How I Built This with Guy Raz - Stonyfield Yogurt: Gary Hirshberg

Episode Date: October 2, 2017

In 1983, two hippie farmers decided to sell homemade organic yogurt to help raise money for their educational farm in New Hampshire. As the enterprise grew into a business, it faced one near-death experience after another, but it never quite died. In fact it grew — into one of the most popular yogurt brands in the US. PLUS in our postscript "How You Built That," how Indiana Jones inspired Steve Humble to sell secret passageways for a living. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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walking distance from so much of the city, made it feel less like a visit and more like we were actually living there. Plus, taking a trip is the perfect time to host your space on Airbnb. Your place with all of its personal touches and its amazing location could make someone else's vacation even better. Your home might be worth more than you think. Find out how much at Airbnb.ca.com slash host. On many occasions, I would tiptoe over to the office to call my mother-in-law, to have a chat to see if I could borrow another 3,500 or 2,500 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 maybe she didn't believe in it. Well, she had no reason to believe in it. It was insane. From NPR, it's how I built this. A show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on today's show, how to,

hippie farmers and a cow named Lily Bell started a side business in a drafty barn and grew it into Stonyfield, 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 Field yogurt 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 e-coldeastern. 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 and sliding into deep debt.

Now over the years, Stonyfield has had a whole slew of near-death experiences, but it never quite died. In fact, it grew. It grew into one of the most popular yogurt brands in the United States. in the United States. And one thing about Stonyfield's co-founder, Gary Hirshberg, 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, in those days, there were probably 50 shoe manufacturers in New Hampshire alone and probably 150 in New Hampshire, Maine, and Vermont. So how many people did your dad do you? company employee? Several thousand, I think at their peak, they were at 2,800. Wow. These were true company towns. Of course, in those days, manufacturing was, you know, the state was built, and the region and the country were built on things that we made. And the dark side of that is that when they, essentially, because of cheaper labor from abroad, when the domestic shoe industry collapsed, all these communities did as well. And what happened to your family? Well, it was very,

really a three a three fur. The family's business went bankrupt. My parents got divorced. And my sort of childhood role model died suddenly of spinal meningitis. So it was a, it was a wake-up year. Yeah. I mean, did your lifestyle change overnight? Because I have to imagine as a kid, you were probably pretty prosperous family, affluent family. Yeah, we were certainly comfortable. I was a ski racer. I, you know, wasn't ever worrying, certainly, about the next meal. And, and, you know, we traveled up north on weekends for skiing. We had a home on a lake. But yeah, you know, the world, I mean, I think everybody at 14, any conscious being starts to, that your life undergoes changes. But in my case, they were kind of expedited. My father began drinking. And so I had to sort

confront all of that and, you know, watched sort of all the rocks just suddenly turned a 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, again, because my dad's business was gone now. So, you know, there was a huge amount of tension. There was lots of battling over alimony, which for money that didn't exist. So she wound up becoming a buy. for a local family-owned hotel chain, actually close friends of ours, which eventually sold to Sheraton. Wow.

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 when they built that. So, yeah, she was like literally, you know, a mom with five kids running a little general store part-time as kind of a hobby to becoming a, you know, a global executive. So this like major change in your life happens at the age of 14, which of course is going to have an impact and influence on you. Did you start to think about business, about being a businessman that early? I mean, you saw your parents that were both entrepreneurial? No, I started to think about running as far as I possibly could away from it. You know, obviously the bankruptcy didn't happen overnight.

It was a result of a steady decline. and my grandfather, my father, and my uncle were all in the business. And I used to sit or work there, and I would listen to them screaming at each other. They were arguing, you know, passionately about what to do, about this downturn. And so to me, business was this thing where people yelled at each other, people hung up phones on each other, people were stressed. Employees lost their jobs. And on top of that serious pollution, so it led to my deciding that business was the worst thing on the planet, the last thing I wanted to do, and led me to really pursue a career in the sciences, environmental sciences. So what did you do after high school?

I went off to a college that was just an overtly liberal arts sort of non-business environment. It was Hampshire College. Oh, yes, right. which of course Ken Burns. If you want to get business knocked out of you, that's where you would have gone, right? Yeah, but stick with it because it turns out that it was probably the best training for an entrepreneur that there is, because this is a school that has no credits, no requirements, no grades. You only pass, matriculate through by contracting and making progress with individual professors

who take you on as they're essentially apprentice. And in many cases, the funding of work. I mean, I wound up diving deep into ecology and environmental sciences. And turns out I was, though, hating business still and thinking, you know, again, now I thought getting educated, 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 actually getting business skills all the while. So I guess it was after college that you went and worked 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 windmill apprentice to windmill technician to executive director. And I saw them on the cutting edge of... of how we were going to need to grow food in the future. And around this time, you also meet Sam Kamen, right? Right. And he is the guy who's going to become your business partner.

And he's also running his own organic farm? Right. So he was mostly teaching organic farming methods, raised beds, biological pest controls, greenhouse, season extending, basically kind of back-to-the-land-type stuff. but with an organic focus. Basically running this as a nonprofit and just... Oh, yes, it was a nonprofit. So we were 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 loved. And he's older than you? Oh, yes. He's about 16 years older. Samuel at that time had six kids. Wow. I was a single guy.

But, you know, we became fast friends. And he asked me if I would join the Board of the Rural Education. Center to help him 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 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 Samuel's board meetings up at the rural education center.

And by the way, critical to this whole story, he had one cow. named Lily Bell and Samuel was experimenting with yogurt and he was a fermentation nutcase I mean he made

sourcrow, beer, wine, kimchi, 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 bowls of this absolutely incredible plain cream on top whole milk yogurt. And just to back up one step, Samuel is originally from Brooklyn,

grew up very poor in Flatbush. But he got to know a lot of these old Jewish yogurt makers down there. And they taught him yogurt making. And what they explained to him is it's very simple. It's all about the weather, meaning times and temperatures. It's about the weather, the humidity, the temperatures. And so Samuel, for his family and for the school, experimented with yogurt for many years. And one day, and unfortunately none of us can remember who, but one of us said,

gee, why don't we start selling this stuff to, you know, make up for the lack of grant money? Because it was nigh impossible to raise money during that period. And, you know, seemed like a pretty good idea. So Samuel was able to get some Catholic nuns. to provide a $25,000 grant. Wait, nuns? Yeah. The Sisters of Mercy,

which you'll hear in a moment the appropriate name, they were taking mercy on these two crazy entrepreneurs. They were selling their monastery, and they wanted to turn their principal into local community action. And Samuel used that money to build the first yogurt works. And about the time that the money came in, which was April of 83, 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'm going to join you in September. So the summer of 83, you move to New Hampshire to start doing this full-time? Right. I moved into a three-story wood-heated log cabin

with no plumbing, and I put solar cells on it, and the Cayman family lives there, and our interns are there. It's one big, kind of happy, crazy cow-milking, yogurt-making operation. So, I mean, how did the yogurt system start? I mean, it was being sort of put into jars, and how did you get it to customers? How did you sell it? How did you put a shingle out and say, yogurt for sale? Well, we started with one cow.

Sammy used the money to buy six more cows. So now he's milking seven. He finances this little tiny factory in a tiny little room that you could only really describe as a closet in a 1792 barn with a wood-fired boiler. And the way it worked was he put in a 50-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 continue to get shipments for five months without paying for any more.

So he started producing April 9, 1983 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 is? should we sell it? And Samson said, I don't know, whatever price you think. I mean, we were not business people. So we started selling at $1.49 a court, which is the same price Danin was selling for. By the way, he was only making courts, six packs of plain cream on top yogurt. 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 eventually the hardwoods people called said, gosh, you know, this is good. It's selling. By the way, way, way below the price that we could afford. So Samuel said, great. So we eventually hired a young local guy to drive a van. We couldn't afford a refrigerator van, so we just told them to drive fast. But yeah, so by the time I got there, five months into this thing, Samuel had probably about $50,000. of sales. Wow.

And my gosh, the product was selling through, but he couldn't keep up. And he was out of cash, and, of course, he wasn't paying bills. He was out of cash because the lag time between when he was getting paid. Well, he had to pay for 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. But he had to pay, you know, people to help. And, you know, the $35,000 had sort of disappeared overnight.

Honestly, I don't know how he got through five months because when I arrived on September 15th of 83, Samuel had these old Army surplus desks in this farmhouse. 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 Stonyfield Farm. and I'm going to spend my first... That was the name of the farm, Stonyfield 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. The only problem was there were no checks. Samuel, any money that had come in, he had used it to buy feed or, you know, lubrication, equipment, fuel, wood, whatever. And by 11 a.m. that morning, my first day, I calculated that we were $75,000 in the red. So what did you do?

Well, I did what any self-respecting entrepreneur does. I called my mother. And I borrowed $30,000 from her, which she could ill afford, as I told you before, she was her own businesswoman with four, you know, family. But, you know, 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 borrow?

These were the funders for the farm that you had run back in Massachusetts. Right. Well, Samuel had a handful of folks who had been his funders. Like I said, he raised $125,000 a year. So they were probably 20 or 30 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 10 years of our work was all about proving that, you know,

you can grow food organically. But if we're going to be successful with this revolution, I said to the funders who had gotten us there, then we're going to have to prove that you can actually make money doing it. And we're going to 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, etc., etc., all the things that we were doing in the nonprofit context, I said, you know, this, This is, I'd like to ask you to join us in the next phase, which is helping us to build a successful business. And instead of asking for a grant, I'm asking you for a loan.

And I wound up borrowing $125,000. Okay, so you go out and you start raising money. And did you and Samuel sit down and say, okay, how are we going to structure this business? Like, we are co-owners. This is a joint venture? Like, how did you, did you ever do that? Well, we did because one of the things I did was I hired a lawyer because I knew we didn't know what we were doing. And the first thing this lawyer said to me was he said, Gary, what percentage of the rural education center's revenue is coming from the yogurt?

Well, at that point, it was getting close to 75%. And he said, well, guess what? You've got to spin it off because under IRS rules, that makes you a business, not a nonprofit. So Samuel and I realized we're going to have to buy this from the rural education center. So we agreed to a split in the company, essentially 50-50. And then I went out to our lenders of the 125K. And I said, look, 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.

What did you value at the time? Well, we thought we were going to value it at a million dollars. By then, in 1984, our sales were up to around 250,000 a year. And this was just in New Hampshire or all over New England? Well, by 84, we were starting to push the boundaries. We're selling to about 20 stores. And eventually we started selling to an independent grocer who had seven stores called Alexander's Supermarkets, now part of Hannaford in the New York. Northeast. And this will give you the real flavor for this, what was going on here. So one Sunday night, we were having dinner at the Cayman's after milking. And the phone rings. And Jack DeMoulis, the nephew of the owner of the DeMoulis market basket chain, calls and says, Samuel,

why are you selling my competitor, this little seven-store chain of Alexander's, and not to me? Now, he had 34 stores at the time. And Samuel said, well, to be honest, Mr. Dumas, 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 so we now realized 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 warehouse. How much yogurt were you making at that point? We were producing now about 360. cases a week of yogurt.

And a case is like 24 cups. Six packs. Six packs of courts. So by the end of 84, our run rate was headed in the sort of half a million dollar range. But 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. Yeah. I knew on a Wednesday morning how much money had to come. in that afternoon in order for us. Because by then, the cup guy had figured out, you know, Samuel wasn't paying him. So now we were on very short terms with everybody. I mean, my fundraising skills turned 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, because 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 Guy Raz, 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, Whole Foods didn't exist yet. But the Holy Grail for natural products was a little three-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 baskets this is now i'm talking july of 84 and um and we were desperately trying to get down there because 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 they said no no no we've already got you know a hippie yogurt made by somebody in vermont who 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 what did you guys deal? So in July of 84, I had my 30th birthday at the farm, and I had my old ultimate Frisbee team come up to visit me, most of whom lived in Cambridge, as you might imagine.

And I said, look, it's wonderful you've all come. If you want to give me a really good birthday present, get underbred and circus on prospects in Cambridge and asked for my yogurt. That was on a Sunday. On Wednesday, Mary Carol Skinner, the buyer of 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 yogurt. When can you get it in there? Well, I got in my car and I made the first delivery that afternoon.

About a month later, we were her number one selling yogurt. 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 always say we can ship the yogurt 3,000 miles. It's the last 18 inches that makes all the difference. You get it in people's mouths, and then they're going to 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? Utterly. It was impossible. Look, this was crazy, right? We're growing, we're booming, and we're burning cash. And probably working like crazy. Yeah, we're 24-7.

And Samuel had six kids. Yes. Well, actually, by the way, the six kids were the secret weapon because it was sort of indentured servitude. I mean, you know, it was hard if they were going to have dinner that night, it was hard for them to say no to, you know, milking or making. And by the way, several of his kids were our just absolutely astonishingly good yogurt makers. They had their father and mother's sense of pride in the product. And this is right around the time you meet Meg, who would become your wife, right? Yeah. So a month after that fateful meeting with Bread and Circus, we had our summer NOFA conference,

Northeast Organic Farming Association conference. And 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 that this is possible, that if you build it, they will come. And right after I finished my speech, this very adorable organic farmer from New Jersey, who was running her own nonprofit farm down there, waited patiently to ask me a question. Well, that turned out to be what is now my 31-year wife, Meg. And we began courting, and Thanksgiving that year, in 84, Meg introduced me to her family. and her mom had been the deputy commissioner of agriculture for New York State. So she had a kind of an ag orientation.

At one point she kind of whispered to me that she'd be okay with if I needed some money with lending me some. Well, of course I needed money. So she loaned us $50,000. And now we're heading into 1985. We've now launched small cups of flavored yogurt. I now needed to raise about 500,000 because we needed to buy more cups, more fruit. You know, people expected us to pay.

So Doris had loaned us the 50 towards the 500,000. Doris is your mother-in-law. My mother-in-law, excuse me. And I started raising, and I got to about 275, 300. This is sort of a month or so later. She said, well, I think we can increase. And so she increased to 100. and eventually I got across the finish line, got the 500.

Why did you need so much money? Well, the factory itself was probably 300,000. The factory on Stonyfield Farm. Yeah, we called it the yogurt works, the little shop. You know, it was a drafty old barn. It was 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 19. But one night in this same era, Samuel was out milking. He had milked the first of the 19 cows, and the power went out. Samuel came in and said, you know, I need help because he is 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. Let me tell you, they didn't. 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 finished milking the last cow at about 3 a.m. in time to start milking the first one. And that was the night when we realized, you know what, we got to sell the cows. You had to sell the cows because you guys could not milk them all by yourselves. Right. And so the next morning, we reached out to a local Jersey farmer because 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 going to have anything to do with 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. But that was your condition? Well, honestly, we had no conditions. We were beggars, not choosers. So we briefly, at this moment in Stonyfield'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 because you were, you were hemorrhage, you didn't have any money, but you had this demand and you had to make, 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, a guy pretty practical. You know, venture capitalists, the reason they want what they call F&F money first, friends and family money, is because they know that you might, as an entrepreneur, if things get rough, you might just get up and walk away if it's, you know, some Harvard MBA, you know, with a tie. But if it's your mother's money, uh-uh, yeah.

And so, no, we worked for our moms. Which must have been pretty stressful. Oh, yeah. You know, what happened in this farmhouse, I always had payroll on Thursday mornings. 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. This became our way of life.

And so thinking Meg was asleep in our bedroom, which was about 50 feet from my office, I would, on many occasions, tiptoe over to the office to call my mother-in-law, to have a chat, to see if I could borrow another 30-year-old. $3,500 or $2,500 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 telling her mom not to lend you money for the business?

Right. Because she didn't have confidence in 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 power would go. I mean, we're on this hilltop farm along with.

from anywhere. So was Meg saying to you, let's just ditch this thing. Let's bag it. I mean, or did she, because it sounds like 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, 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, I'll say this. Meg, you know, fortunately loved me, even more fortunately probably loved 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, I know that you think it couldn't get worse, but as Lily Tomlin

says, it got a lot worse before it got worse. Okay, what happened? Well, so now I'm going to jump a year and a half. We've now expanded the plant. We're buying milk from 10 or 12 farms. I'm going to guess, let me just tell you the number. We are at about a $1.3 million a year run rate. Wow. And we have maxed out this little farm. There is no, you cannot squeeze another drop of yogurt out of this place. So presumably you are looking to work with another factory. Right. So spring of 86, 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. We started making yogurt. And boy, it was great. I mean, all of a sudden, paved roads, you know, regular power dairy. And we thought we were coming out of the woods. Yeah. The yogurt's being made somewhere else, but you can oversone. see it. Yeah, yeah. But now we round the bend into the fall of 87, October of 87, a fateful weekend, the weekend of the crash of 87 and Wall Street. But what happened for us was on the Thursday night of that weekend, Becky Capeless, the banker for his, our manufacturer's bank, called me up at the farm and said, Gary, would you like to buy this dairy? The dairy that was producing your yogurt. producing our yoga.

And I said, no, we don't have the cash to buy their dairy. And I said, why are you asking? She said, well, they're in their third year of their small business administration loan guarantee, and the SBA has announced they're not going to renew it. And therefore our bank, my boss, is going to have to pull our loan to him. And that means that he's probably not going to make it. The next morning at 7 a.m., their bank went in and put them into Chapter 7, padlocked the place, locked it up.

My cups, my lids, my fruit, my yogurt was in there. Wow. But suddenly this thing is in receivership. Wait a minute. Your production comes to a halt. I mean, this is an outsourced production facility. It just stops? So it came to a screaming halt.

Worse than that, I had to come up with $100,000 to get my inventory out of the building. Because, again, we owed them co-packing fees. Now the bank's the owner. and so I had to call my shareholders and find $100,000 within hours. And so I did. We got our inventory out, but now we have no factory. 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 hilltop farm where the roosters were now living and said, son of a gun, we've got to come back here. Now, by then, our volume had grown. to 100% more, you know, when it had been exceeded.

You could not make enough yogurt at Stony Field 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 $100,000 that we had to borrow to pay off the dairy. And then we had to put about $100,000.

into getting this place up and running again. We, 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 everything they had ever put in was at risk. So Monday morning, we begin production again at Stonyfield Farm. Now the problem is, in order to keep up, we have to produce 24 hours a day, seven days a week.

Samuel or I had to make yogurt every other night And Guy, this began and continued for 20 months. And we started burning, embrace yourself for this, we started burning $25,000 a week on top of the $200,000 that we had borrowed. So now I am in deep, you know what. How much money do you think you were in debt at that point? Like you're talking about a million or more. Well, by Christmas of 87, you know, running this factory for two months, I can tell you we were already $600,000 in debt. By Christmas of 88, we were $1.9 million in debt. By Christmas of the next year, we were $2.7 million in debt. Do any of our shareholders say, I'm getting nervous here?

Like you are, this has been a while here. And I, you know, this is like a lot of money for me. Every one of them. And, you know, what you have to know at the punchline of this story is that I wound up by the end of this period with 297 individual investors. There was no way to find common ground with an institutional investor, right, a venture capitalist. Believe me, I knocked on every door. They were like, take a hike. Right.

But what about your shareholders? I mean, 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 $75,000 when that dairy went Chapter 7. And somehow they had not been paying attention,

and they continued to ship us fruit back up at the farm. So they figured it out, you know, three months later that they were now into us for 125,000. And 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, because we certainly had no credit, flew out to Cleveland and met with the fruit people. And I said, look, here's the bad news. We owe you $125,000. But here's the good news.

They said, at our current growth rate, if we can meet orders, we will be a $250,000 a year customer for you within six months. So here's what I'm prepared to do. I would like to see if you would advance us another $125,000 of fruit. I will pay you back, starting in six months at your interest rate, whatever you want to charge, which is a joke, because nobody, no commercial bank would even lend to us. I said, I will pledge my stock as collateral, which was a joke because 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 said, well, Gary, that's an interesting offer. They said, do you mind if we go off 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 going to do it. Wow. 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 just have no shame anymore. You have to ask. And now I'll just tell you the punchline of that story is those guys have

sold us in the 30 years since. They've sold us probably $250 or $300 million worth of fruit. That's amazing. You know, Gary, it's kind of crazy because at this point 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 started making money, hand over fist. But you are still in crisis. I mean, your company is still not doing well. I mean, you didn't even have a factory to make yogurt at this point. You needed a new one. Yeah. And we ultimately found one. It was a dairy in northern Vermont. And we negotiated for three months with this dairy in northern Vermont to become the answer to this whole thing. Namely, they would

produce our yogurt. Samuel and I would focus on sales and marketing. And we would become partners, and they would get paid a price for every cup of yogurt, and just like the other dairy. But this was a much larger, $70 million company. So D-Day comes in April of 88 to go up and get this deal signed. And we had negotiated a deal that was about two inches thick. And I went up. Samuel and I left the farm.

Now, at this point, Meg is pregnant with son number one. And, of course, I've got now – I now have over a me. million dollars of her mother's money. Okay? Wow. Like money she could never afford to lose. Everything they had. And Meg comes to me at the door and as we're leaving, she says, you promise this is done, right?

We're going to, I mean, because I've been milking every other night, right? No vacations, no breaks, no nothing. So I'm leaving now to go sign this deal. And Meg said, you promised me that all the details I worked out that when you come back tonight where the beginning of this relief is going to happen. 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 seat, instead of the two-inch-thick agreement that we were going to go over, there was a letter to me. And it said,

Dear Gary, and bottom line is, Dear Gary and Samuel, basically they decided to trade, to steal the company from us. They said, we've decided that you guys need us more than we need you. We're going to take over, what we're going to 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 yogurt, 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, this was just sitting on the table, this letter that said, yeah, our offer is, is we're stealing

we want the company and all the while they're looking at me and one guy is 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 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

wow and got in the car and we started driving now of course as luck would have it don't you know 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 going to have to make yogurt that night. And worse than that, I have to face my wife. And so we start driving. I turned to him. I said, what will you do now? Because I knew we were going to have to sign the deal. I knew it was over. Yeah.

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 yoga. I mean, he was a genius who was making the most perfect product, and now he's going to sell widgets. So you basically thought, or at least Sam thought, that this was it. I mean, you guys were... I mean, look, this is the darkest of the dark of ours.

We're burning $25,000 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.

And 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 10, 30, 11 at night. He goes in to make yogurt.

I go in to see Meg. She wakes up and she says, so is the deal signed? is it done? I said, no, no, no, no, that deal's not going to happen, but we've got a much better idea. I slept alone that night over in my office, and the next morning at 7 a.m., I was up at the SBA office in Concord, New Hampshire, the Small Business Administration. Remember, 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 guys were in debt. You had no plant. You couldn't fulfill your orders? How are you going to talk them into giving you a loan? Well, we had figured out that we could

build this factory for $597,000. So I drove up to the SBA and I sat down with them. And they never, normally you don't go to the SBA, you go to the bank who goes to the SBA, but I sat down, you know, Stonyfield'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 730 and I said, Bill, here's the deal. We can build this factory for $597,000. We need an 85% loan guarantee. And guess what? We've got a bank, the Bank of New England's willing to lend us. That was a little bit of an exaggeration. This is stone soup. You know the story. Yeah. I said, and I knew that I had to come up with 20% of it with shareholder equity. So, and I said, I've got the 100,000.

125,000 from the shareholders. Also not quite true. Bill said, well, listen, Gary, if you've got the bank and you've got this plan and you've got the shareholders, then we'll happily do it. I drove from there to the Bank of New England, sat down, I said, look, guys, the SBA is going to provide the loan guarantee, and I've got the shareholders, will you do this loan? And they said, well, if the SBA will do it, of course we'll do it. And if you guarantee the equity, we'll do that.

called 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 and speakerphone. I said, here we are, guys. We got the bank. We got the SBA. All we need is your $125,000. And to make a long story short, we got our money. Wow. How much money did you raise? All told, including paying off the debts, $2.5 million. And opened our new factory nine months later in London. where we are today. And did you, both you and Samuel, have to give up big chunks of your ownership? Oh, yeah. By then, Samuel and I were down to 10% each in the company. Now, we also had stock options. Like, we had an earnback.

The end of 89, we began manufacturing in this facility. The business is now doing $3.4 million in sales, but we lost $1.4 million that year. The next year, we did $6.5 million in sales, and we lost $900,000. The following year, the second full year in the new factory, we did $10.1 million, and we made $125,000. This is 1992? March of 92. So that was our first year of making money. So the 90s are, this is just the growth period.

You guys are on this trajectory. And when do you know that you are now sustainable and that, things are looking up? We hit $44 million in around 95. 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 1,750 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 95, we converted back our plain, whole milk courts to organic. 96, we converted our small cups. 97, we launched drinks. 98, we're at 78 million in sales. 99, we're at 100 million in sales.

And that's when I began negotiating with Danon to have them come in. Yeah, I mean, at this point, it's been a long road, right? 83, you start the company. and you hit 100 million in sales by 99. What was the reason why you decided to sell, you know, a huge stake to DeNone, to the French multinational, I guess much of what they do is yogurt and dairy products? So the answer is the 297 shareholders. I mean, some of these folks came in in 1984 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 pay them back. 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 20% ownership. I had through the earn out.

And I said, you know, I have this commitment. I'll stay on for a really long time. But you've got to let me keep running the shot. So I talked to 21 companies, 20 of them laughed at me. Actually, even Danon laughed to me. The original head of M&A who came to see me said, Garie, do you mean to tell me, we're going to buy 80% 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 spent two years negotiating with them. So you remained the CEO of the company. And, I mean, in the 2000s, if I'm, if I'm, I get, I have my sort of dates right. And I think I do because I remember this. Like, all of a sudden, Greek yogurt just exploded.

And you guys were not a Greek yogurt company. What did that do to your sales? Well, Greek is not 50% of the yogurt category. The thick, unusual, creamy taste of Greek just, you know, just caught on. It just simply caught on. Huh. I mean, we have a wonderful, incredible. incredible Greek line, but it's only for us about 15% 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 80% of organic yogurt in the U.S. 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. We were lucky to find people who would lend us money despite how silly this was. Skill helps. What made this possible was Samuel and his genius and his incredible skills. Without that superior recipe, none of this could have happened. You and I wouldn't be talking to you. Of course, skill counts. But 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 1983 has made you very wealthy. I mean, first of all, was that ever important to 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 his failed business and all the tragedy that came of that with all the people in my communities. And, you know, I was never a believer that making money was the holy grail. You know, I sit on 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. And that's basically what you did. I mean, despite all these obstacles that you guys faced. Yeah. 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.

And yet, it's interesting that my dad and my mom, by the way, in both cases, what I now realize I got from them was this belief in myself that it didn't matter what was going to happen if yogurt cups were leaking, if stores weren't accepting us, if competition was coming on, if I couldn't meet payroll, you know, there was always going to be a way. And I learned that from both of them. And your mother, is she still around? Sadly, she just passed a couple months ago. I'm sorry to hear. I'm assuming that her million dollars was in the end of very good investment. She did extremely well. She and I still kept secrets. I was, she passed at nearly 97. And I can, I can.

can tell you that the risk she took with Stony Field was probably one of her greatest points of pride. You know, she and Meg used to always have this conversation, 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 going to work out. And she was right. Gary Hirshberg, co-founder of Stony Field Yogurt. By the way, earlier this year, Danone sold Stonyfield to another company called Lactalis, one of the biggest dairy companies in the world. And the amount Lactalus paid for Stonyfield? $875 million, which is not bad for a yogurt business that began with just one cow.

And please stick around because in just a moment, we're going to hear from you about the things you're building. Hey, thanks for sticking around because it's time now for how you built that. And this week, our story starts at the movies. So there's a scene in Indiana Jones and the Last Crusade, and you may have seen it, where Harrison Ford is stuck in a room that has burst into flames. So he starts to scoot his chair to the only place that is not on fire, which is the stone fireplace. And then, and I think you know where I'm going with this, the fireplace suddenly spins, and Indiana isn't a whole new room.

And this room is full of Nazis. So this movie, it was kind of formative for Steve Humble. Steve is a mechanical engineer. And a few years ago, he was living in Salt Lake City, renting a big house with some friends. And there was a spot in the house that was a big stone hearth. And I have always been kind of fascinated with secret passageways. And I thought I could totally make a secret passageway like what I've seen.

the last crusade. Because let's face it, how awesome would it be to have a secret passageway in your house? And the more Steve mulled it over, the more he thought, you know, I bet other people want one too. So the first thing he did was to Google secret passageway building companies. And there was nobody. Absolutely nobody anywhere that could make these secret doors like were in the movies, you know, motorized and maybe high security stuff. Now at the time, Steve was pretty bored at his day job. So he started to dream of creating a business that would build secret passageways. And he called up some contractor friends and he asked, would your clients possibly be interested in something like this? And I got overwhelmingly positive feedback. So eventually, you know,

I decided I'm going to do this thing. I quit my job. I had to move in with my parents. Steve moved to his parents' place in Mesa, Arizona. And he started to tink, in his dad's garage. And it just so happened that an old high school buddy was building a house nearby. So Steve said, hey, why don't I build you a secret hiding place? He had a niche in the wall, like a recess, and he kept a vase in there. And I made it so that when you twist the vase, a painting on the wall opens, and it exposed a fingerprint scanner. And then when you scanned your print, then the niche itself would slide upwards towards the ceiling. And it was a replaced from below by a gun safe. A hidden gun safe. So at this point Steve started to

market his idea. He got a story in the local paper and within a year people started to find him. Like big people like people you would have heard of and they are building multi-million dollar houses. And of course we asked him for the salacious details but well... I wish I could name drop for you but yeah I am sworn to secrecy. So anyway Steve is suddenly in his dream job. He's flying around the world He's working on palatial homes, putting in vaults and fingerprint scanners and secret doors for people whose names he cannot reveal. I felt a little bit like an imposter. I'd show up at this house where there's this incredible team of talent.

But I kept reminding myself that nobody knows how to make secret passageways any better than I do. Certainly no one's built any more than I have. So I guess I am the expert at this. A custom-made secret door starts at around. $9,000. But Steve's recently introduced a cheaper line of his secret doors, just $1,500, and they're made to look like anything other than a door. One is a full-length mirror. One is a bookcase. One is a wardrobe. And you can install one of these secret doors in front of your spare bedroom or a closet. You hide what you want, and then you trigger the door by remote control.

And Steve says he's barely advertised, and he's already selling about one of the same. these a day. I mean, it's on a clear trajectory to surpass our core business. And then his more middle class ones, Steve expects to make $1.5 million just this year. His company is called Creative Home Engineering. And you can read more about it on our Facebook page. Just search how I built this on Facebook. And of course, if you want to tell us your story, go to build.npr.org. We love hearing what you're up to. And thanks for listening to the show. this week. If you want to find out more or hear previous episodes, you can go to how I built this.npr.org. Please also subscribe to our podcast if you haven't already. You can do that at

Apple Podcasts or however you get your podcasts. You can write to us at Hibt at npr.org. And if you want to send a tweet, it's at How I Built This. Our show is produced this week by Jed Anderson with original music composed by Ramtin Arablui. Thanks also to Neva Grant, San Azmesh Claire Breen, Lawrence Wu, and Jeff Rogers. Our intern is Diana Mustak. I'm Guy Raz, and you've been listening to How I Built This from NPR.