What does it take to be successful in today’s ever-changing food market? According to Greg Steltenpohl, co-founder and CEO of Califia Farms, you need an innovation mindset, collaborative and reciprocal relationships with trusted suppliers, and the willingness to really listen to your customers when they tell you what they want.
Next month at FPSA’s 2018 Annual Conference, Steltenpohl will be speaking at the Dairy and Beverage Joint Council Session, giving a talk called “Winning Through Innovation and Embracing Disruption.” We spoke with him to learn more about his talk and his approach to business.
Steltenpohl has been in the Natural Foods industry since 1980, when he co-founded the Odwalla Juice Company in Santa Cruz, CA. His innovative approach transformed the small juice start-up into a publicly held corporation, which was acquired by The Coca-Cola Company in 2001. Following the sale, he worked on several projects, including an organic fair trade beverage company that sold coffees and teas from around the world. There, he was instrumental in launching one of the biggest recent trends in the coffee world: cold brew.
Then, in 2010, Steltenpohl got a call from the chairman of the Sun Pacific Farming Cooperative. The organization had a problem familiar to everyone in the industry: food waste.
California citrus growers had recently moved away from planting traditional oranges to planting tangerines, which are smaller and easier to peel, making them more child-friendly. However, because the thin-skinned fruits are very tender, there is a lot of waste, and Sun Pacific wanted to explore using that waste to make beverages.
Just like that, Califia Farms was born. Initially, they built a large facility to process fruit, but then Steltenpohl realized that he had both the capital base and the relationships with retailers to pursue another interest — plant milks, especially plant milks blended with coffee. Today, Steltenpohl’s goal is for Califia Farms “to be a leader in helping the consumer have a dairy-free lifestyle and also to stimulate and promote the wisdom of a plant-centric lifestyle.”
Specifically, Califia Farms aims to “transform the dairy case into something that’s substantially inclusive of non-dairy options.” To that end, the company offers an extensive line of plant milks and creamers, cold brews, and juices. They’ve launched 80 SKUs in the past five years and have an 80% success rate on product launches — numbers almost unheard-of in the food industry.
Listening wholeheartedly to what consumers want
One of the reasons for Califia Farms’ success is their unwavering commitment to listening to their customers. And not just surface listening. The Califia Farms team listens wholeheartedly so they can understand what consumers really want. For example, Steltenpohl notes that while some brands may be able to achieve clean label status simply by removing the artificial colors, consumers want more than that — they want healthier, better food.
“We take ideas like clean and clear labels, direct trade, lower sugar formulations, and nutritional density and use them as guidelines for our product development and brand-forward thinking,” Steltenpohl says. “By putting the consumer desire profile at the front of the process, we can keep our products from becoming overly engineering-driven.”
Unlike at many companies, when Califia Farms says they listen to their customers, that doesn’t mean they read market research reports. It means they engage with consumers and work to understand and appreciate the significance of cultural and demographic shifts. And what they’re seeing with the ideas like clean labels is that they’re no longer fads or even trends — they’re significant social changes.
“What’s different now compared to the ‘80s and ‘90s is that the consumer has totally changed,” Steltenpohl says. “Back then, we had a huge job just convincing people that spending a little more for their food was the right thing to do and that they should explore new types of products. Today, consumers, especially younger ones, demand quality and variety. They don’t even shop in the center of the store anymore.”
Part of what’s driving these social changes is the internet and social media. Steltenpohl notes that at Odwalla, because the shelf-life of fresh juices is so short, they could only distribute in cities with “conscious consumers” — places like San Francisco, Seattle, Portland, New York City, Austin, and Boulder. “What’s different now,” he says, “is that these trends reach far beyond those cities and at an accelerated rate. You can go to the middle of the Midwest and buy a kombucha.”
The culinary and farm-to-table movements are also leading people to cleaner, more conscious eating. “The proof is in the pudding,” Steltenpohl says. “My mom was a chef, and I was raised around cooking and good food, so I know first hand that if you don’t eat well, you don’t feel well. I view producing clean food as an alleviation of suffering.”
One of the biggest ways to alleviate suffering, Steltenpohl believes, is by reducing sugar. He cites That Sugar Film as an example of the dangers of hidden sugar. In the film, a man performs an experiment in which he eats only “healthy” foods, like low-fat yogurt, muesli bars, juices, and cereals. The result is a marked decline in his health, which he attributes to the high amounts of sugar in foods touted as healthy.
“The food system evolved for efficiently distributing calories,” Steltenpohl says. “Because of that, efficiency and profits became more important than the latest medical data. So, unfortunately, we have a food system that puts sugar in almost everything. But, highly processed carbohydrates are the enemy of good health, and consumers want foods that taste good without all of the calories from sugar.”
“The food industry needs a transformation,” he continues. “We have to develop brands, packaging, and formats that deliver the clean labels and the nutrition that people need. This shouldn’t be legislated — that’s not the American way — but the food industry has taken the easy way out and that gets my entrepreneurial goat. We need to go in a different direction. It’s not true that you can’t make products that people will like without the sugar. You just need to put the effort and R&D into it — it requires innovative new processing techniques.”
As proof that sugar is not a requirement, Califia Farms has developed the largest selection of unsweetened beverages of any major beverage company. “They’re our best sellers,” Steltenpohl notes.
Working strategically with suppliers
Developing innovative processing techniques to create new types of products isn’t easy. It’s also not something the industry puts enough effort into, according to Steltenpohl. “Many young brands think innovation is just coming up with a nifty formula or new ingredient, but the industry could use its talents to rethink processing flows and techniques, which is what we do. We repurpose equipment and use mechanical processing innovations to create the textures, mouthfeels, and organoleptic properties of our best-selling beverages.” That requires working closely with suppliers, which is what Steltenpohl will focus on in his Annual Conference talk.
Since Califia Farms is a small-to-medium-sized business, their R&D team is only seven people. Yet they’re competing in the market with huge companies with extensive R&D budgets and aggressive acquisition strategies (think: Danone, Starbucks, Coke, and Pepsi). That’s why collaborating with suppliers is a core company strategy.
This collaborative approach was inspired in part by Steve Jobs, who was Steltenpohl’s mentor and also a fresh juice drinker and personal friend. “He would say, ‘Greg, if you don’t know how to do something, pick up the phone and ask the smartest person in the world. You almost always get them to answer your call.’” Califia Farms has taken that advice to heart by tapping into the vast industry knowledge of their suppliers and other experts.
“We involve suppliers in a strategic manner,” Steltenpohl says. “We also create a lot of additional interactive touchpoints with suppliers. This allows us both to think about the relationship as a partnership, rather than as a transactional arrangement. It creates a virtuous cycle in which we can make improvements and breakthroughs together and have success in the market. That, in turn, allows both us and our suppliers to add resources to the conversation.”
Organizing for innovation
Placing customers at the center of the process and creating collaborative partnerships with suppliers are two ways Califia Farms builds innovation into the design of the company.
They also literally organize their business to promote innovation. The business is divided into three disciplines: the innovation discipline, the commercialization discipline, and the base business optimization discipline. Each discipline has its own team leader.
Through these disciplines, Califia Farms is able to develop and launch products much faster than larger, less agile companies.
They start by finding innovation partners on the retail side, like Whole Foods and Sprouts, with whom they can pioneer products. If the new products are successful, then they go after conventional grocery and finally foodservice. Using this process, Califia Farms can get a product from ideation to launch in 6 to 9 months, compared to the 18-month cycle that’s common for larger companies.
Because of their ability to move quickly, Califia Farms has also entered into partnerships with large companies that have innovations they’ve been unable to get to market. For example, Califia Farms partners with packaging firms on innovative designs. As a result they use 12 different packaging formats for their products, which Steltenpohl notes provides a benefit by differentiating their products in the dairy aisle.
These types of partnerships will become even more important in the future, as more small businesses emerge looking to take market share from large ones. “There’s a widening gap between companies getting too big to innovate and small businesses where their speed to market can be 2 to 3 months,” Steltenpohl says. “They can get their product into pop-up stores, and, if it’s the right thing and people love it, they can be off and running in less than a year.”
“In the current system, companies can’t be the most efficient when they get too big,” he continues. “As an entrepreneur, I believe that to be successful, you need to combine speed to market, success rate, continuity, and overall track record. Califia Farms has been able to assemble a team of people who are very dynamic and who have been extremely successful at rapid innovation and consumer adoption. And our partnerships with processors, retailers, and ingredient makers help us come up with new products that get people’s attention.”
Overall, Steltenpohl’s larger vision is to challenge processors and formulators to do better in terms of developing healthier products, forming more collaborative relationships, and fostering innovation. “That’s the world we’re in,” he says. “Don’t fight it, embrace it, and let’s get on with the transformation of the industry.”
FPSA Annual Conference — Greg Steltenpohl
Winning Through Innovation and Embracing Disruption
Thursday, March 22, 4:30pm – 5:15pm
With over 80 SKUs spanning across categories from cold brew coffee to juice and nut milks, Califia Farms utilizes its vertically integrated infrastructure to move products through its innovation pipeline at a rapid pace. From its iconic bottles to the delicious tasting beverages inside them, Co-founder and CEO Greg Steltenpohl’s disruptive approach has made Califia Farms one of the fastest growing natural beverage brands in the U.S. Steltenpohl will share how the company collaborates with suppliers and retailers for dynamically evolving packaging design, ingredient concepts and sustainability initiatives that are driving innovation in the dairy aisle.