Switzerland Gets a Foothold in the Northern California Cheese Industry

What do Cowgirl Creamery, Redwood Hill Farm and Creamery, and Cypress Grove Cheese have in common? Of course, they all produce delicious, award-winning cheese and dairy products that are much-loved throughout the Bay Area. What supermarket dairy case would be complete without blue tubs of Redwood Hill's goat yogurt? What Berkeley cheese plate is without its lavender-and-fennel-scented wheel of Cypress Grove's Purple Haze, its ash-streaked wedge of Humboldt Fog? Is there a cheese drawer in San Francisco complete without a round of Cowgirl Creamery's pungent Red Hawk or buttery Mt Tam?

They're also held up as examples of small-scale, artisanal food products, as successful women-run businesses, as rural job creators, dairy businesses that uphold high standards of animal welfare and support healthy pasture-based ranching and family farms.

So what happens when Emmi, a major Swiss-based dairy company, becomes the owner of all three, as well as, most recently, Meyenberg Goat Milk Products, a Turlock-based family-run dairy and creamery?

The easiest, knee-jerk reaction is to blame the small brands for "selling out" as if they were a hip indie band licensing their songs to Budweiser or Chevy, stripping their products of authenticity and artisanal cool. It's what writer Tom Philpott did in a recent Mother Jones post, Your Favorite Artisanal Food Brand is Probably Owned by a Huge Company, when he wrote, "For US cheese lovers like me, the thought of Cowgirl falling into the maw of a large company is like seeing your favorite local coffeehouse get bought by Starbucks." Clearly, Philpott's lunch was ruined on the day that "Spam king" Hormel "gobble[d] up" organic nut butter company Justin's. And it just kept getting worse: Copain, a Sonoma County niche winery, was "swallowed" by Jackson Family Wines, a nearby wine-biz "titan," then the "European-style" Cowgirl was "snapped up" by a "European giant." By the end of 2016, Philpott wrote, "three much-loved small companies succumbed to the appetites of larger players."

Yet were these gobbled, swallowed, snapped-up companies mere guppies in the fish tank when the Big Food piranhas came calling? The contract lawyers involved would most likely disagree: paying out $286 million for a successful business, as Hormel did for Justin's, is hardly the action of a rogue invader, and the fine print alone must have generated many a billable hour on both sides.

But why is Philpott, and by extension Mother Jones, so determined to make these small companies into victims, undefended and unprotected? Do smaller businesses have to renounce any power or self-agency--or indeed, significant capital-fueled growth--to keep their hipster cred? Is it cool to sell your homemade chocolate peanut butter or goat-milk yogurt at the farmers' market, but not to aspire and succeed in building a multi-million-dollar organic brand? Is selling to a larger company always selling out, and does the product--and the local jobs it sustained--always have to suffer?

To address some of these issues, along with the future of their dairies and cheesemaking operations, the founders of Redwood Hill, Cowgirl Creamery, and Cypress Grove, along with a representative from Emmi, recently hosted an ask-anything round table talk and Q&A at the Ferry Building with seven members of the media. On hand were writers and editors from Bay Area Bites, San Francisco magazine, Edible Marin and Wine Country, Edible San Francisco, and Culture magazine.

Mary Keehn (Cypress Grove, started in 1983), Jennifer Bice (Redwood Hill, 1978), Sue Conley and Peggy Smith (Cowgirl Creamery, 1997) are the brain trust of Northern California cheese-making. It's no exaggeration to say that much of the explosion of interest in California farmstead and artisanal cheeses can be traced back to the hard work of these four women. Tally up their collective years of experience in hands-on dairy farming, cheese-making, and cheese-related sales and distribution, and you'll have to measure in centuries, not decades.

Which means, like any reigning, graying dynasty without obvious heirs, they are facing the challenges of succession. None of their family members are interested in taking over their companies. (Too many after-school hours spent wrapping and labeling cheese: there's no back-to-the-land romance in being a farmer's kid.) As Keehn said of her four daughters, "None of them were particularly interested in glorified dishwashing, which is what ninety percent of cheesemaking is."

Selling was the obvious solution, but not one any of them could take lightly. None of them were serial entrepreneurs, drawn to fast growth and a quick sale. Each of them owned just one company, and they'd spent a lifetime building it, dedicated to making high-quality cheese and dairy products while supporting sustainable farming practices and creating jobs along the rolling green pastures of Marin, Sonoma, and Humboldt counties (and, in the case of Cowgirl, in selling and distributing similar farmstead and artisan cheeses). As their companies had grown, so had their support of other businesses around them, creating an interdependent web of jobs and community responsibilities.

Keehn was the first to take the leap. While she investigated the possibility of transferring ownership into an ESOP, or employee stock ownership plan, the company needed significant capital investment that employees couldn't provide. Already, the scope of the business had outgrown its newly built creamery, as demand grew for fresh cheeses like Sgt. Pepper and PsycheDillic, as well as its soft-ripened and aged offerings.

Even after decades in business, Keehn couldn't find a bank willing to loan the necessary funds. As Keehn pondered, she got into the habit of having a breakfast meeting during the annual winter Fancy Food Show with Matthias Kunz, who had grown up on an 8th-generation family farm in Emmental, Switzerland (yes, that Emmental). Kunz now handled the U.S. division of Swiss dairy giant Emmi, who had recently invested in, then acquired, a Wisconsin cheese company named Roth.

"We did this for a long time, and we built a friendship," said Keehn about their yearly breakfasts, at which Kunz would always probe, delicately, to see if she was ready yet to consider terms. The company had other suitors along the way, but she was determined to find a buyer who would do what she cared about: keep the business in Humboldt county, where they've become a big employer; value the brand and let it "be weird and quirky like we are, which is really important--I say the culture's not just in the cheese," said Keehn.

The Swiss-based Emmi, with some $3 billion in annual sales, wasn't an obvious first choice for a business owner dedicated to keeping it small and local. But as the friendship grew between Keehn and Kunz, she learned that 54 percent of the publicly traded company was owned by a farmers' cooperative. In Switzerland, the dairies they worked with averaged 20 to 25 cows. The Swiss cheeses they imported into the U.S. were high-end, and they wanted to continue that profile with the American companies they acquired. No, they weren't local, but they were willing to keep her company where she'd first started it. (Jennifer Bice's parents had sold her her first goats, back in the early 1980s). In 2010, she made a deal with Emmi, while remaining a managing director.

Emmi has now invested "way more than you should have, probably," said Keehn to Kunz, laughing. When she started the company in 1983, she said, the "cheese came before the milk." While demand was small, sourcing milk wasn't hard, but as the company grew, its needs often outstripped the ability of local goat dairies to keep up. Now, she says, the company has "the most beautiful dairy in the United States. Our goats produce half again as much milk as the average California dairy, we're humane-certified, we raise our own baby goats. . . this is not normal for corporate America! We get to do the right thing." Employees get benefits, and one percent of profits is reinvested in their community every year.

Jennifer Bice's parents started their farm in Sebastopol in 1968, then Jennifer took it over and built the creamery in 1978. After decades as the founder and head of Redwood Hill Farm, she's now a managing director as well as a milk supplier, thanks to the 350 goats that she's retained on the original farm. (In 2005, the dairy became the first humane-certified goat dairy in the U.S.) In 2010, the company started a second, and now fast-growing, line, Green Valley Organics, which specializes in lactose-free dairy products, including milk, butter, cream cheese, sour cream, kefir, and yogurt. So when Bice, as an aging owner, was faced with similar issues--no obvious heirs, a need for growth that outstripped the resources available to her 80 employees, a determination to keep the company's values and community responsibilities in place, including livable wages for employees and sustainable milk prices for their suppliers--she talked to Keehn about her five years' experience with Emmi.

Everything was good, said Keehn. The company hadn't been dismantled and moved to Wisconsin. Another dozen jobs had been added. The new dairy was gorgeous and the goats were healthy and happy. There were useful corporate resources, including experienced engineers and dairy scientists, to draw on. The only drawback? Performance reviews--her first, after a lifetime heading her own business--increased paperwork and more detailed accounting, and a long corporate tail that meant change came more slowly and less nimbly than before. Emmi acquired both Redwood Hill and Green Valley in 2015.

Longtime business partners Peggy Smith and Sue Conley came to Point Reyes in the early 1990s and "got hooked up with the Strauses," who were shifting their longtime family dairy over to organic production. They fell in love with the landscape and with the milk. Since both were professional cooks, they started trying to make fresh cheese by hand with Straus milk, and as they "got hooked into improving our craft," Jennifer and Mary became their mentors. When Peggy and Sue opened Tomales Bay Foods in 1997, they sold Jennifer and Mary's cheeses alongside their own. Said Smith, "When we started, there were seven different local cheesemakers in that region. Now we have 28, and most of them are on-farm producers." The growth in cheesemaking has been a boon to the longtime family-run dairies of Sonoma and West Marin, many of whom had been barely keeping up (or losing money) for decades.

Like Keehn, Conley and Smith knew they were getting older and needed to plan an exit strategy that would ensure a robust future for their employees and partners. They weren't interested in simply cashing out. "We have such strong ties with our community, and we wanted that to continue on. We have people that we've worked with for a really long time that have helped us develop the business," said Smith. "We looked and looked at ways to sustain the business. And it's so difficult, for agricultural businesses, to find people who are interested in putting money into your business. We could all tell you tall tales of trying to get bank loans."

"It was 26 years [of being in business] before I got my first bank loan," agreed Bice. "And if they do, it's a very small loan, and your house is on the line [as collateral] and you can't get it off."

Conley and Smith looked at the possibility of an ESOP as well, before deciding against it. "You only have one opportunity to sell your business," said Conley, who noted that selling a business to employees (who would most likely need to put up their own houses as bank-loan collateral) wouldn't preclude the new ownership from selling out to another bidder in the future. But offering the business to an open market didn't seem very appealing, either. "If you sell it to the highest bidder, who do you get? Kraft?" asked Conley.

"Our intention was to continue to work with our partners--the milk suppliers, the people who make the paper we use to wrap our cheese, the people who haul our waste--and we really wanted a long-term commitment. We work with [local dairy farmer] Albert Straus, we work with the Taylors, we work with Taverna to single-source milk, and I think they've come to rely on us as we rely on them. In working with Emmi, we all said 'We want to maintain our partnerships, we want to maintain who we work with, how we buy from local producers for the cheese we distribute.'

"So it was such a relief to be able to work with someone who understood agriculture, who wasn't looking for a business you could build up in three years and make a huge profit," Conley explained. "This idea is that it's slow growth, which is how we've always done our growth," over the past 20 years.

Conley and Smith spent months hammering out the details of their contract with Emmi, which was finalized in May 2016. Like Keehn and Bice, they remain as managing directors, and are working to bring the next level of younger managers into the current decision-making loop. Most importantly, said Conley, "We're still mentoring young cheesemakers--that's a huge part of our mission."

"The big value of these three companies is where they are, in their roots in what they do," said Kunz, when asked if Emmi could be relied on to keep the businesses local. "Each company has a totally different culture, but what's common is that they come from strong--very strong!--personalities, which were needed to go over all these hurdles when they were building up these businesses."

And all four women are still, by contract, playing a significant part in their companies' overall decision-making and long-range plans."We still pay the same prices, which are probably the highest prices [in the area] for milk, because we really appreciate the quality of milk that we get," said Conley. Bice and Keehn pay similarly high prices for their goat milk. (Not to be outdone, Kunz quickly noted that Switzerland has the highest milk prices in the world.)

"I like to say that it's altruistically selfish," said Smith. "If you do the right thing, it works out."