Swanton Berry Farm
Business Model Overview
|Sector:||Production, wholesale, and retail|
|Local Ownership:||Yes (100%)|
|Products:||Certified organic strawberries, cauliflower, artichokes, sugar snap peas, kiwi, brussels sprouts, shelling beans, jams, and other value- added products|
|Market:||Domestic: local/regional (100-mile radius)|
|Customers:||Direct sales (~45%): Farmers markets, on- farm sales; Wholesale (~55%): Independent natural foods stores, regional locations of national supermarket chains|
|Niche(s):||Direct marketing, on-farm sales and tours, 100% unionized, California and USDA Organic, superior quality and flavor|
Farming is the original CFE. For millennia, family farmers met the food needs of themselves and their community. As national and global trade grew, farmers increasingly focused on distant markets, expanded the scale of their operations, liberally applied pesticides and fertilizers, relied on unpaid family labor, and otherwise strove to minimize payrolls. They deployed machinery where mechanization was possible and low-cost workers where it wasn’t. For fruit and vegetable farming in the United States, migrant workers have been the mainstay for more than a century. Many are undocumented immigrants from south of the border taking jobs Americans wouldn’t, and they are among the lowest paid workers in the country.
Swanton Berry Farm has embraced a different logic. Yes, be efficient but also be attentive to quality. And with high quality organic growing methods and a labor force highly motivated by fair compensation, a product can command a higher price. Moreover, quality and social responsibility solidifies brand loyalty, which makes possible direct sales to committed consumers that yield a higher profit margin.
The signature product of Swanton Berry Farm is the strawberry. Jim Cochran fell in love with strawberries 25 years ago: “I already knew about the chemical way of growing strawberries. I felt like it might be possible to grow them without chemicals, even though most people thought that was crazy and couldn’t be done.”
Strawberries actually represent only about 10% of Swanton’s 200 acres. Due to water shortages and crop rotations, Jim leaves as much as 65% of his land fallow each year, keeping just 70-90 total acres in production at any one time. Around 30 acres are reserved for broccoli and cauliflower, both of which are used to suppress soil disease. Another 20-40 acres are dedicated to bush berries, kiwis, artichokes, peas, and brussels sprouts.
The choice of crops reflects Jim’s awareness of place: “Strawberries are capital and management intensive. So the other crops I chose because they are comparatively easy to grow. The coast of California is one of defining characteristics of this area, with warmer winters and cooler summers. If you go even five to ten miles inland, you get more extreme temperatures. Certain crops like these climates. Tomatoes do not thrive on the coast— they need hot summers, as does corn. But broccoli, peas, strawberries, on the other hand—they do well at the coast.”
Swanton’s business model rests on three markets. The first, what Jim calls an “easy target,” is the top 20% income bracket. Swanton reaches these consumers through upscale farmers markets in Marin County, San Francisco, or Menlo Park, and in higher-end grocery stores in wealthy neighborhoods.
The second market is made up of “committed food people, broken into organic food people and the flavor food people.” Some have high incomes but many do not. “They pay the price,” says Jim, “because they appreciate the product.” Examples might be buyers at the farmers markets in Berkeley and Santa Cruz.
The third market contains “accidental customers from middle and lower income strata, who stumble upon our products at farmers market or the farmstand and U-Pick, which is right on the highway.” Jim disputes the notion that only high-income customers buy premium foods. People drop by for all kinds of reasons. Some are drawn by the sign advertising the strawberry shortcake. “After they taste the product, they’ll pay the money for it. When it comes right down to it, my strawberries compare favorably to Oreo cookies.... Pretty much everyone can afford to pay for Oreo cookies. If you weigh out what you can afford per pound in strawberries versus Oreos, the strawberries are really not a bad value.” “The catch,” he says, “is that we’re not talking about something that’s abstractly grown under good labor and abstractly under organic practices. It really needs to be a superior product.”
The farm has expanded over the last 25 years, from a handful of employees to now 50 people comprising the part-time and full-time workforce. Twenty five long-term staff members hold the production end together, and they hire another 5-10 or so every peak season. Several employees staff the farmstand and U-Pick site. The big turnover occurs for those working the farmers market booths. “Many are college grads who want to be artists or folks who don’t want to work full time. Eventually they get tired of it and move on.”
As noted earlier, Swanton provides a full raft of benefits to all its employees working 30 hours per week or more. Jim is one of the few farm employers to pay by an hourly rate instead of piece rate. He offers low-cost housing to his workers that three out of four take advantage of.
Jim also offers his workforce an employee stock ownership plan (ESOP)—a rarity in the world of production and agriculture. It took about 10 years to amass the $50,000 needed for the legal and accounting work. Jim is aware that his employees cannot afford to buy shares all at once, so he is taking “a gradualist approach,” where, at some point in the future, his ownership stake will be diluted to a minority status.
Jim further holds himself accountable to his workers through open-book accounting, which means that the books are always available for staff examination. He hires an outside evaluator to review the financials and to set a fair market price for the value of the shares given to employees. And once a year he holds a meeting with the staff to review them.
Jim notes that his model “is profitable, but just not very profitable.” And the company’s books bear this out. While Swanton’s returns are below the industry’s average and they’ve had losing years, they have most often been in the black. Even though it’s unusual for a farm to be unionized—“it’s not always been an easy path financially”—Jim is unswerving in his conviction that it’s the right path.
“When people are really building a solid business,” reflects Jim, “does it really make all that much money when you look at all the inputs? Even when people think they’re making money, or they have a boom market, it may just be for a few years. If people really look at how much they’re working, the stress on their family, if they think about how am I living, that sort of thing, how much do I enjoy my work...there are huge costs that might not be taken off the financial bottom line but are certainly taken off the human bottom line.”