Marie Jackson Revitalizing renfield farms PDF

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ANTHONY J. MAYO H E A T H E R B E C KH A M

Marie Jackson: Revitalizing Renfield Farms “Two steps forward, one step back” was how Marie Jackson characterized her effort to set a new direction for Renfield Farms Corporation. In June 2013, Jackson had been hired to turn around Renfield. The process of formulating a cohesive, compelling vision had been fraught with strife and uncertainty, but Jackson and her team eventually began to chart a new course for Renfield. In December 2014, Jackson reflect ed on her efforts, “The past eighteen months have been an epic journey: arduous and frustrating at times, yet invigorating. We are at a critical inflection point. We are committed to reengaging with our consumers, delivering innovative products, and reclaiming our status as the leading dairy pioneer. We have made progress, but there is still much to do. We can’t take our eye off the prize yet.”

The U.S. Dairy Industry The U.S. dairy industry faced numerous challenges, including mature markets, volatile commodity costs, low profit margins, and fragmentation. Demand fluctuations were affected by general economic conditions, disposable income, demographics, and increased competition from alternative options. Growth was driven by lifestyle trends (e.g., focus on health/wellness foods), premium products (e.g., organic), and product innovations (e.g., Greek yogurt and plant-based dairy alternatives). Within the dairy industry, there were six general product segments: Cheese; Fluid Milk and Cream; Other Dairy; Frozen Dairy; Yogurt; and Butter . Performance and growth projections varied between segments. For example, forecasts showed substantial gains for yogurt, 1 but fluid milk per-capita consumption had been declining for several decades.2 (See Exhibit 1 for historical consumption data and brief segment overviews.) Dairy products generally followed broader trends for consumer packaged goods. Private-label goods were prevalent, and the segment included several powerful brands with sales growth driven by

1 Kathleen Furore, “Yogurt,” Progressive Grocer, July 2013 92: 7 2 Roberto A. Ferdman, “The Mysterious Case of America’s Plummeting Milk Consumption,” The Washington Post, June 20, 2014. _______________________________________________________________________________________________________________ HBS Senior Lecturer Anthony J. Mayo and writer Heather Beckham prepared this case solely as a basis for class discussion and not as an endorsement, a source of primary data, or an illustration of effective or ineffective management. Although based on real events and despite occasional references to actual companies, this case is fictitious and any resemblance to actual persons or entities is coincidental. Copyright © 2015 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.

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marketing efforts and promotional campaigns. Brand-management strategy harnessed the power of new media. In particular, social media campaigns had become critical to overall marketing strategies.

Renfield Farms Renfield Farms was founded by Donald Franklin in 1964 as an organic farm and dairy in Maine. The farm originally produced and distributed organic milk and cream to retailers in the Northeast under the brand name Nourish. Franklin founded Renfield Farms based on his conviction that food should be simple and wholesome, with as few additives as possible. Franklin was an idealistic farmer and an astute businessman. By the 1990s, Renfield had grown through a series of regional dairy acquisitions and had become a leading producer of both conventional and organic dairy products . In 1991, it became the first company to supply organic milk nationwide; in 1993, it transformed the yogurt category with its Season’s Harvest all-natural yogurt line. It was known for its strong brands and strong ideals. Employees were passionate about natural living and sustainable environmental practices. Renfield’s brands reflected the company’s culture , which was based on healthy living and honest nutrition. In his autobiography, Bottom Line Organics, Franklin wrote, “There is no substitute for healthful foods; but when I started Renfield, natural foods were an underdeveloped, niche market . Our products were more nutritious, tasted better, and were better for the environment, but we needed to educate consumers about why our products warranted higher prices. We were one of the first dairy companies to focus on brand and marketing.” Under his leadership, Renfield grew from a regional dairy supplier to a highly profitable national company. Renfield Farms utilized a decentralized organizational structure. Franklin promoted a culture of accountability and authority at a local level and believed that competition among managers was a valuable motivator. According to Franklin, “I don’t believe in forced cooperation within our business. We have empowered our product line and production facility managers to operate as independent business units. This encourages initiative, responsiveness, and profitability throughout the company.” As the company grew, it retained Franklin’s decentralized philosophy. After Franklin retired in 2002, the company had a difficult time finding a passionate and driven leader. He had left an indelible imprint on the organization, and it was hard for successors to measure up. Over the next 10 years, the company transitioned through two chief executive officers, each of whom a former executive characterized as “bland” and “uninspiring.” Reflecting on that time, the executive added, “It was a stagnant period in our history. We seemed to have lost our way. Renfield lagged behind its competitors. We didn’t even launch a Greek yogurt product until others had established the category. Franklin would have been very disappointed in our lack of innovation. In some ways, we were even ceding our control over the organic market.” Since 2003, Renfield Farms had steadily been losing market share to competitors. Farmer-owned cooperatives like Organic Valley were growing share rapidly, and established traditional companies like Groupe Danone had developed successful organic and all-natural product lines that were winning over Renfield customers . In early 2012, the company faced a firestorm of criticism when a video of cows being abused at a company-owned dairy in Belvidere, Illinois, went viral. The video showed cows jammed into pens and beaten with pipes. The Society for Prevention of Cruelty to Animals quickly organized a boycott of Renfield products. An independent investigation found the incident was isolated, but many consumers felt the company did not respond quickly enough to punish these actions. Margaret Sparks, Renfield’s community relations director, said she was shocked by the images but revealed she did not know the video existed until it had been picked up by a national news agency. Conrad Lee, Renfield’s chief executive officer at the time, later admitted, “We weren’t as proactive as we could hav e been with 2

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monitoring social media, which cost us dearly. The video demonstrated for us the power of social networks and how quickly negative exposure can spread. We were wounded internally and externally. We disappointed our consumers and suffered a lack of confidence in our ranks.” After the scandal, the press referred to Renfield as “apathetic” and several long-time, senior employees left the company. Morale at the company hit an all-time low. In 2014, Renfield’s business comprised four product lines: Yogurt, Milk and Cream, Frozen Dairy, and Plant-Based Beverages. The company’s yogurt division included conventional natural yogurt products under six regional brands, an organic national brand, and a national Greek yogurt brand. Milk and Cream was the largest, best-established business segment, consisting of eight regional brands of conventional milk, one national organic milk brand, and one national coffee creamer brand. Frozen Dairy was the smallest division, with one national frozen yogurt brand and four regional all-natural ice cream brands. The plant-based beverages segment, which operated under the Bloom brand, was the most recent addition to the company’s product portfolio. Renfield had acquired the Bloom business in the spring of 2013. Each product line and production facility operated as a profit center, utilizing market-based transfer pricing between production facilities and product lines. Variable bonuses comprised a significant portion of overall management compensation, with annual cash incentives determined by individual business unit profitability. (See Exhibit 2 for Renfield’s organizational chart.) Renfield’s recent financial performance had been lackluster, with relatively flat sales and shrinking profits over the past four years. Conrad Lee began his tenure as chief executive officer in 2009 by promising to get lean and grow the business, but his cost-saving and growth initiatives fell short. Lee attempted to consolidate product development at the corporate level, but business unit leaders resisted and continued to develop independent product strategies. One former executive noted, “Conrad spent a lot of time and money on traditional marketing campaigns aimed at building the Renfield brand, but our return on investment was minimal. In addition, the business units continued to market the same products in the same way we did 10 years ago. There was little progress made under Conrad’s leadership.” In June 2013, Lee stepped down. To fill the role, Renfield Farms hired its first outside chief executive officer, Marie Jackson.

Marie Jackson Jackson was born and raised in a small town in Georgia and began her career as a marketing analyst at Procter and Gamble. After earning her MBA at University of Virginia’s Darden School of Business, she became an assistant brand manager at Coca Cola and worked her way up to global brand manager, then marketing director, and then senior vice president of integrated marketing communications and capabilities. She was known for her exuberance and brilliant marketing strategies. In 2006, Jackson was named chief executive officer of Crivelli, a multinational candy company. During her tenure, Jackson took the company from the edge of bankruptcy to a thriving business. She grew the business from $250 million in sales to $500 million by 2012 and added innovative new product lines to the company’s portfolio. Crivelli won the 2009 Best New Product of the Year, the leading consumer-voted CPG award program in North America, after Jackson led the launch of a wildly successful line of candy-inspired baking products. Jackson earned a reputation for rapid responses to market trends. She had developed strong relationships with trade partners. She also was an early adopter of social media marketing, which helped to establish Crivelli as the most recognized candy brand in the world. One former colleague recalled, “Marie’s passion for Crivelli products was infectious. No one could energize a room like she could. She was truly a visionary.”

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When Jackson was appointed chief executive officer of Renfield Farms in 2013, some insiders were wary. Renfield prided itself on promoting from within. An outsider at the senior level was extremely rare. Christina Garcia, the company’s chief financial officer, commented, “Renfield tends to snub outsiders. We are intensely loyal to our own. Marie was not only from outside our ranks, but also came from a processed food background. Those kinds of products are the antithesis of everything we stand for at Renfield. On paper, she just didn’t look like a good fit to me.” Jackson’s leadership style and actions quickly grabbed the attention of employees throughout Renfield. In her first month, she organized a series of virtual town-hall meetings in order to reach almost everyone in the organization. Jackson began each meeting by addressing the press’ characterization of the company as “apathetic.” She told employees, “It is my mission to restore the reputation of Renfield and create a vibrant, prosperous path for the future. I am not yet sure what form this effort will take, but I know that I will need your help. I will need your insight to chart that new course. I will depend on each of you to foster positive change .” Jackson followed up her words with actions. She met with several groups of executives and outlined changes to the organizational structure and reporting lines. Jackson created a brand group to coordinate product and brand strategies with product line units reporting directly to the chief marketing officer. Within two months of joining the company, she dismissed a senior brand manager who resisted the changes. One insider commented, “Marie hit the ground running. She inspired us with her dreams for Renfield. We lost several talented colleagues after the Belvidere cow incident, and it was exciting to see such positive energy back at the company. ” Jackson spent much of her first three months talking with, and gathering feedback from, trade partners and consumer groups. She personally met with buyers from all of Renfield’s major retailers and participated in dozens of consumer focus groups. She consistently heard that the company was disconnected from its core customers and absent from the social media scene that was now considered to be an integral component of building and cultivating a brand image. Furthermore, the brands scored low on innovation and product distinctiveness. On the positive side, consumers were still passionate about the ideals for the brand (organic, healthy, and nutritious) that Franklin had created, though this passion was sorely tested by the Belvidere incident. It was clear that the company would need to reestablish its credibility with some longtime consumers. At the same time, the company needed to attract new, younger consumers especially as the market for organic products continued to soar and as competitors entered the industry. Jackson regularly gathered senior managers and their teams to share her findings and challenged them to think about solutions. At one meeting, she remarked, “I want to be brutally honest with you. The Renfield brands are considered boring and stale. We have also missed some great opportunities for new products and digital marketing, but we can start to remedy those oversights.” Some insiders bristled at her observations, but others found her candor enlightening.

Changing Direction Jackson needed to determine whom to involve in formulating Renfield’s new direction. She observed the attitudes and actions of managers throughout the company. Recalling that time, Jackson said, “I identified some serious weaknesses in the company, and I couldn’t fix them alone. We needed a new vision for the company and a strategy to get there. I wanted people who weren’t afraid to shake things up, who truly loved Renfield, and were excited about our future prospects.”

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In August 2013, Jackson sent an invitation to a select group of twelve managers, asking them to join her planning team and attend a weekend retreat in Sea Island, Georgia. The team was culled from different functions and business units in the organization. There was a dairy plant manager, a group brand director, an account executive for wholesale clubs, the sales director for the Midwest region, the EVP of sales and distribution, the chief information officer, the chief marketing officer, and several product line managers. Jackson explained, “I was looking for change agents. I wanted those who understood the need for change, those who were respected in the organization, and those who had been vocal about their desire to revitalize our brands.” Jackson had hoped that the Sea Island meeting would generate spirited, constructive debate and provide clear priorities for change. She asked Brent Cooper , executive vice president of sales and distribution, to organize and facilitate the process. Cooper decided to use a SWOT framework to structure the discussion.3 He said, “I wanted to start with a simple framework to get us all collaborating. We were a wildly diverse group of personalities, and we needed some common ground to get us on the same page.” Strong opinions on the process and priorities for change immediately surfaced. Some thought Cooper’s framework was too theoretical to generate meaningful output; others thought the SWOT needed to be followed up with a more detailed framework, such as the McKinsey 7-S model.4 A handful of team members wanted to jump right into areas that warranted immediate change and determine the roots of the problems that Jackson had already identified. Stephen Sundal, Renfield’s chief information officer, thought the first discussion should concentrate on the path to competitive advantage and to determine the company’s distinctive capabilities. Jackson probed further into the insights and Cooper recorded each priority for change, but there was no consensus or action plan. Cooper remembered, “By the end of the weekend, most participants were inspired to chart a new course, but felt discouraged we hadn’t made much progress.” In November, the team reconvened in Lake Placid, New York. Jackson recalled, “ We had proposed too many priorities in Sea Island. After a couple of sleepless nights, I wound up revising the list by focusing on what I consider to be the three most urgent concerns.” When the visionary planning team arrived in Lake Placid, Jackson told them, “In order to right our course, we need to take immediate action. We need to honor Renfield’s traditional values, but adapt them to the changing marketplace. Therefore, we will have only three strategic priorities in 2014: 1.

Win Back Consumers – We must focus our efforts and resources on our end-consumers. Renfield owes its early success to the support and loyalty of passionate consumers. We need to recapture and nurture those relationships through multiple networks, harnessing the power of social media and other digital marketing platforms.

2.

Keep Things Fresh – We need to reestablish a continuous product-development process. We must capture and leverage customer insight to guide R&D and reduce time to market for new products through internal cooperation.

3.

Optimize Our Resources – We have talked too much about—and acted too little to correct —the company’s deteriorating financial performance . We must leverage our cost structure and allocate our resources more effectively.

3 A SWOT analysis identifies the strengths, weaknesses, threats, and opportunities of an organization or project. 4 The 7-S model analyzes se...