Brainstorm Green

How to sell sustainable foods to the Wal-Mart shopper

April 17, 2012: 3:09 PM ET

It's important to bring sustainable foods to the masses, but the companies doing it don't always agree on how to get there.

By Jennifer Reingold

FORTUNE -- "A lot of eco-fascists in my world were very upset when I started selling to Wal-Mart," says Gary Hirshberg, CEO of Stonyfield Farms. They said "'This is the devil.' But this is the angel in my world."

Speaking as part of the "Boundaries of Sustainability" panel at Fortune's Brainstorm Green conference on Tuesday, Hirshberg's comment shows just how much green business has changed in recent years. Instead of seeing huge consumer companies as the enemy, they have become the preferred partner.

That's partly because of the huge changes in the mindset of companies like Wal-Mart (WMT), which have embraced sustainability on many levels. But it's also because many of the smaller producers have realized it's the only way to scale.

The panelists, which also included Wal-Mart EVP and CMO Duncan Mac Naughton and Google (GOOG) sustainability head Rick Needham, who shared details of the company's investment in clean energy assets, all agreed that large company partnerships are key to making progress in the green area.

But they disagreed on how to get there—primarily when it came to price. Mac Naughton, EVP and CMO at Wal-Mart, reiterated that for Wal-Mart, the key to making sustainable food work is its cost. "We believe that good food shouldn't cost more," he said. "But our customer tells us that they're not always willing to pay more."

Hirshberg disagreed, saying the key to getting people to embrace sustainability was to move the focus from price to quality. "It's about banishing the myth of cheap," he said, noting that while his gross margins are lower than other yogurt makers because he pays his farmers more and uses sustainable practices, his net margins are higher. "I've made it up by building consumer loyalty," he says. "My marketing spend is a rounding error [compared with competitors,]" he says. "But you can go on Stonyfield's web site (YoTube), and watch cows chewing their cud."

Naughton admitted that Wal-Mart has made more progress in greening its own company than in convincing the consumer why they should care about sustainability, and said the company was considering adding sustainability metrics to the way it evaluates suppliers, possibly next year. That would have a huge impact—in the way that only a devil—or is it angel?—can.

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