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North Bay Business Journal

Monday, November 18, 2013, 5:57 am

Food & Ag Conference 2013: Marcus Benedetti, Clover Stornetta

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    Marcus Benedetti is president and chief executive officer of Petaluma-based Clover Stornetta Farms, a third-generation dairy processor.

    Purchasing from dairies throughout the North Coast, Clover makes certified-organic, hormone-free and natural milk and other dairy products sold under the Clover Stornetta brand. The company recently was certified by the Non-GMO Project.

    Mr. Benedetti is set to speak at the North Coast Food & Agriculture Industry Conference, presented Thursday in Santa Rosa by the Business Journal and Bank of America/Merrill Lynch.

    What kinds of food businesses are best-suited to the North Bay?

    Marcus Benedetti

    Marcus Benedetti

    MARCUS BENEDETTI: It’s important to understand the context of the North Bay economy: value-added products. Any agricultural product that can be produced in the climate of the North Bay, from grapes, milk and olives to lamb and beef, have to compete in the marketplace. If [such products] do not imply a value-added component, they have to be marketed as such.

    They need an appellation-like aspect. Bay Area consumers like it that they were grown and raised in the North Bay, versus in the Midwest or Central California, and that gives [North Bay products] a leg up.

    Nothing epitomizes commodity products as much as milk. Taking economic circumstances such as the enhanced cost structure in the North Bay, instead of seeing that as a detriment we can see it as a positive that resonates with consumers. One has to adequately draw the distinction between commodity milk and value-added milk — who produced it, where and how, and the welfare of the animals — and wrapping all that up in a marketing position. It’s more than just claiming that your producing it in Sonoma County.

    As more and more companies continue to evolve to that end in Sonoma County, that draws efficiencies and a concentration that shows it’s an “appellation” for exactly that — value-added products.

    Every consumer has a different view on whether added value in agricultural products comes from quality, the perception of its being produced in an area conceived as better, food-safety awareness for food coming from a specific region.

    We have been seeing Sonoma County evolving into an area where aesthetics of the region are attractive. Many people who have not visited Sonoma County have a perception of it, whether its the vineyards. It has become this magical region or pocket in California. It is extraordinary for a county to have an incredibly eclectic variety of products exist in the premium way that they exist here.

    The rest of the North Bay, to some extent, can share in this. Napa [County] certainly put wine on the map for the entire U.S., not just for California. No county in California is that diversified in terms of mictroclimates and soil variations and in terms of water availability, and the history and heritage of commodity agriculture transforming itself into value-added products.

    What helped and hindered the business in getting started and growing?

    MR. BENEDETTI: First and foremost, we are tied to our production availability. Our whole business model is predicated on access to the best supply in the country. We are tied to where we’re located, and that’s Sonoma County.

    The pendulum has swung both ways in the past few decades in the regulatory and business climate. That’s something that will ebb and flow for us, based on our supply. … We try to make best out of situation where at.

    At the same time, we recognize we’re a consumer-products company, and that can get thorny. Often, public policy translates into regulations. We can be advocates to the public marketplace for access to education, an improved corporate talent pool and [Sonoma County BEST's] Food Industry Group, which I’m co-chair of, is to engage local schools, colleges and universities to be more flexible to the skill sets of job candidates we need, like engineering and electrical engineering.

    Historically, those institutions have not been turning out those types of skills. They have been more open to the wine and hospitality industries in turning out professionals with those skill sets.

    What lessons there from your story in what other North Bay food companies need to thrive?

    MR. BENEDETTI: Recognizing the challenges in doing business in Sonoma County. The cost is not going to be the lowest, with the cost of real estate, owning property and manufacturing. The cost structure is going to be higher from day one. Alternatives such as American Canyon and Fairfield–Vacaville are nearby.

    The benefits of operating in Sonoma county have to outweigh the costs. If the product is not unique, then one should think twice before starting [an agricultural products] business in Sonoma County. The benefits are compelling, so you need to work that out in the business plan.

    With the recent high level of recruits finding that living in Sonoma County has significant appeal allows their move to be neutral from a real estate standpoint.

    What are indications that an artisan food producer needs to consider bringing in sales, marketing or management professionals?

    MR. BENEDETTI: There is an evolution those companies go through in looking to scale. And you need to know you will need help before you hit those milestones in the business’ evolution.

    Santa Rosa, San Rafael and Napa are geographic centers in the North Bay. These are centers to look to before jump to next milestone where need more expertise.

    How does an specialty producer balance artistic sensibilities, marketing distinctiveness and bottom-line realities?

    MR. BENEDETTI: For those looking open a business in Sonoma County, those aspects have to be baked into the business plan. The cost-benefit of operating in Sonoma county has to play out in a real way: What will you be able to sell the product for?

    Otherwise, can you take the same product and business model and operate outside Sonoma County and have same margin structure?

    In our history, there has been a need to find a balance for the costs of inputs used, infrastructure and labor.

    When you do operate in Sonoma County, the general rule of thumb is to strive for higher-margin products and identify niches in the market that support that. You cannot play in the commodity world. You need to pick geographic or demographic areas in the state and country you can play in.

    How do social, product-content and quality-process certifications and standards affect your operations and access to the marketplace?

    MR. BENEDETTI: It continues to define who you are and narrows your focus. It’s not just in the supply chain that defines that product but also who do you connect with in the marketplace, from the consumer to the retailer and distributor. It more closely marries you to that value proposition. It more closely focuses on who you are, whether it’s no rBST [growth hormone] or animal welfare or non-GMO. We’re comfortable and happy to reinforce those values that resonate and connect with consumers.

    We have strong bilateral connections with the 26 dairies we source from, and we work with them on achieving these goals. This can be different from large cooperatives in United States, in that they order what they want for the next day but are not able to work with suppliers over the long term.

    What has company growth been like, and what’s happening in the marketplace that’s contributing to that?

    MR. BENEDETTI: Fluid milk sales nationwide continues a decline over the past several years. There are a whole lot of substitutes now, with almond, soy, rice and walnut beverages. The traditional family routine from a decade ago probably will not remain intact, so that translates into different habits with on-the-go products.

    Our same-store sales reflect that decline, but we’ve taken on new lines of distribution and new products. Back in the 1970s and early 1980s, our geographic distribution in Sonoma, Marin, Napa and Lake [counties]. In the early 1990s, we crossed the Golden Gate Bridge, and for us that was like going to the Moon. Now, we go east to Sierras and through a third party to Mexican border and east to Jackson Hole, Wy. And in a very limited fashion, we’ve started to Hong Kong and Singapore, with quarts airlifted there.

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