR: Here's a hypothetical for you, for everyone out there who is thinking about starting a new business: if I were to partner with another person who was supplying green media, would that be a way to go, or is there really something to -- if you've been an early adopter, to benefit from, "I've been here for the bad days. Now let me be on my own for the return on investment?" Or does it often make sense to team up with somebody doing something similar or the same as you to be a bigger entity?
DR: Well, there's not one answer. I mean, part of that is do the part that you like best, and if you can find somebody, either an employee or a subcontractor or a partner, who loves and does the other part really well, then that's great. And a smaller piece of a bigger pie can also be financially rewarding as well as to get you your lifestyle back.
BR: So you're saying look for the gray matter. Look for the senior experienced employees, and also look for the brainy folks inside and outside of the head. That's always a good thing, obviously. And that's the interesting thing about this wave, is not a lot of people have experience in the green zone, so you see a lot of entrepreneurs, be it in business or media, trying to figure out how to do this quickly. And it's an exciting time.
It's also in a way kind of dangerous because I'm sure some people will not do their research or due diligence before they raise a lot of money. We remember the dot-com bubble. Why is this not likely to be just a fad that's going to go poof?
JD: Well, Danny and I live here in the Bay Area, and of course, we experienced the dot-com bubble. And so we saw it. We lived it. We breathed it, and we were actually from time to time asked to weigh in on some of these ventures and give it a score, give it a rating. And why this is just so different is that this is real critical stuff now. The dot-com industry was not up against the kinds of things we're up against now. This is really ... survival.
I mean, I don't want to be too dramatic, but it's true. We are at a place in all of our lives where we're looking at what happens to the next generation of kids? And so this is not baloney. This is the real deal. We're really in a place where we really are looking at our own lives and how are we going to find a way through.
And so this is not like some technology company who had some idea about how they're going to get a capitalist session of $100 million and how are we going to do that, and then five years later the company is completely gone. I mean, this is not what Danny and I have been involved in. We've been involved in businesses that stick, and the reason why they stick is because they are meaningful and they have a place in the world that is around us looking so fragile.
And so this is all about building up infrastructure that is more stable, more real, more environmentally sound and really speak to the hearts and minds of people who are really worried about this.
BR: And among the many ironies is that the healthier stuff has been called "the alternative." The alternative to what? The more toxic examples? And I guess the whole goal is to make it -- reverse that equation and make the alternative the mainstream.
DR: I think that's happening, and although the numbers might be small to some, the organic food industry just as recently as four years ago was only 1 percent of sales. And last year in 2006, it was 3 percent of all food sales. In 2007, we expect it to be considerably higher. The goal in our industry is 10 percent by 2010. 10 percent for '10 is sort of the goal, and I think as people become aware of the personal benefits, and it's convenient, and it's affordable, there's no reason why they won't do it.
BR: Let's talk a little bit about money. You mentioned one thing about raising money -- one key is to know if you're going to be big or small in the beginning or as soon as you can. What are some other things that you should keep in mind that investors are looking for?
DR: Well, people invest in people, and so they have to believe in the vision and the leadership of the founders or the core team of people or there will be no -- very little likelihood of the money coming forward. Then they obviously need to see that there's an enormous market potential that is untapped where their capital will make a significant difference. And the competition -- the competitive environment is such that their -- they feel like they have some sort of advantage. I mean, those are some of the main elements. Unique product and service, large market, the capital makes a difference, and most importantly that they believe in the people.
BR: And are angels who are investing in environmentally proactive companies, businesses, and socially aware companies, are they any more generous about the return on investment and patient or is this really still just for the cash?
JD: No -- no, when you're in the money business, the metrics are pretty well-defined. And this may have on the surface a very nice touchy-feely, you know, people show up and they don't have on ties. They come in their khakis, and they're not dressed like Wall Street folks, but the truth be told the constraints that are in the capital business, you know, raising money are the same everywhere. And so you're gonna be facing the same kind of stringent due diligence that everybody has to go through. There's no way around this. It just may look touchy-feely on the surface, but the constraints are the same.
BR: Kum-Ba-Ya is not the main song?
DR: No.
JD: No.
BR: So cash is still king. It is about money and profit, but these people are also aware. They read the newspapers, listen to the reports, and they have kids. Are you starting to see any kind of shift? Are some of them at least trying to make this world a better place beyond lip-service?
JD: I think they are. I mean, I don't want to say "cash is king" to the exception of other values. I think that the social responsible investing market, being a positive filter or a negative filter sort of approach, is broadening and expanding. When it talks -- talking about individual companies who need to raise money, yes, you do want to partner up when you can with somebody who, as Janet said, will hold the same financial rigor, but also appreciates what you're trying to do.
And therefore, there's an emotional and a psychological component that they're behind you for reasons beyond just the money so when times get tough, there could be some greater understanding and appreciation for what you're up against.
BR: You read a list of qualities that if you don't have most of them, you probably shouldn't become an "eco-preneur."
JD: Yeah, so this is based on our own personal experience. These are the kinds of qualities that Danny and I have always -- this is who we are, and so I think this is pretty vetted. So you see things differently. You're not fond of rules. You have little respect for the status quo. You explore. You create. You invent. You inspire, and you have to be a little crazy. You are usually a troublemaker. You can't be ignored. You are relentless. You make a contribution every day.
BR: Terrific. You say you have to see things a little differently. Those of us who have been seeing the world through green-tinted lenses, isn't it nice that that tint is somehow spreading?
JD: Yeah, we couldn't be more gratified to have been asked to come and speak at this conference. For us, this is a watershed moment, and also for Co-op America to be growing this business all over the United States and hosting these conferences in Chicago, here and in other places in the U.S. is a great confirmation of what's happening.
BR: Thank you so much for your words of wisdom, and let's hope the future is green, or as someone said, not at all.
DR: Thank you, Betsy.
JD: Thank you, Betsy.