Devoured or Empowered?
BIG THREE NORTHERN CALIFORNIA CHEESEMAKERS ON SELLING TO SWISS FIRM
A trailblazing trio in the local artisan cheese movement have a lot in common—and not just that they’re all strong, opinionated women of a certain age with jovial senses of humor who have liberated discerning Americans from the tyranny of blocks of orange cheddar. These dairy industry veterans all have decades of food and farming experience under their belts, are significant employers in their communities and have nurtured their boutique brands from infancy to adulthood, producing sought-after, award-winning products through trial and error.
Sue Conley and Peggy Smith of Cowgirl Creamery and Tomales Bay Foods, Jennifer Bice of Redwood Hill Farm and Creamery, and Mary Keehn of Cypress Grove built admirable small-scale businesses from scratch, through hard work, long hours and a devotion to all things cultured. Their companies are well established in their regions: Cowgirl operates in Point Reyes Station, Petaluma and San Francisco; Redwood Hill calls Sebastopol home; Cypress Grove is based in Arcata in Humboldt County. These sisters in sustainability produce popular cheeses and other dairy products beloved in the Bay Area and beyond.
Consider Cowgirl Creamery. A wheel of their flagship triple-cream, cow’s milk Mt. Tam or brine-washed, bloomy rind Red Hawk is practically de rigueur in Marin picnic hampers. Likewise, Cypress Grove’s edible ash-flecked, soft-ripened goat cheese Humboldt Fog, or the company’s Purple Haze, a fresh goat cheese with lavender and fennel pollen flavor notes. Meanwhile, Redwood Hill is perhaps best known for its tubs of creamy goat yogurt and kefir, a probiotic beverage. But it also produces goat milk cheeses, including an aged cheddar, smoked cheddar and feta, that will be discontinued once inventory runs out in a year or two. And, up until recently, Redwood Hill also made Frenchstyle and fresh goat milk cheeses. These seasoned industry stalwarts tick all the good food steward boxes: They partner with like-minded farms; they create jobs in rural settings; their businesses are synonymous with quality and high standards in terms of flavor, form, animal welfare, environmental leadership and community engagement.
What else do they share? A careful succession planning process that resulted in all three agreeing to sell to the Swiss-based dairy company Emmi, which owns agricultural interests around the globe.
BOUGHT BY A BIG CHEESE
Cypress Grove was the first to jump: The company sold to Emmi in 2010. Redwood Hill made the move in 2015 and Cowgirl Creamery followed suit in 2016. In January 2017, Emmi also purchased the Turlock-based, family-run dairy and creamery Meyenberg Goat Milk Products. Demand for goat milk, a seasonal product, is on the upswing. A company spokesman for Emmi, the largest Swiss milk processor and a major cheese exporter, says there are currently no plans to scoop up other niche Northern California cheesemakers or dairy farms.
Cypress Grove founder Keehn says selling to Emmi was like sending a child off to college. The single mother of four daughters, none of whom had an interest in taking over the family business, Keehn had taken her cheese company as far as she could on her own. Absent obvious heirs, the founders of each of the three cheese empires say they wanted to ensure the legacy of their products, long after their reigns end. This is the uncomfortable stuff that business owners in their 60s need to address. They also wanted to expand their brands and improve infrastructure—and finding access to capital or securing bank loans is never easy in the industry. They all have stories about their struggles securing bank loans. It took Bice, for example, 26 years in business before she landed her first bank loan. Presumably goats are considered financially risky.
“It was so hand-to-mouth in the beginning,” says Bice. “Goat milk products weren’t as popular as they are now. I would go to banks and it was always, ‘Oh, no, we don’t do loans to goat farmers.” None of these passionate powerhouses is going out to pasture any time soon. But Cowgirl co-founder Conley would like more time to mentor new cheesemakers and develop new products; Cowgirl Creamery celebrated its 20th anniversary of operation this spring. Bice, who took over the family business in 1978, wants to spend more time at her farm, gardening and caring for her goats. “I need this freedom because, deep down, I am a farmer,” she says. “For me, it has always been about spending most of my day with goats—and so my life will come full circle.” Keehn, who has been freed from the day-to-day operations of running the company she founded for the longest of the bunch, now focuses on big-picture strategy and experiments with new cheese styles.
That said, each swears not much has changed at the businesses they created. Or at least, any developments have been improvements to the existing infrastructure, operations and quality control. And they all maintain Emmi has proven a good fit, a company that shares their approach to food production and appreciates their quirky workplace environments. None of the parties will reveal the financial details of the deals, citing confidentiality agreements.
“The sale to Emmi has been all I hoped for: We’ve kept all our employees, company culture and philosophical values in place,” says Bice, who still serves as the managing director of Redwood Hill, echoing a sentiment shared by the other queens of cheese. “It’s not like we got bought and there’s someone coming in telling us how to run things. Emmi leaves us alone to do what we’ve done successfully for many years.”
CONSUMER, INDUSTRY CONCERN ABOUT BELOVED BRANDS
Still, such seismic shifts raise eyebrows in certain circles. After all, consumers in California feel a sense of ownership in their local foodshed. When a giant international conglomerate with more than $3 billion in annual sales gobbles up small craft producers like Cowgirl people pay attention. Cowgirl makes about $20 million a year (cheesemaking accounts for $8 million, wholesale accounts another $12 million), according to Conley. The Northern California food community in particular prides itself on its local, sustainable, organic approach to agriculture: slow food, slow growth, unique product.
“For U.S. cheese lovers like me, the thought of Cowgirl falling into the maw of a large company is like seeing your favorite local coffeehouse get bought by Starbucks,” wrote Tom Philpott in a 2016 column for Mother Jones.
It’s true, around the country indie food labels are being devoured by big food players on a regular basis. Consolidation in the craft beer and boutique wine categories have also given drinkers—and industry observers—pause. A “European behemoth,” (that’s Heineken), gulped up a 50% stake in Petaluma’s Lagunitas Brewing Company, noted Philpott and, in a press release dated May 4, 2017, Heineken announced that it had closed a deal for the remaining 50% stake, now owning the brewer outright. Other “much-loved small players [who have] succumbed to the appetites of larger players,” from Philpott’s perspective include Copain, a Healdsburg specialty winery that was “swallowed” by Jackson Family Wines, a Santa Rosa–based industry “titan.”
The David versus Goliath narrative is widespread. Hershey snapped up Sonoma’s Krave Jerky in 2015. The same year Perdue purchased Niman Ranch, which originated in Bolinas. It’s not a new phenomenon: Coke guzzled Bay Area juice company Odwalla back in 2001. And it’s understandable: Industry food giants see the market value in scaling up small, innovative edible enterprises. But at what cost to product quality and workplace culture?
Emmi isn’t even the first European cheese producer to develop a taste for a beloved local brand. In 2006, Sonoma-headquartered Laura Chenel’s Chèvre sold to the French cheese corporation Rians Group, causing momentary shock among the goat-cheese-salad set at farm-to-table-touting restaurants such as Chez Panisse. More than a decade later, the pioneering logs of creamy, tangy, grassy cheese are still much the same and widely available; astute observers and palates know that these days the first chèvre in California can be found under a Trader Joe’s house label. And—sacrebleu—in Costco stores, too.
In 2011, the Rians Group also bought Petaluma’s Marin French Cheese Company, the oldest cheese manufacturer in the U.S., known since 1865 for its handcrafted, artisan soft-ripened cheese. The sale, following the death of longtime owner Jim Boyce, has allowed the brand to complete a cheese plant expansion. It has also allowed the operation to introduce new products made in a traditional manner. The company’s Good Food Award–winning Petite Breakfast, a fresh brie, is also found at Trader Joe’s stores and its Triple-Cream Brie is available at Costco. In each of these recent cases—and count Laura Chenel in this crew—none of these women-owned businesses feels like it sold out—or fell prey to the man. Indeed, they quickly dismiss any whiff of a victim-based storyline as simply untrue. They were each merely looking for the best solution to the predicament of their own pending “best by” expiration date and each came to the same conclusion on her own timetable.
A COURTSHIP WITH A CHEESY TWIST
The decision to sell was not made lightly.
About a dozen years ago now, Keehn knew Cypress Grove had outgrown its creamery and would need significant capital investment to maintain growth. she mulled over what to do for several years. She explored what’s known as an employee stock ownership plan (ESOP), in which ownership of the business is transferred to workers. One major hiccup with ESOPs: These contractual maneuvers leave employees on the hook for expensive infrastructure investment. Such costs can prove prohibitive for many workers. And there’s no guarantee that a company won’t be sold after an ESOP is in place. So Keehn ruled out an ESOP as an option.
Her courtship with big cheese began over breakfasts with Matthias Kunz, Emmi’s executive vice president for the Americas. Emmi, she knew, had already acquired the Wisconsin cheese company called Roth. Keehn and Kunz made a date to get together each year during the winter Fancy Food Show in San Francisco. Kunz grew up on an eighth-generation family farm in Emmental, Switzerland. He speaks cheese.
Kunz wasn’t an aggressive suitor, but at each annual visit he’d check in with Keehn to see if she was interested in talking terms. Keehn, who was also being wooed by others smitten with her company, proceeded with caution. Cypress Grove is a big employer in Humboldt County; today the company has around 75 employees. The brand values quirkiness—and not just in its cheese culture. Keehn wanted to find a buyer who was a good match for her business and its staff.
On the surface, Emmi and Cypress Grove might seem like an odd couple. But 54% of the publicly traded company (Emmi is listed on the Swiss stock exchange) is owned by a farmers’ cooperative. And in its homeland, Emmi works with tiny dairies, averaging only 20 to 25 cows per farm. The company also has a reputation for exporting quality Swiss cheese to the U.S. Mostly, though, over the years Keehn learned to trust her instincts—and her relationship with Kunz.
In the end, Keehn says she dictated her terms: The company needed to remain in Arcata and she would stay on as managing director for a period of time. Keehn had already handed over business operations to Pamela Dressler, now the company’s managing director. A deal was struck.
“People were initially gobsmacked, shocked, baffled,” says Dressler. “Some worried—even within the company—that it was potentially a bad fit. But they’ve had the good sense to leave us be to do what we do well.”
The Emmi acquisition has allowed Cypress Grove to “paint with a bigger tapestry,” says Dressler. Improvements have been made at the 18-acre creamery and a new, modern, humane, 38-acre goat dairy funded by Emmi’s investment was built in nearby McKinleyville. The farm, with around 700 goats, has the capacity for about 1,200 animals. And, of course, goat milk is the most important raw ingredient in the company’s products.
Dressler has many positive things to say about the Emmi sale, but the Cypress Grove veteran doesn’t sugar coat the relationship. “The reporting is truly miserable,” she says. “There’s a level of financial scrutiny that small companies generally aren’t good at and don’t like doing. We opted to hire a controller; half of that person’s job is handling accounting reports to headquarters; it comes with the territory.”
It’s a tradeoff she and Keehn are prepared to live with. “We have a lot more opportunity for growth and development and a lot more resources in all departments—from dairy scientists to accounting experts—to draw on,” says Dressler. “The more successful we are the better problems we have. We’re not worrying about making payroll.”
And the losses? “We pay more attention to budgeting. Maybe we’ve lost a little of our playfulness; we’re more focused on the bottom line,” says Dressler, who notes that such a shift is to be expected in a business that is becoming more professionalized as it expands. The company earned $25 million in revenue in 2016 and is projected to have 10% growth this year.
BLAZING A TRAIL FOR OTHER CHEESEMAKERS
Keehn has never second-guessed her decision. And she’s advised her fellow cheesemakers about Emmi, based on her own experience.
Redwood Hill’s Bice followed Keehn’s sale to Emmi closely. Redwood Hill made a national name for itself as a purveyor of goat cheese and yogurt, supplied by its own dairy and other local goat milk farmers. In 2010, the company launched Green Valley Organics, which specializes in lactose-free, cow-milk products, including milk, butter, cream cheese, kefir and yogurt.
In 2005, Bice’s farm became the first humane-certified goat dairy in the U.S. Her business grew to around 350 goats, 80 employees earning livable wages, and partnerships with other farmers, to whom she was proud to be able to offer sustainable milk prices. All good. But a few years ago now, Bice began contemplating what it might mean to step back a bit from the business. One of the first people she sought out for advice on the matter: her friend Mary Keehn, of course.
Keehn is a straight shooter. She also had no complaints. Well, maybe, just a few quibbles around those exacting financial reports—the Swiss are nothing if not precise—and the fact that the company isn’t able to move as quickly as it did in its youth. Oh, and the oddness of receiving performance reviews after decades of running her own show.
“I have a boss now. I hadn’t had a boss in 38 years. I was nervous. It was scary,” she says. “It’s worked out well. Yes, he’s my boss but he’s in based in Switzerland.”
Bice felt confident enough to strike her own deal with Emmi. She sold the Redwood Hill and Green Valley brands to the company and retained ownership of the farm. And she was proactive, alerting the community and customers to the sale. At the time of the sale, revenue was more than $22 million a year.
“To just die one day and leave my business and all the people who depend upon it for their livelihoods with no clear plan for the future was not an option,” she wrote on the company’s site in December 2015. “In the last 10 years, I have been approached nearly 20 times from people and companies who wanted to buy my business. It never felt right. Good options are limited, and to do it right, the process has taken me a lot of strategic thought and a long time to find the right partner.”
Still some thought she was walking away; people asked her if she was retiring to cruise around the world, she recalls with a laugh. “I want this business to eventually go on without me. For now, I keep doing the parts I like and am good at,” says Bice. The partnership is working out well: Yes, there’s more paperwork, but also fewer headaches around financials, and better quality-assurance measures, says Bice. Around the same time-frame as Bice, Conley and Smith began exploring succession planning options. These cheesemakers’ lives are so entwined: Cowgirl Creamery has sold both Keehn’s and Bice’s cheeses since it opened the doors of the Tomales Bay Food Company in 1997, when just six different local cheesemakers dotted the region. Since then, the industry has blossomed beyond two dozen, many of them on-farm producers. The boon in the cheese business has been a win for local dairy farmers, too, who had been barely eking out a living in Sonoma and Marin for some years, says Conley.
Like Keehn and Bice before them, Conley and Smith felt protective of their brand, their 100 or so employees, and their community connections. Cashing out to the highest bidder was never in the cards for these cheesemakers; it was simply at odds with their value system. And expecting long-term workers to land bank loans to take over the business—when they’d struggled themselves to secure financing—just wasn’t realistic. So Conley and Smith also considered and then ruled out an ESOP.
To Conley and Smith’s relief, the big cheeses at Emmi understood that sustainable growth and retaining strong ties to the local agricultural community were key to the company’s continued success. As with Cypress Grove and Redwood Hill Farm, Emmi has invested in significant infrastructure at Cowgirl since the purchase was completed in May 2016. The company is building a new production facility in Petaluma. Budgeted at $6 million, it will cost significantly more, says Conley, of the 30,000-square-foot plant. Capital investment from Emmi has been crucial to the project.
The new plant will allow Cowgirl to expand its aging room facilities, bring back its cottage cheese—a fan favorite—and expand its fresh cheese offerings. Like Bice, Conley and Smith are staying on as managing directors. They retain significant decision-making capacities and long-term planning responsibilities. As a major U.S. hub for artisanal cheese, Emmi is interested in having a presence in Northern California to diversify geographically, according to the company’s Kunz. “As a culture, the Swiss believe in a decentralized way of working,” says Kunz, which also appealed to the Northern California cheesemakers. Emmi, he says, knows how to delegate, not dictate.
THE CHANGING LANDSCAPE OF LOCAL CHEESE
For other local cheesemakers, the brands now under Emmi ownership remain role models. “All of these women-owned businesses—and the fact that they’re all women-owned should be underscored—are mentors to all of us in Northern California cheesemaking and they continue to be in the next evolution of their companies,” says Jill Giacomini Basch, of Point Reyes Farmstead Cheese Co., which is itself expanding to include a production facility near Cowgirl Creamery in Petaluma. “They each built their cheesemaking businesses from the ground up, on a shoestring budget with limited resources, learning along the way.”
Giacomini Basch’s admiration is palpable. “They’re not the kind of people who are selling up and retiring to the South of France,” she says. “They all realize their brands are bigger than them and have planned accordingly with a lot of thought and care to provide for their employees, the communities and the quality of their products in these sales.”
Others in the cheese world agree. “There are not a particularly wide range of options available to producers whose businesses have matured and who are looking towards the future,” says Nora Weiser, executive director of the American Cheese Society. “They need to figure out an exit strategy.” The concern that quality might slip postsales hasn’t panned out, adds Weiser, who notes all three producers have received recent awards in the society’s annual competition. “It is a positive thing if companies can manage and maintain some control over change, and of their own narratives.”
Still, change is hard for all parties. Some customers thought a move away from a European-style display case of cheeses at Cowgirl’s San Francisco Ferry Building store was related to the sale. But it was actually a U.S. FDA-required shift around refrigerating cheeses; it had nothing to do with Emmi’s purchase. “We had a lot of explaining and education to do with our employees, partners and customers,” says Conley. “The timing was unfortunate. We finished the Ferry Building shop remodel last year on June 1, just after the sale to Emmi. We have not reduced or changed our offerings. We [still] offer tastes and custom cuts to customers who need help with their selection.”
The artisan cheese movement in California is still relatively new, adds Conley, who says she sees no imminent danger of consolidation in the industry that would detrimentally impact the unique qualities of the craft movement.
Still, even those within the industry are watching carefully to see if there’s fallout from sales to foreign corporations. Lynne Devereux, a board member of the California Artisan Cheese Guild, has observed the benefits these big European companies bring: centuries of experience in making and operating small cheese companies, state-of- the-art equipment and time-honored techniques, the patience to perfect challenging cheese styles or continue with limited productions, investment capital. But she notes Redwood Hill opted to discontinue most of its cheesemaking in favor of its prime revenue generators, yogurt and kefir. And she wonders aloud whether down the track tighter controls on operating costs may impact company employees or dairy farmers. And what losses for employee development or cheese innovation might come to pass with an absentee owner-corporation.
The ladies of local cheese understand the fear and concern. But they don’t share it. They’re still mentoring young cheesemakers; it’s a big part of their mission. Bice, for one, announced an annual $10,000 scholarship for emerging artisan cheesemakers; the first award is expected this summer. And they believe their brands are protected by the fact that their fundamental value is tied to where the companies are located, their deep community roots and their unique workplace cultures. Emmi isn’t trying to change them, they insist, the company loves them just as they are.
One major change at Redwood Hill since the sale that Devereux references was a personal decision by founder Bice not related to the Emmi purchase, according to a Redwood Hill spokesperson. Bice made French-style and fresh goat milk cheeses beginning back in 1994. In February this year, as part of her succession plan for retirement, she announced she had gifted her recipes and cheesemaking equipment to upcoming artisan cheesemaker Seana Doughty of Bleating Heart Cheese in Tomales. Goat milk for these cheeses will continue to come from Bice’s goats. The generous transfer—unconventional even among community-minded artisan cheesemakers—is expected to take place in 2018.
“We’re seven years into the relationship and these aren’t some kind of Swiss overlords forcing us to make Swiss cheese or move to Wisconsin or anything like that,” says Keehn. “I had confidence that if I did the right thing for my company, employees and community—as well as for me, personally—it would all work out. And you know what? We’re still here doing what we do best.”