Area food businesses tout worker-owned structure to preserve core local values
Garth Shaneyfelt, Sam Dibble and Will Savitri drink their Green River Ambrosia mead at the People's Pint in Greenfield. 09/01/30 Franz Purchase photo reprints »
Staff member Kristin Howard from Real Pickles with a jar of the companies award winning Garlic Dill Pickles at 311 Wells Street in Greenfield
11/1/20 MacDonald Purchase photo reprints »
GREENFIELD — From pickles to granola to beverages, a few local food makers are mixing up the recipe for how to own their growing businesses.
In each case, spokesmen for the businesses say there are advantages, in taxes and borrowing, that they discovered while the changes were in the works — but that their main motivation was to keep the small-scale, locally oriented businesses operating that way, with greater worker involvement in ownership.
The simplest change comes with the merger last week of Katalyst Kombucha and Green River Ambrosia, two related Wells Street businesses now known as Artisan Beverages Cooperative.
There, General Manager and CEO Will Savitri, who helped found the “living elixir” business in 2002 using a recipe for a 2,200-year-old, cultured Chinese drink, is one of seven worker-owners who decided to form a cooperative to emphasize workplace democracy. They also wanted to protect what he calls the “values” of the locally owned business from an outside buyer who might try to take over and move it.
In the case of its neighbor, Real Pickles, which since its 2001 founding has turned commercial picklemaking on its head, owners Dan Rosenberg and Adie Rose Holland decided to ensure that even if they choose to do something else, the business would retain the principles of buying from local farmers and selling their naturally fermented products on a scale that made sense to them.
The Real Pickles Cooperative Inc., which they established in October to have its workers join and collectively buy the business, has received approval from the state Securities Division and its counterpart in Vermont to sell non-voting stock to Massachusetts and Vermont residents to raise $500,000, in preferred stock to finance the transition to worker ownership. The community investment campaign, which will take place over the next six months, provides for investors with at least $2,500 to buy stock over the next five years. Five of the pickle company’s 12 workers have become part of the founding group of worker-owners with common shares purchased for $6,000 each, with other workers planning to join as they become vetted in the business and can buy in. The workers are not obligated to become co-op members, Rosenberg said.
“We’re pretty excited about making this happen,” said Rosenberg, who with Holland moved to Franklin County to turn back the clock in picklemaking, using a natural fermentation process and all local ingredients. As a sole proprietorship that’s won regional and national awards for products sold around the Northeast, Real Pickles has grown at the healthy rate of 125 percent a year. It outgrew its Western Massachusetts Food Processing Center home after eight years, moving into its own factory across Wells Street, which has been outfitted with state-of-the-art refrigeration and photovoltaic panels to power it.
“Addie and I have been thinking about this for a few years, and we brought the idea to the staff about a year ago,” says Rosenberg. “We’re trying to create a structure for the business where Real Pickles would stick to its social mission long term, a structure that would allow us to eventually move on, where we could help the business get to the point where it’s not dependent on founders. We want to see Real Pickles continue to do well and do good in the world for a long time to come.” Rosenberg, who founded the business a matter of months before Cain Foods announced plans to sell its South Deerfield pickle plant, has focused attention on growing Real Pickles gradually to ensure that it would use locally grown products and employ a year-round local work force.
“Over the years, the business has relied more and more and more on its staff for its success, and we’re excited by the idea of bringing in the staff to share in the ownership,” said Rosenberg. “It feels like a key part of this business’ formula for success is to get the staff, on whom the business increasingly depends, increasingly invested and get them to stick around.” Real Pickles has about $650,000 in sales a year from 11 organic, naturally fermented products, including pickles, sauerkraut, kimchi, beets and ginger carrots — more than 160,000 jars a year.
Another approach Meanwhile, New England Natural Bakers, on Laurel Street, converted on Jan. 1 from a corporation that had been owned by founder John Broucek, to an Employee Stock Ownership Program (ESOP) that for now retains the 35-year-old business’s same top-down governance structure as well as its core values, says Broucek, whose role is now general manager.
Broucek, who began by looking at selling the company to another business but insisted on finding buyers who would keep its jobs in Greenfield, turned instead to selling the business to its 45 employees, with help of a bank loan that totaled “millions.” Each employee’s ownership is based on wage and salary, so that in effect, Broucek says his ownership is in the range of 3 to 4 percent instead of the 100 percent he shared with his ex-wife.
“It makes sense for the employees to have ownership,” Broucek says, “and if we can leverage the deal where we can get some financing through banks, I can pull some money out and do my work without being a full owner, that makes sense.” The downside, he said, is that he takes home less profit at the end of the day.
“But there are plenty of owners, especially in natural products companies, where their number-one motivator is not to maximize profit.” New England Natural Bakers, which in 2011 broke the $10 million wholesale sales mark — translating to about $20 million retail — makes more than 40 products including granolas, granola bars and trail mixes sold around North America.
Broucek said he was surprised to learn that as a corporation that’s switched to an ESOP, the business will save paying $200,000 to $300,000 a year in federal taxes because employees will get a share of the company profits as part of their retirement income. The company continues to offer a 401(k) savings plan for employees.
Tax breaks; who knew?
At Real Pickles, Rosenberg said he discovered that as a worker-owner cooperative, the business won’t have to pay corporate income tax on the profit sharing. It may choose each year to pay workers in proportion to how much they’ve worked. It can also retain that money for a limited time to help cash flow, he said.
And at Katalyst Kombucha, Savitri said that as a cooperative, his business, like Real Pickles, has access to a loan fund operated by the Cooperative Fund of New England. Whereas a few years ago, banks may have been reluctant to lend to workerowned co-ops, that’s changed in Massachusetts. Also, as a result of the growing success of co-ops, he said, the U.S. Small Business Administration recognizes them as legitimate businesses, so it’s willing to back loans to them.
But most important, said Savitri, “I’ve seen a big shift regarding employees and work, in their attitude about the business. People are more invested as owners. And as businesses are getting more environmentally and socially responsible, worker ownership can help retain the values of a business and make it a little more difficult for a large corporate entity to come in and buy out the company. That protects the value systems they’re founded on.” Rosenberg says the real motivation for Real Pickles was simple.
“We’re trying to rewrite the story line for a successful organic food business, because the typical path these days is that businesses keep getting bigger and bigger, and position themselves for getting bought out by a big industrial food corporations where it’s hard to keep any meaningful social mission intact. We want to see the business stay small and stick to a really strong social mission. We felt this structure is great way to help ensure that, inscribing our mission and guiding principles in the governing documents, the co-op articles of organization and bylaws, making them really hard to change. Staying small, sourcing regionally, selling our products regionally are all those key parts of what our social mission’s always been.”