Stonyfield Yogurt: Gary Hirshberg (2017)

So before we start the show, I want to tell you about a few how I built this live shows you can attend on the East Coast this fall, supported by American Express. First, I'll be heading to New York on September 10th, where I'll be talking with Christina Tosi of Milk Bar at Town Hall. And then I'll be able to do it. I'll head to Washington, DC on September twelfth with Tristan Walker of Walker Company at Lincoln Theater. You can get your tickets and find out more about our live events, including a third East Coast show that we'll be announcing very soon at nprpresents.org. And I hope to see you there. Okay, so I'm not exactly recommending you do this, but

If you wanted to, you could literally fast forward to almost any point in this hour long episode. Almost any point and hearing different incredible story about how Gary Herschberg almost lost his company, almost failed in his venture. But don't don't do that. Listen to the whole thing, start to finish, I guarantee it is Totally worth it. This episode first ran back in October of 2017. It is super fun, and I hope you enjoy it. On many occasions I would

Tiptoe over. Hm. To have a chat to see if I could borrow another thirty five hundred or twenty five hundred to make ends meet. And one night I heard the click click of call waiting on my mother in law's phone and Meg was calling from the house To say Mom, don't do this. Wait, your wife was telling her mom not to lend you money for the business? Right.

Because it sounds like she didn't believe in it. Well, she had no reason to believe in it. It was insane. It's how I built this. A show about innovators, entrepreneurs, idealists, and the stories behind the movements.

built. Guy Roz, and on today's show, how two hippie farmers and a cow named Lily Belle started a side business in a drafty barn. And grew it into stony fields. One of the biggest yogurt brands in America. So of all the stories that we've told on this show so far.

I think it's Fairly safe to say that Stony Fiogurt has had more ups and downs, and really more downs. than just about any other. And it's a pretty unlikely tale to begin with. Two ego hippie farmers with no real desire to build a company.

Wind up. Building a company. They start small. Milking their own cows, making their own yogurt, selling locally to nuns. and then eventually spreading themselves way too thin.

sliding into deep debt. Now over the years, Stoneyfield has had a whole slew of near-death experiences. But it never quite died. And in fact, it grew. It grew into one of the most popular yogurt brands in the United States. And one thing about Stoneyfield's co-founder, Gary Hirschberg, is that even though he didn't really set out to build a company, He knew what it took to run one.

Because when he was growing up in Manchester, New Hampshire His dad owned and ran a pretty big shoe company. You know, it was uh in those days they were probably fifty shoe manufacturers in New Hampshire alone, and probably A hundred and fifty in New Hampshire, Maine, and Vermont, and so so how many people did your dad's company employ?

Several thousand. I think at their peak they were at uh twenty eight hundred. Wow. These were true company towns. course in those days manufacturing was uh you know the state was built in the in the region and the country were were built on things that we made.

The dark side of that is that when they Essentially g because of uh cheaper labor from abroad when the domestic shoe industry collapsed. Uh all these communities did as well. And what happened to your family? Uh well it was really a three a three for. Uh the family's business uh

Went bankrupt? Uh my parents got divorced. And my uh sort of childhood role model uh died suddenly of spinal meningitis. So it was a It was a wake up year. Mm.

Yeah. I mean did your lifestyle change Overnight,'cause I have to imagine as a kid you were probably pretty prosperous family, affluent family. Yeah, there we were co certainly comfortable. I was a ski racer. I you know wasn't Ever worrying certainly about the next meal or and and and you know we

Traveled up north on weekends for skiing. We had a Home on a lake? But yeah, it it you know, the world I mean I I think everybody at fourteen Any conscious being uh starts to Uh that your life undergoes changes. But in my case they were kind of expedited. I um

My father uh got uh began drinking. Um And so I had to uh sort of confront all of that and You know, watched uh sort of all the rocks just suddenly uh turn to mush. You know, my mom became a single mom with five kids. I was the oldest. And how does she support you? What does she Do

Well, yeah, so of course My dad's business was gone now. So you know, there was a huge amount of tension. There was lots of uh battling over alimony, which for money that didn't exist. So she wound up becoming a buyer for a local family owned hotel chain, actually close friends of ours.

Which eventually sold to Sheraton and and and gradually she parried that into becoming ultimately the senior buyer for Sheraton worldwide. And then from there she became the senior buyer for Disney for the Epcot Center. Wow. when they built that. So yeah, she she was like literally uh You know, a mom with five kids, uh running a little general store part time as kind of a hobby to becoming a I don't know, a global executive. So this like

major change in your life happens at the age of fourteen, which uh, of course, is going to have an imp impact and influence on you. D did you Did you start to think about about business, about being a businessman a that early? I mean, you saw your parents that were both entrepreneurial? Mm. No, I I started to think about running as far as I possibly could away from it.

You know, I obviously the b bankruptcy didn't happen overnight. It was a s result of a steady decline and my my grandfather, my father, and my uncle were all in the business and I used to sit Or work it there and I would listen to them screaming at each other. You know, they were arguing, you know uh Um passionately. Uh about what to do about this downturn. And so to me business was this thing where people got people yelled at each other.

People hung up phones on each other, people were stressed. Employees lost their jobs. And it and on top of that, serious uh uh pollution. So it led to my deciding that business was the worst thing on the planet, the last thing I sh I wanted to do and led me to really pursue a career in the sciences, m environmental sciences. So so what'd you do after high school? I went off uh you know to a college that was

Just uh Uh ov an overtly liberal art uh sort of non business environment. It was Hampshire College. Oh yes, right. Which in which of course Ken Burns and If you want to get business knocked out of you, that's where you would be gone, right? Yeah, but stick with it because it turns out that it was probably the best training for an entrepreneur That there is this is a school. that has no credits, no requirements, no grades, you only pass Matriculate through by contracting

And making progress with uh individual professors who take you on as their Essentially apprentice. And and in many cases the funding of of work. I mean I wound up Diving deep into ecology and environmental sciences. And um turns out

I was uh Though hating business still and thinking You know again now I thought. I realized my God, we're warming the planet, we're toxifying, we're depleting water we're disturbing, you know, biodiversity everywhere. It's all because of industry. So I was

sort of radicalizing in my environmental beliefs, but But actually getting business skills all the while. So I I guess it was after college that that you went and worked uh on an organic farm? Yeah. At the time there was a little ecological research institute on Cape Cod called the New Alchemy Institute.

And they were advancing the idea of using wind and solar power, building really sustainable food systems long before those words were in our vernacular. And I went from uh windmill apprentice to windmill technician to executive director and And I saw them on the cutting edge of um of how we were gonna need to grow food in the future.

And and around this time you also meet Sam Cayman, right? Right. And he he is the guy who's gonna become your business partner who's and he he's also running his own organic farm. Right. So he was mostly teaching organic farming methods, uh raised beds, uh biological pest controls, uh uh greenhouse season extending. Basically kind of back to the land type stuff, but with a with an organic focus. Basically running this as a nonprofit and just Oh yes, it was a nonprofit. So we're both we're each running nonprofits.

But I got really excited by his work and of course he was back here in my native New Hampshire, which I love. And he's older than you? Oh yes. Uh he's about sixteen years older. Samuel Uh at that time uh Had six kids. I was a single guy.

But um You know, we became fast friends. And uh he asked me if I would join the board of the rural education center to help him Uh with his money raising. And did he have a hard time raising money in the first place?

Well, right about that time Ronald Reagan came into office and uh essentially cut off the lifeline for sustainable energy research, sustainable ag So essentially money dried up. For these nonprofits. And so we would sit at Samuels board meetings

At up at the Royal Education Center. Um but and by the way, critical to this whole story, he had one cow Uh named Lilibel. And Samuel was experimenting uh with yogurt. And he was uh

a fermentation uh nut case. I mean he made sauerkraut, beer, wine. A Kim Chi. Yeah if it fermented, he made it. And when I say he made it, he made incredible Foods and he made this wonderful yogurt. From his cow from his one cow.

And we would sit at these board meetings Eating balls of this absolutely incredible Plain cream on top, whole milk yogurt. And um just to back Up one step. Samuel is originally from Brooklyn.

Um grew up very poor. In Flatbush, but he got to know a lot of these old Jewish yogurt makers down there. And uh they taught him yogurt making. And uh what they explained to him is it's very simple. It's all about the

Meaning times and temperatures. It's about the weather, the humidity, the temperatures, and he And so Samuel, for his family and for the school, experimented with yogurt for many years. And one day and and unfortunately n none of us can remember who, but one of us said Gee, why don't we start selling this stuff to r you know, make up for the lack of grant money'cause it was Nigh impossible to raise money during that period.

And um You know Seemed like a pretty good idea. So Samuel was able to get some Catholic nuns. Uh to provide a twenty five thousand dollar grant. Wait, nuns?

Yeah. The sisters of mercy Which is You'll hear in a moment the appropriate name. How they were taking mercy on these two crazy entrepreneurs.

They were selling their monastery. And they were wanted to turn their principle into uh Local community action. Hm. And Samuel used that money to build the first yogurt works.

And um About the time that the money came in, which was April of eighty three, when we opened I decided that I was Pretty interested in joining him full time. Not

So much to run the yogurt, but I thought that I could help him run his farming school while he did this little fun Yogurt venture. So I said, Look, I'll I'm gonna

Join you in September. So the summer of eighty three you move to New Hampshire to Right. I moved into a three story wood heated lug cabin uh with um no plumbing. and I put solar cells on it and and the Cayman family lives there and and and our interns are

There's one big kinda happy Crazy. Cow milk, yogurt making. Uh operation. So

I mean, how did the yoga system start? I mean it was being being being sort of put into Jars and how did you How did you get it to customers? How did you sell it? How did you put a shingle out and say Go we're for sale? Well we started with one cow.

Sammy used the money to buy six more calves. So now he's milk seven. He finances this little tiny factory in A tiny little room that you could only really describe as a closet in a

Seventeen ninety two barn. With a wood he wood fired boiler. And The way it worked was he Put in a fifty gallon stainless steel tank.

We bought Plastic cups. And Sammy was a very charming and persuasive guy, and after paying for his first shipment of cups, he managed to somehow get continue to get shipments for five months without Paying for any more, so

He started producing April ninth, nineteen eighty three. And took his first Six packs of yogurt and Drove down to The local supermarket

to Harwoods and said, Would you guys sell this stuff? Well they didn't know what the heck this was. And Sam they said, What price should we sell it at? Sam said, I don't know, whatever Whatever price you think. Me we were not business people. So we started selling

At uh a dollar forty nine a quart, which is the same price Dannen was selling for. He by the way, he was only making quartz. Six packs of plain cream on top yogurt. Mm-hmm. It was like Ambrosia Guy. It was the most incredibly perfect Product still the best thing we make. So you guys just start to

You know, basically Sell it locally. And And uh eventually The Harwoods people call and said, Gosh, you know, this is good. It's selling.

Uh by the way, way below the price that we could afford. Uh so Samuel said great. So We eventually hired a young local guy to drive a van. It we couldn't afford a refrigerator van, so we just told him to drift. But yeah, so by the time I got there.

Uh five months into this thing. Uh Samuel had Probably about fifty thousand dollars of sales. Wow. And

My gosh, the product was selling through, but he couldn't keep up. And he was out of cash. And He was out of cash because the the lag time between

When he was getting paid and pay for um grain to feed the cows. He had to pay this guy to drive And bring the yogurt. As I told you before, he wasn't paying for his cups. Uh but he had to pay you know people to help. And uh, you know, the thirty five thousand dollars had sort of disappeared overnight. Honestly, I don't know how he got through five months because

When I arrived on September fifteenth, of eighty three. He Samuel had these old army surplus desks in this farmhouse. The the the three desks were piled high with envelopes, on open mail. And I said, okay, I'm now the executive director of the Royal Education Center. and the vice president of Stoneyfield Farm.

And I'm going to spend my first That was the the name of the farm, Stoneyfield Farm. Oh yes, the farm, sorry, yes, of course. And it's still there. So I spent the morning separating I thought the checks From the Bills.

There were no checks. Uh Samuel, any money that had come in, he had used it to buy feed. Uh or You know, lubrication, equipment, fuel, wood, whatever. And

By eleven AM that morning, my first day I calculated that we were seventy five thousand dollars in the red. So what did you do? Well I did what any self respecting entrepreneur does. I called my mother. And I borrowed thirty thousand dollars from her, which she could ill afford, as I told you before, she was

you know, her own business woman with four, you know, family. But you know, I I had a good fundraising skill, so I went to many of my former funders and many of his and I said, Look, can we Can we borrow? Th these were the the funders for the farm that that you had run back in Massachusetts? Right. Well, Samuel had a handful of

uh folks who had been his funders. Like I said, he he raised a hundred twenty five thousand a year. So there were there were probably twenty or thirty wealthy individuals and then I had raised a million dollars a year, so I had You know, high net worth individuals out there and I Look, what I told them was very simple. I said

You know, the first Ten years of our work. Was all about proving that you can grow food organically. But if we're gonna be successful with this revolution, I said to the funders who had gotten us there, then we're gonna have to prove that you can actually make money doing it.

And we're gonna have to build a model enterprise. That will show that you can Avoid the use of pesticides, avoid the use of hormones with cows. Support family farmers. Not depend on fossil fuels.

Ецтра, ецетра, алтансь за винь і на нон профіт контекст. I said you know this is I I'd like to ask you to join us in the next phase, which is Helping us to uh build a successful business and and instead of asking for a grant I'm asking you for a loan.

And I wound up bar borrowing a hundred and twenty five thousand dollars. Okay, so you go out and you start raising money and and did you and and and Samuel sit down and say, Okay, how are we gonna uh structure this business like I uh we are co owners, this is a uh joint venger. Like how did you did you ever do that? Well, we did because uh

One of the things I did was I hired a lawyer. 'Cause I knew we didn't know what we were doing. And the first thing this lawyer said to me was he said, Gary, um What percentage of the rural education center's revenue is coming from the yogurt? Well at that point

It was getting close to Seventy five percent. And he said, Well guess what? You've got to spin it off. Because under IRS rules that

Makes you a business, not a non profit. So Samuel and I realized we're gonna have to buy this from the rural education center. So we agreed uh to a split. In the company. Essentially fifty fifty.

And then I Uh went out to our lenders. Of the hundred twenty five K. And I said, uh look, um, will you take stock in this company? And we did our first private placement. You know, threw a dart at the wall, figured out the value of the business. W what did you value it at the time?

Well We thought we were gonna value it At a million dollars. By then in nineteen eighty four our sales were up to Around two hundred fifty thousand a year. And this is just in in New Hampshire or all over New England? Well By eighty four we were starting to

Push the boundaries. We're selling to about twenty stores. And Eventually we started selling to a An independent grocer who had seven stores.

uh called Alexander Supermarkets, now part of Hannaford in the northeast. And um This will give you the real flavor for this uh what was going on here. So one Sunday night we were having dinner at the Cayman's after milking And uh the phone rings and uh Jack De Mulis, the nephew of the

Why are you selling to my competitor this little seven star chain of Alexanders and not to me? Now he had thirty-four stores at the time, and Sammy said, Well Uh to be honest, Mr. DeMillis, we don't have enough cows. He said, Well get some more goddamn cows and he slammed the phone down. And we took that as very Good business advice. So we went out and grew our herd even further and then so we're going to be able to do it Now realize we needed to

You know. Get serious about this and so we managed to lease a small refrigerator truck and started Delivering actually to the market basket ware warehouse. How much yogurt were you making at that point? We're producing now about Three hundred and sixty cases a week of yogurt. And a case is like twenty-four cups. Six packs. Six packs. Six packs of quartz.

So by the end of eighty four we were our run rate was headed in the sort of half a million dollar range. But you you were probably spending more money than you were bringing in, right? Oh my god, you have no idea. Yeah, we were burning I mean, I kept not Weekly cash flows, not daily cash flows. I kept hourly cash flows. I knew on a Wednesday morning how much money had to come in that afternoon. In order for us'cause by then the cup guy had figured out You know, Samuel wasn't paying'em, so now we're on very short terms with everybody. I mean My fundraising skills turn out to be, you know.

We would be nowhere without Samuel's yogurt making skills and his family's unbelievable attention to detail. They were perfectionists all, but we were also we would also be nowhere without my ability to keep getting credit and cash'cause it was burning. I mean we were. On fumes. When we come back in just a moment. How Gary and Samuel begged and borrowed to keep Stonyfield going.

And how they almost lost it anyway. Again and again and again. I'm Gyroz and you're listening to how I built this. From NPR. Hey, welcome back to How I Built This from NPR. I'm Guy Raz. So in the summer of 1984, Gary and Samuel and Stonyfield are almost broke. They're basically running on fumes.

And they're trying to bring in more money by just Finding a few more stores to sell their yogurt. In those days uh whole foods didn't exist yet. But the holy grail for natural products was a little free store chain called Bread and Circus, which eventually became part of Whole Foods. And they had one store in Cambridge on Prospect Street. And you know, we were selling now to

Demulis market basket. This is now I'm talking July of eighty four. And um And we were desperately trying to get down there'cause we knew that if we could crack Bread and circus. Every other little natural foods co op in New England. Would then take us in.

And we kept going down there and And they said no no no. We've already got, you know, uh hippie yogurt made by somebody in Vermont who ha in their teepee with their wet goat. You know, they didn't need another You know, organic yogurt from some crazy people in New Hampshire. So in July of eighty four I had my thirtieth birthday at the farm and my I had my old ultimate Frisbee team um come up to visit me, most of whom lived in Cambridge, as you might imagine.

And um I said, look, it's wonderful you've all come. If you want to give me a really good birthday present, go down to bread and circus on Prospect Street in Cambridge and ask for my yogurt. That was on a Sunday. On Wednesday Mary Carol Skinner, the buyer at Bread and Circus, called and said, Gary, I don't know what's going on, but demand has suddenly gone through the roof. We're getting all kinds of requests for your yoga. Get it when when you can you get it in there. Well I got in my car and I made the first delivery that afternoon. Um about

A month later we were her number one selling yogurt. Uh she took us in the other two bread and circuses and off we went. But it was my Frisbee team. I mean You know, that's what it takes. I you know, I always say we can ship the yogurt three thousand miles, it's the last eighteen inches that makes all the difference. You get it in people's mouths and then they're gonna ask for it. But it was the best selling yogurt at Burden Circus and people loved it. But you were not making a profit. No, that's absolutely right. Wasn't that stressful? Uh utterly.

It was impossible. Look. This was crazy, right? We're growing We're booming and we're burning cash. So and probably working like Crazy. Yeah, we're twenty four seven. And Samuel had six kids. Yes, well actually by the way, the six kids were the secret weapon

Uh,'cause it was sort of indentured servitude. I mean you know, it was hard if they were gonna have dinner that night, it was hard for them to say no to you know, milking or making. And by the way He several of his kids were are just absolutely astonishingly good yogurt makers. They had their father And mother's sense of Pride in in the product.

And and and this is right around the time you meet Meg, who will would become your wife, right? Yeah. A month after that fateful meeting with Bread and Circus, we had our summer NOFA conference. North East Organic Farming Association conference, and I I as it turned out, I was the keynote speaker. And so I started talking about this enterprise, this business that was now a year old and

You know, all of the dreams of organic farmers we were sort of like I didn't talk about our financial problems. I just showed the That this is possible, that if you build it they will come. And uh right after I finish my speech this very Adorable.

Uh organic farmer from New Jersey. who is running her own nonprofit farm down there. Uh waited patiently to ask me a question. Well that turned out to be what is now my thirty one year wife, Meg. And uh

We began courting and uh Thanksgiving that year in eighty four, Meg introduced me to her family. And uh her mom had been the deputy commissioner of agriculture for New York State. So she had a kind of an ag orientation, um At one point she kinda whispered to me that she'd be okay with

Uh if I needed some money. With lending me some. Well, of course I needed money. So she loaned us uh Fifty thousand dollars. Mm.

And now we're in heading into nineteen eighty five. We've now launched small cups of flavored yogurt. Um I now needed to raise about five hundred thousand. 'cause we needed to buy more cups, more fruit, you know, people expected us to pay. So

Doris had loaned us the fifty towards the five hundred thousand. Doris is your mother in law. My mother in law, excuse me. And I started raising and I I got to about Two seventy five, three hundred. Mm. Uh this is sort of a month or so later, she said, Well, I think we can increase and so she increased to a hundred and eventually I got across the finish line, got the five hundred. Why did you need so much money?

The factory. On Stonyfield Farm. Yeah, the little we call it the Yogurt Works, the little shop. You know, as a Drafty old Barn. We needed to switch over from wood to oil.

We needed to just get more modern. We needed to get the warehouse, the barn you know made sanitary we had to get real floor drains we had to stop being a kind of a kitchen operation And what about cows? How many cows did you have at that point? Well at that point we were up to nineteen, but Um one night in this same era Samuel was out milking. He had milked the first of the nineteen cows and the power went out.

Samuel came in and said uh You know, I need help. Uh'cause he has these electric milkers. So Louise and I went out and started milking well You know, it was freezing, the cows hated it. If you haven't hand milked Uh let me tell ya, they they didn't it was it was a nightmare. The cows were kicking over the buckets. We had these kerosene lanterns in this fire trap barn.

You know, every once in a while the cow would kick one over and the milk would spill on the lanterns and We we finished milk the last cow at about three AM in time to start milking the first one. And that was the night when we realized you know what We gotta sell the cows. You h had to sell the cows because you guys could not milk them all by yourselves?

Right. And and so the next morning We reached out to a Local Jersey farmer'cause we were using all Jersey cow milk at that point. And said, look, will you buy our cows and start selling us milk? Well, he said, I'm not gonna have anything to do with that y that organic stuff. And he was fine with hormone free, antibiotic free, but he didn't want to

Feed his cows herbs and buy organic feed and Well Honestly we had no conditions. We were beggars, not choosers. At this moment in Stoneyfield's life we briefly departed from organic. You had no choice.

We had no choice. Did you did that disturb you? Did you feel like you were betraying your values at that moment? I mean I guess'cause you were you were hemorrhaging, you didn't have any money, but you had this demand and you had to make m and you didn't have enough cows right? Yeah, and I not only had all these problems, but I had my mother and worst My mother in law's money. And so you know what? That makes uh A guy pretty practical.

You know, venture capitalists uh the reason they want What they call F and F money first. Friends and family money. is'cause they know that you might as an entrepreneur, if things get rough, you m you might just Some Harvard MBA you know with with with a tie. But if it's your mother's money, uh.

And so no, we worked for our moms. Which must have been pretty stressful. Oh yeah. In this farmhouse I I always had payroll on Thursday mornings. And and by this point it was a half a million dollar business.

And I never had cash in the bank that night before payroll. Never. Just this is became our way of life. And so uh thinking Meg was asleep. In our bedroom which was about fifty feet from my office I would On many occasions tipto over.

Yeah. To have a chat to see if I could borrow another thirty five hundred or twenty five hundred to make ends meet. And eventually Meg got onto this and one night I heard the click click of call waiting on my mother in law's phone and Meg was calling from the house. To say, Mom, don't do this. Wait, your wife was tell her mom not to lend you money for the business? Right. Because what she didn't have confidence in it?

It well look, she's living in a nightmare. I mean she saw How crazy it was. I mean we had chimney fires, we had the well pump would go out, the the power would go I mean we're on this hilltop farm a long way from anywhere. So was Meg saying to you let's just let's just ditch this thing, let's bag it. I mean or or did she because it sounds like sh maybe she didn't believe in it. Well, she had no reason to believe in it. It was insane. But why did you believe in it? Did you think it was good I mean you are you are what two, three years into this thing. And not only are you not making money, you are in debt.

Big debt, big time. Yeah. Well Oh. Say this, um

Meg uh you know, fortunately loved me. Even more fortunately probably love the yogurt. And we had nowhere else to go. You know, she had given up her job down on her farm in New Jersey and signed on.

To this crazy damn enterprise. But here's where the story if I know that you think it couldn't get worse, but As as uh Lily Tomlin says it it it it it w it it got a lot worse before it got worse. Okay, what ha what happened? Well, so now I'm gonna jump

Uh a year and a half. We've now expanded the plant. We're buying milk from ten or twelve farms. Um I'm gonna guess, let me just tell you the number. We are at about a one point three million dollar a year run rate. Wow. And we have maxed out this little farm. There is no So presumably you are looking to to

work with another factory. So spring of eighty six. We are out of capacity. We contracted with a little dairy in Western Massachusetts, Greenfield Mass. We were desperate. We did not do any

Of the financial due diligence one would normally do, we just Got our way in there and we started making yogurt. And boy, it was great. I mean, all of a sudden paved roads Uh you know, regular power, um Uh dairy and we thought we were

Coming out of the woods. Yeah. The yogurt's being made somewhere else, but you can oversee it. But now we round the bend into the fall of eighty seven, October of eighty seven. Um a fateful weekend, the weekend of the crash of eighty seven and wall street. But what happened for us was on the Thursday night.

Becky Caplis, the banker for his our our manufacturers bank Called me up. at the farm and said, Gary, would you like to buy this dairy? The dairy that that was producing your You're producing our yoga. And I said, No, we we don't have the cash to buy their dairy and and I said, Why are you asking? She said, Well, they're in their third year over there uh small business administration loan guarantee and the SBA has announced they're not gonna renew it. And therefore our bank, my boss, is gonna have to pull our loan to him.

And that means that he's probably not gonna make it. The next morning at seven AM the their bank went in and and put him into chapter seven. Padlocked the place, locked it up. My cups, my lids, my fruit, my yogurt was in there. Um but suddenly this thing is in receivership. Wait a minute, your production comes to a halt? I mean this is a outsourced late production facility. It just stops. So it came to a screaming halt. Worse than that. I had to come up with a hundred thousand dollars to take my in get my inventory out of the building.

Because again, we owed them copacking fees, now the bank's the owner. And so I had to call call my shareholders. And Find a hundred thousand dollars within hours. Um uh and so I did. We got our inventory out.

And n but now we have no factory. Yeah, you're making no yogurt. We have no yogurt. We have what was in the factory. So What could we do? We took a look at the old yogurt works up on the f hilltop farm. Where the roosters were now living, I said, Son of a gun, we gotta come back here. Now by then our volume had grown to a hundred percent more. you know when when it had been exceeded. You could not make enough yogurt at Stonyfield Farm where you were living. Right, right. But that didn't daunt us. That weekend Samuel and I put on our carpenter's aprons went out

And kicked the roosters out and restarted the old yogurt factory. Fortunately the equipment was still there. And by Monday morning So it was a hundred thousand dollars that we had to borrow to Pay off. The dairy.

And then we had to put about A hundred thousand dollars into getting this place. Up and running again. You know, we borrowed and borrowed and borrowed and you know, I went to all the shareholders and you know, of course they had no choice but to lend because e everything they had ever put in was at risk. So Monday morning, um

We begin production again at Stonyfoot Farm now. The problem is in order to keep up we have to produce Twenty four hours a day. Seven days a week. Uh, Samuel or I had to make yogurt every other night. And guy, this began

Uh and continued for twenty months. And we've started burning. Embrace yourself for this. We started burning twenty five thousand dollars a week. Yeah. On top of the two hundred thousand that we had borrowed. So now I am in deep

You know what? And um how much money do you think you you were in debt at that point? Like you're talking a m million or more. Well by the By by Christ of eighty seven. you know, running this factory for two months, I can tell you we were already

Six hundred thousand dollars in debt. By Christmas of eighty eight. We were uh one point nine million dollars in debt. By um Christmas.

of uh the next year. Uh we were two point seven. Wow. Million dollars in debt. Did any of your shareholders say I'm getting nervous here. Th like you are this has been a while here.

And uh I you know, this is like a lot of money for me. Every one of them. And you know, y y what you have to know at the punchline of this story is that I wound up by the end of this period With two hundred and ninety seven individual investors. There was no way to find common ground with an institutional investor, right? A venture capitalist. Believe me, I I knocked on every door. They were like take a hike. Right.

But w but w what about your shareholders? I mean h how did you end up dealing with them? I Stayed in constant touch with every single shareholder. I was in constant contact with my creditors. I couldn't pay fruit suppliers, I couldn't pay You know, our fruit supplier had lost seventy five thousand dollars when that dairy went chapter seven.

And somehow m they had not been paying attention and they continued to ship us fruit back up at the farm. So they They figured it out, you know. three months later that they were now into us for a hundred twenty five thousand.

And I I said look. I can't pay it, but can I come out and talk to you? And I borrowed a credit card. From a friend and flew out'cause we certainly had no credit.

Flew out to Cleveland and met with the Fruit people and I said look, here's the bad news. Here's the good news. It said at our current growth rate. If we can meet orders.

We will be a two hundred fifty thousand dollar year customer for you. Within six months. So h's what I'm prepared to do. I would like to see if you would advance us. Another Hundred twenty five thousand dollars of fruit.

I will pay you back. Starting at six months at your interest rate. Whatever you want to charge, which is a joke'cause nobody No commercial bank would even lend to us. I said I will

Pledge my stock as collateral. Which was a joke'cause it was a liability, not an asset. And finally I said, and I will pledge that I will buy exclusively from you, not from anyone else. Well that was a joke, because no one else would ever sell to us. And they say, Well, Gary, that's an interesting offer Uh, they said, Could you mind if we go up and talk? And they went into the back room.

And son of a gun, half an hour later they came out and said, You know what, we believe in you, we're gonna do it. Well. And and my uh and my summary of that story and so many others of this period is simply If you don't ask, you don't get. And desperation, you know, breeds this thing where you you just have no shame anymore. You have to

Ask and now I I'll just tell you the punchline of that story is those guys have sold us In the thirty years since Um, they've sold us probably uh two hundred and fifty or three hundred million dollars worth of fruit. You know, Gary, it's it's kinda crazy because at this point in in all of my interviews, normally it's where we're talking about how the entrepreneur like made it through the troughs and the crucibles and just you know just start making money hand over fist, but you are still in crisis. I mean your company is still not doing well. I mean you you you didn't even have a factory to make yogurt at this point. You you needed a new one. Yeah. And and we ultimately found one.

Uh it was a dairy in northern Vermont. And um We negotiated for three months with this dairy in northern Vermont to become the answer to this whole thing. Namely

Uh they would produce our yogurt. Samuel and I would focus on sales and marketing. And we would uh become partners and they would uh get paid a Price for every cup of yogurt. Just like the other dairy. But this was a much larger seventy million dollar company.

So D Day comes uh in April of eighty eight to go up and get this deal signed. And we had negotiated a deal that was about two inches thick. And I went up. Sammy and I d left the farm. Now at this point Meg is pregnant with um Son number one. Mm-hmm.

And Of course I've got now I now have over a million dollars of her mother's money. Okay. Like money she could never afford to lose.

Um Everything they had. And uh Meg comes to me at the door and as we're leaving she says, You you y you promise this is done, right? We're gonna I mean,'cause I've been milking every other night. Right. No vacations, no breaks, no nothing. So we're I'm leaving now to go sign this deal. Meg said You promised me that all the details are worked out that when you come back tonight

Where the beginning of this relief is gonna happen. I said, absolutely, we have nailed down every last detail Drove up to Vermont. When I got there, Samuel went into the restroom at their lawyer's office and I looked at my see Instead of the two inch thick

Agreement that we were gonna go over. There was a a letter to me. And it said Dear Gary, and bottom line is Dear Gary and Samuel. Um Basically they decided to trade

to to steal the company from us. They're they they said we've decided That you guys need us more than we need you. Take over what we're gonna do is have all of your shareholders convert their Stock into debt. And you are welcome to work down their debt.

With a credit of one penny per cup. For every yoga every cup made. We figure it will take two years. And at the end of the two years we'll negotiate your future employment. So it wasn't a deal, it was a steal. Wow. Wait, th this this was just sitting

On the table, this letter that said On the table. Yeah, our offer is you we is is we we're stealing we want the company. And all the while they're looking at me and there one guy's winking at me like, you know, do the deal, son, it's in your best interest or You know, your wife's back there desperate for you to solve this g just be smart. Samuel had not even come into the room. I got up. Uttered some things I can't say on public radio and grabbed Samuel.

And got in the car. And we started driving now, of course, as luck would have it. Don't you know, a an April blizzard has started and So no cars are on the road. We've now got A two hour drive back, and worse than that, one of us is gonna have to make yogurt that night, and worse than that.

I have to face my wife. Mm. And so we start driving. I turned to him, I said, What what will you do now?'Cause I knew we were gonna have to sign the deal. I I knew it was over. Yeah.

And and I said And he said well, I guess I'll do something in sales. And you know, my heart sunk, right? This is a guy who had created this incredible yogurt. I mean he was a genius who was making the most perfect product, and now he's gonna sell widgets. So you basically thought Or at least S Sam thought that This was it. I mean you guys were

Look, this is the darkest of the dark of hours. We're we're burning twenty five thousand dollars a week. We're taking money we cannot ever pay back. We have to go back to this farm, we have no solution. And so I turned to Samuel and I said, Listen, Samuel

Just for the fun of it, what would be the cheapest yogurt plant we could build? Somewhere that would actually cover our capacity. He said, You know I was thinking the same thing, so he flicked on the dome light in the car, pulls out his pad, and we start designing a yogurt plant. In the car. In the car. We're driving in this I'm driving, he's designing. We got back to the house about

Ten thirty, eleven at night. He goes in to make yogurt. I go in to see Meg, she's Wak and she says, um So is the deal signed? Is it done? I said, No, no, no, no. That deal's not gonna happen, but we've got a much better idea.

Um I slept alone that night uh over in my office and the next morning at seven AM I was up at the SBA office in Concord, New Hampshire, the small business administration. Remember they They will guarantee loans to businesses, so they make it possible for banks to lend to high risk, which we certainly were. And you were. I mean you you guys were in debt, you had no plant, you couldn't fulfill your orders. I mean how how are you gonna talk them into

into giving you a loan. Well We had figured out that we could build uh this factory For uh five hundred and uh Ninety seven thousand dollars.

So I drove up Two the SPA and I sat down with them and they never Normally you don't go to the S B. You go to the bank who goes to the S B, but I sat down

You know, Stoneyfield's a pretty popular brand. We're well known in the state, so I I meet Bill Phillips, the head of the New Hampshire SBA office, when he walked in at seven thirty and I said Bill. Here's the deal. Uh we can build this factory for five hundred ninety seven thousand. We need an eighty five percent loan guarantee. And guess what? We've got a bank the Bank of New England is willing to lend us. That was a little bit of an exaggeration.

This is stone soup. You know the story. Yeah. I said and and and I knew that I had to come up with twenty percent of it was shareholder um equity. So Um and I said I've got the hundred thousand hundred twenty five thousand from the shareholders. Also not quite true. Bill said, Well listen, Gary, if if you've got the bank and you've got this

And And you've got uh the shareholders then we'll happily do it. I drove from there to the Bank of New England. Sat down I said look guys uh The S B A is gonna provide the loan guarantee and I got the shareholders. Will you

Do this alone. And they said, Well if the SBA will do it, of course we'll do it. And if you guarantee the equity will do that. Call the shareholders to a meeting in Boston the next night. Got together with as many of them as I could, had my mother in law on speakerphone, I said, Here we are, guys We got the bank, we got the SBA, all we need is your hundred twenty five thousand.

And To make a long story short. We got their money. Wow. How much money did you raise? All told, including paying off the debts.

Two and a half million dollars. And opened our new factory nine months later. In Londonderry. Where we are today. And did you both you and Samuel have to give up Oh yeah. By then Samuel and I were down to ten percent each in the company.

Now we also had stock options like we we had an earn back. Um the end of eighty nine we began manufacturing in this facility. The business is now doing Three point four million dollars in sales. But we lost one point four million that year.

Mm. The next year We did six point five million in sales. And we lost uh nine hundred thousand. Uh-hu

The following year, the second full year in the new factory? We did ten point one million and we made one hundred twenty five thousand dollars. This is nineteen ninety two? March of ninety two. So wow. That that was our first year of making money. Yeah. So the nineties are this is just the growth period. You guys are are are on this trajectory and when do you know that you are now sustainable and that things are are looking up? We hit forty four million dollars in around ninety-five. Now we've got stability and cash flow. And this gave us the courage to go back to our roots.

Initially with one farmer and eventually now with one thousand seven hundred and fifty farmers begin buying organic milk again. And of course organic has evolved at this point. Whole foods has become a reality. I mean the organic sector is Real. Yeah. So In ninety five we converted back our plain whole milk quartz to organic Uh ninety six we converted our small cups.

Ninety seven we launched drinks. Ninety eight, we're at seventy eight million in sales. Ninety nine, we're at a hundred million in sales. Uh and that's when I um began negotiating with Danan uh to Have them come in. Yeah, I mean uh at this point it's been a long road, right? Eighty three, you start the company and you hit a hundred million in sales by ninety nine.

Wha what was the reason why you decided to sell you know, a huge stake to to to Denone, to the French multinational uh I guess m much of what they do is yogurt and dairy products. So the answer is The two hundred ninety seven shareholders. I mean some of these folks came in In nineteen eighty four

Without Children. Now they have kids going to college, right? I mean they Do need a return on investment. I had no legal obligation but I felt a moral obligation to um And Samuel also was ready to retire. So

My idea was I'll sell my company to you, you buy out all these shareholders and my partner But you leave me in control. By then I was up to about twenty percent ownership.

I had threw the urn out. And I said, You know, I have this uh uh Commitment. I'll stay on for a really long time. But you gotta let me s keep running the shot.

So I talked to twenty one companies, twenty of them laughed at me. Actually even Danon laughed to me. The the original head of M and A who came to see me said uh Gary, do you mean to tell me We're going to buy eighty percent of your company and you'll still be in control? And I said yes. And the banker and the lawyers and everyone laughed and You know, two years later that's the deal we signed. I I spent two years negotiating with them. So you remained the CEO of the company?

And um I mean in the two thousands if I'm if I'm I get I have my sort of dates right, and I think I do'cause I remember this Like all of a sudden. Greek yogurt just exploded. And you guys We're not a Greek yogurt company. What did that do to your sales?

Well Greek is now fifty percent of the yogurt category. The thick Unusual creamy Taste of Greek. Yeah. Just caught on. It just simply caught on.

I mean we have a wonderful, incredible Greek line. But it's only for us about uh fifteen percent of our sales. And you know, while we're not the leader in Greek, we are the leader in organic. I mean I think we're something like eighty percent of organic yogurt in the US. So How much of what happened to you and your success is because of luck and how much because of skill?

Oh, luck counts for a lot. I mean I was lucky to meet my Incredible wife and Her amazing mother. I was lucky to meet Samuel. I was We were lucky to find people who would lend us money despite how

Silly this was. Um Skill helps, you know. What made this possible was Samuel. and his genius and his incredible skills, okay? Without that superior recipe, none of this could have happened. We you and I wouldn't be talking today. So of course skill counts, but You know, sk there's plenty of fantastic entrepreneurs who've

You know, failed, who had wonderful skills but just didn't Have good luck. This small little hippie, like yogurt thing that you started in nineteen eighty three um has made you very wealthy. It's I mean first of all, was that ever important to you? Did you did you always want to become rich out of this?

All I wanted was my mother and my mother in law to get their money back. Yeah. I kid you not. No, look, you know, we began this interview by talking about my father and tragedy that f came of that with all the people in my communities and You know I

I was never A believer that making money was the holy grail. Um Many boards now. I work with Wall Streeters and

Look, I know the Best way to convince these guys to invest in organic and Renewables is to show you can make a lot of money. So and and that's basically what you did. I mean, despite all the these obstacles that you you guys faced. Yeah. I I often joke that we had a wonderful company, just no supply and no demand. I mean no one knew that there was such a thing as better yogurt, and certainly no one knew what organic was. Uh and yet it's interesting that my dad

And my mom, by the way. In both cases, uh what I now realize I got from them was this belief in myself that Uh it didn't matter what was going to happen. If if yogurt cups were leaking, if uh Uh stores weren't accepting us if competition was coming on, if I couldn't meet payroll. Uh, you know, there was always going to be a way. And I I I learned that from both of them.

And and your mother in law, is she still around? Sadly she just passed a couple months ago. I'm sorry here. I'm assuming that her million dollars was in the end a very good investment. She did extremely well. She uh She and I still kept secrets. I was She passed at uh nearly ninety seven and uh

I can tell you that uh The risk she took uh with Stoney Phil was probably one of her greatest points of pride. You know, she and Meg used to always have this conversation and And Meg begging and pleading her mother not to invest in Doris always had this one line which she had for decades, which is Maggie, I'm a big girl.

I know what I'm doing. It's gonna work out. And she was right. Gary Hirschberg, the co-founder of Stoneyfield Yogurt. By the way, back in 2017, the same year we first spoke to him, Danone sold Stonyfield to another company called Lactalis. One of the biggest dairy companies in the world.

and the amount Lectalis paid for Stonyfield? $875 million, which is not bad for a yogurt business that began with just one cow. Hey, thanks for sticking around because it's time now for how you built that. And today we're updating a story that we first ran last year.

It begins with Corinne Luna Ostasky. And back in 2009, she was working in marketing in New York City. After work one day, a friend asked me if I wanted to grab a glass of scot. And I said no, I don't drink scotch. That's that's my grandfather's drink. But The friend took her to one of those places that specializes in scotch. And that night I tried four different brands and I instantly fell in love with a brand called Oben Fourteen. And I loved the beauty and the nuances and the complexities of the spirit. And so almost instantly, Corinne became a scot drinker. She started reading about it and then collecting it and then eventually evangelizing about it. I became that friend, you know, that was always trying to convince everyone else, oh you should try Scotch, and everyone always said the same things. You know, it burns my nostrils, it tastes like gasoline, it's too expensive.

So Corinne began to think, hey, I already have all this amazing scotch in my personal collection. Maybe I could just blend my own. One that's designed specifically to change the way that you think about scotch. Very smooth, approachable, that has a lot of vanilla and caramel and citrus and just a little bit of smoke. So starting out in her kitchen. I would take two brands that I thought would go well together, and I'd take a measuring cup and three glasses and I would put One that was measured 50-50, another 2575, and the other 7525, and then I had three new blends. And I did this quite a lot and I came up with some really bad, not so great tasting blends. Like even just on the nose, I just dumped it before even tasting it. But eventually, after about six months of experimenting, Corin came up with the blend she really liked.

At this point she was living in San Francisco and she started to call and email dozens of master blenders In the only country that makes scotch, which is Scotland. But time and time again I just got so many nos. In fact there were eighty nos. Eighty no's Um I would say it's an old boys club more than anything, right? Especially being, of all things, an American woman living in California. I think from a third party I heard, oh yes, that's that crazy American woman that's trying to create a scotch brand. But finally. The eighty first person was the one that said, yes, we can help you.

It was actually two sisters that they work for their father's Scotch whiskey importing business. And it was just this amazing moment that I realized that this could actually come together. Corinne then started a Kickstarter campaign, raised$48,000, and used the money to blend her first bottles of scotch. Since we last spoke to Corinne Cia Scotch has been doing pretty well. It's on sale in about 1600 stores across the country, and it's made its way into some major retailers on the West Coast, including Safeway and Target. Oh, and the name Sia? It comes from Gaelic. So the name Sia means the number six and there are six whiskies in the blend and a friend recently pointed out to me that it could stand for

Scotch is awesome. If you wanna find out more about CSGotch, head to our podcast page, howibuilthis.npr.org. And of course, if you want to tell us your story, go to build.npr.org. And thanks so much for listening to the show this week. You can subscribe at Apple Podcasts or wherever you get your podcasts. You can also write to us at hibtnpr.org, and if you want to send a tweet, it's at how I built this, I'm at GuyRaz. Our show is produced this week by Jet Anderson with music composed by rap team Erablui.

Thanks also to Julia Carney, Niva Grant, San Az Meshkin Poor, and Jeff Rogers. Our intern is David Ja. I'm Guy Raz. been listening to how I built this.

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