The story of SILK – Steve Demos and organic soybeans

In 1970 after graduating from Bowling Green University in Ohio, Steve Demos decided to take 4 years off and traveled through India. He decided to become a vegetarian after this exposure which led to him formulating his own version of the ‘Golden rule’ to adopt in business, which goes like this…

SILK Organic soymilk products

SILK Organic soymilk products

Everyone who touches the stream of revenue must be doing good for society

After his return to the USA, Steve Demos started White Wave Tofu in 1977. Tofu, is a soft, bland, custard like food made from crushed soybeans and was intended as a meat substitute. After being in business with marginal success for almost 2 decades Steve came up with a gold mine of an idea in SILK – a fresh soymilk product made entirely from organically grown soybeans, sold in freshness dated, refrigerated cartons that resembled the more common dairy milk. The rationale behind this was that Steve wanted to come up a product that would require no customer education. Tofu, even after nearly 2 decades of customer education, had questionable success in its acceptance as a meat substitute.

In 1997, soon after the launch of SILK, White Wave sales rose 37%, from $6 to $8.2 million. Within a few years, after FDA and others started touting the benefits of soy products, sales shot up to $180 million by 2002. Not long after a deal was struck with Starbucks in 2003 to complement their espresso and chai drinks. In 1998 Dean Foods, Inc. the second largest dairy in the USA purchased a minority share in White Wave. Imagine, one of the leaders in Dairy products buying a stake in a direct competitor! Soy milk, by the way, is a wonderful and healthier alternative to dairy milk and the only choice for people that are ‘lactose intolerant’.

In 2002 White Wave was sold to Dean Foods, Inc. in a highly publicized $295 million transaction at a time when it had 150 employees, of whom 100 had worked for the company for more than 2 years. In keeping with the ‘Golden Rule’ that Steve Demos had laid out for himself in business, he refused to sell the company unless every employee who had been with the company more than 2 years received something from the sale. The lawyers were astounded by Steve’s request. It took them 3 months to work out the legal mechanics, which could have jeopardized the sale of the company. At the end, $15 million of the sale price was handed out to about 100 people. One, Pete a truck driver, received almost $400,000. There was no legal obligation to do this, but Steve Demos just took pleasure in handing out checks to his employees as proceeds of the sale.

Feel free to read ‘The new Wellness Revolution’ by the famous economist Paul Zane Pilzer where he has covered this story in much greater detail. (around page 90)

After the sale, Steve was asked to stay on at Dean Foods as President of the refrigerated products division with sales of $1.2 Billion and continued to serve on the Board of the company.

Now, if this story warms the cockles of your heart, it is meant to. But don’t get used to that feeling.

White Wave started out with the Soy Milk (SILK) product by buying organic soybeans from local farmers in the USA. Recently however, Dean Foods, Inc., has completely abandoned its support of domestic organic farmers and gone to China for cheaper soy products. The US domestic farmers essentially have had a gun placed to their heads and asked to match the Chinese prices for Soy or  lose the business.

I wish I could have left you feeling all nice and good, but unfortunately this is the end.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s