CV#12 Vital Farms: Understanding Their Multi-Stakeholder Approach to Business
COMPANY AT A GLANCE
Founded: In 2007 by Matt O’Hayer and his wife, Catherine Stewart. After returning from life on the ocean, Matt and Catherine wanted a way to get back in touch with their roots. Matt had raised chickens in his youth, so with a little convincing, Matt and Catherine bought a 27-acre piece of land and began raising hens. Over time, twenty-two hens turned into 1,000 chicks and they went from selling to farmer’s markets to Whole Foods. Driven by the desire to bring ethically produced food to the table and to scale the model of pasture-raised eggs, they have partnered with over 130 small farmers and produce over a million eggs a day.
Purpose: To bring ethically produced food to the table.
Employees: 110 | 2017 Revenue (estimated by Forbes): $100M
Community: Community/Environment is one of Vital Farms’ 5 stakeholders. The company holds quarterly meetings for all its farmers, and are active in the Springfield community, regularly hosting tours of its plant and farms. Vital Farms took a regenerative approach to the design and construction of its first full-scale egg packing plant which opened last fall, including restoring native vegetation to the site, and creating a multi-stage rain garden, which holds and filters water falling on the property before returning it to the local aquifer.
LET THE TOUR BEGIN
I arrived at Vital Farm’s office in Austin, Texas, home to the leadership team, along with the accounting, finance, human resource and marketing departments. The majority of Vital Farms’ employees, (they call them ‘crewmembers’), actually work at Egg Central Station, their new egg washing and packing facility in Springfield, Missouri, or are out on the road in key areas such as farm support and sales. During my time, I had the opportunity to learn from Founder and CEO, Matt O’Hayer, President & COO, Russell Diez-Canseco, and VP of Human Resources, Jennifer Gregg. Here’s what I learned:
1. Understanding the Multi-Stakeholder Approach
Vital Farms’ business model is all about the multi-stakeholder approach, which means that they are always balancing their five most important stakeholders: employees, shareholders, vendors (birds included), customers, and community/environment. Founder & CEO, Matthew O’Hayer, believes that for Vital Farms to be successful as a business, the relationship also needs to be sustainable for all these key stakeholders. While not every group can be happy about every decision that Vital Farms makes, over time things need to work for everyone. Here’s how it works:
2. A Common Mission
To effectively bring together these five stakeholders, they have to be united around a common mission. For Vital Farms, this common mission is to bring ethical food to the table. According to President and COO, Russell Diez-Canseco, in order to unite everyone around the mission you have to 1) make sure they truly care about it and 2) think about what’s most important to that stakeholder and work backwards. Here’s what that looks like in practice:
Investors obviously want to make money. But impact investors also want to make an impact. This is the type of investor Vital Farms seeks out. Currently, Vital Farms has seven private equity shareholders in addition to founders and individual shareholders, of which Matthew O’Hayer is the largest. To balance investors’ desire to make money and have an impact with Vital Farms’ long-term approach to business, the company offers shareholders regular liquidity events. According to Matt, this gives Vital Farms the best of both worlds: the ability to raise capital to grow the business, while being able to make long-term decisions for the success of the company.
Just like Vital Farms vets their investors, they also do their due-diligence when hiring employees. The company seeks not just to understand a candidate’s skills and track record, but to uncover their why and personal mission. To do so, the company uses a structured interview approach which feels a lot like talking to a biographer. For 1.5-3 hours, candidates explore their career history in detail, with a focus on understanding what really motivates them, and the kinds of roles and situations in which they not only had the most success, but also felt the most passion. The idea is not just to find the best candidates, but to also set them up for success once they join. As Jennifer Gregg, VP of Human Resources said, “It’s more behavioral-based to put people into a frame of mind where they remember actual experiences, versus guessing what they think they would do well for us. It’s a great way to draw on past experiences and gauge future behavior and satisfaction in the role. It’s also a framework for consistency.” Of course, once crew members join, Vital Farms provides a terrific work environment and perks that extend beyond pay, including weekly crew lunches and even an occasional cooked-to-order breakfast by Matt O’Hayer, a former chef himself.
Vital Farms mission to bring ethical food to the table naturally draws customers who care about ethical food practices. To further engage customers (especially the millennial generation), Vital Farms produces fun and transparent marketing campaigns, such as their “Bullsh*t-Free Eggs” campaign to share how they live out their mission.
Many of Vital Farms’ suppliers are the 130+ family farmers who supply the company with its pasture-raised eggs These farmers care deeply about their animals, land, and desire to earn a good income. Farmers are paid a substantial premium above what they would earn producing more conventional eggs, but in return agree to follow Vital Farms’ high standards for everything from outdoor access to food safety biosecurity. The hens are treated very well: at least 108sqft to roam and eat forage + feed, versus cage-free hens, who only have +1sqft per bird and soy/corn feed only.
Vital Farms cares deeply about their community and environment. While they see this as a broader scope, generally their philosophy is that they want to leave the earth better than they found it. An example of this is when they built Egg Central Station in Springfield, MO. When determining the location, they partnered with the local chamber of commerce to decide where to build the plant, and how to involve community, including hiring locally & paying at least 25% more than the living wage. They were awarded the 2017 Environment Excellence Award by the City of Springfield's Water Quality Division for their best practices of storm water green infrastructure, tree preservation, bio retention features, and erosion and sediment control both during construction and ongoing operations at its egg processing facility.
3. Practice Active Listening & Transparency
While they have a common mission, it’s critical that Vital Farms listens closely to what’s important to each stakeholder and shares openly with them to continue to keep them engaged. For investors, this includes holding quarterly board meetings to share financials and gather feedback. For their farmers, this includes quarterly educational summits (more on this in a moment). For the community and customers, this includes surveying frequently, hosting quarterly farm tours, answering every customer question via phone or email, and being very open in the documentation of their farm practices.
For employees, this includes creating a safe and trusting environment where feedback can be given honestly. The Vital Farms leadership team recently went through an active listening training offered by the Barry-Wehmiller Leadership Institute, where they learned how to better listen and empathize with their stakeholders. VP of HR, Jennifer Gregg, who currently leads the operations of Egg Central Station, is the first to admit to employees that she doesn’t know much about manufacturing and asks employees for their feedback from the get-go. “We want our frontline crew members to feel like they have a voice to express concerns – to know why we are doing it this way. We want them to be able to say, ‘Hey I’ve been doing this job this way, but it’s silly, let’s not do this’. We believe that no one knows better than the folks doing the jobs every day.”
Same goes for farmers. President & COO, Russell Diez-Canseco shared with me that it’s not uncommon for farmers to call him on a weeknight and let him know how things are going and what feedback they have. Vital Farms is all ears.
4. Continuous Education
To maintain high levels of engagement, Vital Farms continues to educate themselves and their stakeholders. For farmers, this means quarterly gatherings where Vital Farms invites their 130+ farmers to gather and share best practices with one another, and to learn from industry experts, such as veterinarians and nutritionists. For employees, Vital Farms hosts weekly Thursday lunches, where they share company updates and impact. For consumers, this means continually educating them on the various farming techniques, conditions of the birds, and evolving Vital Farms practices to best care for the hen throughout their lifecycle. One example is the pursuit to end the industry practice of killing male chicks. Research and resources were put against finding a solution and ultimately Ovabrite was formed [see Washington Post story] and subsequently spun-off so that the entire industry could benefit and not only Vital Farms’ hens and suppliers.
Vital Farms’ commitment to the multi-stakeholder approach to business has ensured their success so far. They will continue to passionately pursue their mission to bring ethical food to the table through engaging, listening, and educating their stakeholders.