GBR - Keeping up with CSR During a Recession

Uploaded by pepperdine on 30.11.2009

**Graziadio Business Report Jingle** DS: What is a values driven company? What
does corporate social responsibility mean in practical terms? How do you balance creating
social good with the bottom line? Hello. This is Danielle L. Scott, Managing Editor for
the Graziadio Business Report. Today is September 29, 2009 and here with me is Rick Hesse, Professor
of Decision Sciences, who will be interviewing Bill Sanderson and Chuck Browne of Golden
State Foods, a worldwide supplier to the quick service restaurant industry.
RH: Gentlemen, thank you for taking the time for being with us today.
BH: It’s a pleasure. RH: Tell us about Golden State Foods, a little
about its background, what kind of revenue, how far dose it reach around the United States,
et cetera? BH: Well, Rick we’re 60 plus years old now
founded as a little beef company in Vernon, California where our founder Bill Moore met
Ray Kroc in the early days of McDonald’s and liked Ray’s commitment and passion for
quality and Ray convinced him to become a dedicated supplier of hamburger patties to
McDonald’s again, many, many years ago. We’ve grown with McDonald’s through the
go-go years of the ‘70s and ‘80s and today we serve a plethora of quick service restaurant
companies throughout the world. Our revenues about four billion. We have 3,000 employees
on three continents and we serve our customers in 60 different countries.
RH: How has GSF been impacted by the economy, this economic downturn that we’re experiencing?
BH: It’s actually created opportunities for us. Most of our customers, McDonald’s
and others that are in that quick service restaurant space as we call it are doing fine
in this environment given that people are trading down from fine dining and casual restaurants
to quick service because they present a great value proposition to the customer and it’s
much more affordable. So as our customers go, especially McDonald’s which is our very
large customer as they go typically we go. However, we have seen some opportunities by
competitors stumbling in this environment in our liquid products group and in our distribution
group to actually gain market share. And so we’re actually having a very good year this
year. RH: That’s great. I’m glad someone is.
And how did GSF get into this whole idea of corporate social responsibility? I have a
feeling it was not knew for them. It’s knew for a lot of people to talk about but not
necessarily for GSF. So Chuck. CB: Absolutely. You are correct. When we,
a year ago, began to talk about the social responsibility aspect and we polled our field,
our grass roots, our managers in our facilities we found that there were 65 separate initiatives
that they were undertaking from recycling to idling programs that we were pleased and
surprised at and that goes back to the founding of the company and giving the customer a fair
deal and being responsible. RH: And can you think of a couple of examples
that you found out that your divisions were doing?
CB: Well, I think our recycling program was one. Obviously, there’s a lot of plastics
involved in both shipping and … BH: Wrapping palettes and that kind of thing.
CB: Yes. BH: I mean we could deliver a lot of waste
product to waste streams and we do a lot of things with waste water. We do a lot of things
with plastic corrugated that kind of thing. And we’re talking not like recycling at
home but at industrial quantities. We’ve also developed some relationships in our plant
in the Southeast with companies that are buying our waste product from us, using it to power--
or actually using it to create power and create energy that we end up buying back from them
at a discounted rate. So we’re actually taking those products, instead of recycling
them, composting them and then burning them and creating energy from them. So there’s
really some exciting things going on across the company. I think what surprised us is
all of this was being done at a grass roots level. And like Chuck says it’s really kind
of who we are. We have this philosophy as a company that it’s not only important to
do well but do good in the communities in which we live and work and also give our customer
a fair deal. So we find that a lot of these initiatives have multiple bottom lines. They
make our associates feel good because they’re doing the right thing. It helps the community,
leaves it a better place than it was before we got there. And also it adds to the profitability
of the company. RH: Sure. And do you want to add to that at
all anything more? CB: I think the piece of it that maybe needs
to be added is with Starbuck’s who’s a customer of ours. We were finding that as
we made our deliveries in the evenings that there was a lot of food that was then going
into the waste stream. And through one of our associates interaction with the foundation
and then back with Second Harvest Food Bank, we developed an initiative and a partnership
with them that takes that food back to our distribution facility and then down to the
food bank where it is given out to the various pantries that helped those less fortunate.
So there in San Antonio we have a great initiative that came from our associates that also has
sustainable issues in terms of environment. RH: That’s very good. And Bill, you were
describing to me about the whole cooking oil problem with McDonald’s and how you kind
of helped solve that and turned a negative into a positive.
BH: Yes, it really wasn’t a problem. I mean you use cooking oil in McDonald’s fries,
French fries and fish and chicken and those kinds of products so they generate a lot of
waste cooking oil. And that product typically would go into-- it could actually be further
processed and used in the makeup industry, believe it or not. It could be used to enrich
chicken feed which was the primary use of used cooking oil five or six years ago. What
we saw as an opportunity was to take used cooking oil and turn it into bio diesel fuel,
a bio renewable fuel that actually has the lowest carbon makeup of any petroleum, well
it’s not a petroleum product but when you compare it to petroleum fuels. And one gallon
of used cooking oil will yield one gallon of bio diesel fuel. So we can actually take
the waste oil we pick up from McDonald’s today and yesterday, turn it into bio diesel
tomorrow and power it, our delivery fleet with it to deliver case goods to the stores
the very next day. RH: Tell me about some of that delivery and
pick up? Because in the old days they used to take the old oil and a bucket and kind
of splatter it across the floor and dump it out or whatever. And how is that delivery
and recapture system done now? BH: That’s a great question because that
and I know when I worked in the quick service restaurant industry when I was high school
that’s the ugliest, dirtiest, most unsafe job in the restaurant is handling the waste
grease. It’s very hot and very dangerous. It can spill on the floor and cause a slippery
floor. It contributes to slips and falls and back injuries carrying large cases of cooking
oil to the fryer. About seven years ago we saw a company come into the space that developed
some proprietary technology where they hard plumb in the restaurant a system that pumps
in fresh cooking oil and extract waste cooking oil at the push of a button so a completely
hands free system. Then they have a specialty delivery vehicle that comes to the store,
dynamically routed so it’s vendor managed. When they’re low on oil it will come, pump
in fresh oil, extract the waste oil and take the waste oil back to a depot. We reached
out to them and actually at McDonald’s suggestion partnered with them in a way to help them
move this initiative quicker across the country. Today, we partner in six depots throughout
the U.S. The company now has 36 depots to make up the whole total U.S. footprint. And
they not only collect waste cooking oil from McDonald’s but from all of the major quick
service restaurant companies and aggregate this oil at their depots throughout the U.S.
So our build on initiative, the sustainable initiative around that is then to take that
waste product and convert it to bio diesel fuels. We’re right now making relationships
with bio diesel processors throughout the country that can take that product, toll it
for us, we’ll buy it back use it in our delivery fleet and then sell it to other customers
in that local market. So we’re really excited about the initiative and we have a lot further
to go but we’ve made some great strides. RH: I was also impressed about the delivery
and pick up of the oil that no longer do you have to interrupt operations? Speak a little
about that. BH: That’s right, Rick. The restaurants
when we install this infrastructure in the store that includes the fresh oil tank and
waste oil tank we connect a coupling system to the outside of the restaurant. This specialty
delivery vehicle drives up outside the restaurant and connects a hose into the fresh oil coupling,
another hose into the waste oil coupling and simultaneous pumps in fresh oil and extracts
waste oil. We can send a delivery receipt via e-mail, wirelessly and never bother the
manager or not. They wouldn’t even know we came. And their use of fresh oil is seamless
uninterrupted. RH: Chuck, tell me about GSF’s foundation
and how that works. And I know you’re a large company. Do you have just one thing
that you do? CB: We don’t have just one thing that we
do but we have 18 facilities, and each of our facilities has it’s own individual unique
committee made up of our associates right there. We encourage them to be engaged at
the local level with their charities. They know the needs of that community well. And
so they are by far the best group to help design where their dollars go. And when you
look at that across the whole company it wasn’t surprising that it began with the senior leadership
team which Bill was a member and Mark Wetterau as our Chairman had said we need and Bill
termed it earlier about we need not only to do well as a company but we need to also do
good in our communities. So beyond the tax benefits, the taxes that we pay and social
security, we have this huge group of 2,800 associates that go out into the community
and give back. And we just ran a great program in Santa Ana with our Irvine based committee
where we gave backpacks to first grade kids that start school without any school supplies.
Anna Galvet [ph?] had been kind of on the giving and on the fringe of the foundation.
Went to that event and came and back and said, “You know I always knew the foundation did
good work but I really didn’t get it until I stood there and handed those backpacks out
and watch those kids respond.” So when you think about social responsibility and giving
back in its purest form there are 2,800 associates apart of Golden State Foods that not only
work hard every day but then give back in their communities and it is just-- I’ve
told Bill and a number of people I’ve got the greatest job at GSF. They make money.
I get to give it away. Really, it is our associates and how they come back and feel about what
they do. RH: And you help coordinate all of that but
then also you sometimes learn from the grass roots some things and benefits that maybe
translate to the whole? CB: Absolutely. It’s just it was like we
started with how we got into social responsibility and the number of grass roots things that
we were seeing done. They have brought forward a number of charities that were just local
that we had taken and applied that same model in our other communities. One of the great
ones is “shoes that fit”. I having lived in the U.S. all of my life I never would have
thought that we had kids that started school wearing dad’s shoes with newspaper stuck
in the end, wearing their sister’s shoes until we saw it first hand. And the shoes
that fit program kind of grew out of one associates involvement and attachment to the organization.
So yes, we have several national initiatives now. We do the backpack thing in cooperation
with United Stationers who is kind of a model foundation modeled after ours. But yes, there
has been a lot of great grass roots things bubbled up that we have been able to take
and give a national face to. RH: I’m struck by what both of you say of
how many partnerships that you have with different businesses, with communities and that you
are as C.S. Lewis once said, “You’re the good infection.” That you bring healing
and help and then others help you and you have a tremendous cooperation. And that must
have been a big surprise as you look back and where you’ve come.
CB: Let’s do the mixing bowl thing. BH: It was about four years ago, I guess,
when our Chairman and CEO came to me and said, “Bill, I’d really like you to take on
the responsibility as our foundation chair for the Irvine committee.” And Irvine is
our corporate headquarters. There’s only 40 of us there out of a company of I say 3,000,
Chuck says 2,800 but you get the idea, it’s a lot of people. So we’re very decentralized.
And I asked Mark, “I said, we’ll I’ll be happy to do that.” When the Chairman
and CEO ask you to do something you typically respond that way. And I said, “But what
are the expectations?” And he said, “Well, of course, we want to continue to work with
Chuck and work with the local associates and do the kinds of things that we’re doing,
but we’d also like to put something together that’s significant where we can collaborate
with others like minded in the community and create an event that celebrates not only our
beliefs but helps the community in a bigger way. And we do that through collaboration
with other like minded business folks. And so I went to Chuck and I said, “Chuck, I
think I’m going to need your help.” And he says, “What do you need?” And I said,
“Well my thought is that we go meet with people in the community that I know that are
very philanthropic that have a heart for those less fortunate.” People that I met on the
board of Big Brothers/Big Sisters over my tenure there, people we’ve met through foundation
activities over the last couple of years and get their ideas on thoughts on what we might
do. And the analogy that Chuck and I created that we were going out on in the community
with a big mixing bowl and we were going to bake a cake and we didn’t know what it was
going to look like or taste like but we wanted everybody’s input. So we had a lot of people
put a little bit of this and a little bit of that and help us create something that
ultimately is very tasty and probably very fattening too but we created a community effort
called “Good News for Kids.” And this year, in fact, November 19 will be our fourth
annual gala. And we bring together 650-700 people from the community. We rent a large
venue called The Grove in Anaheim. And we bring in each year four partner charities
that serve children and families in need. We celebrate the good work they do in the
community. We help them raise significant resources that they wouldn’t otherwise have.
And we have a lot of fun. It’s a very entertaining program. We’ve created a nice brand around
“Good New for Kids” where people just hear the name and they want to come back year-after-year.
And the other thing we do that’s rather unique is we celebrate someone in the community.
We’ve tended to kind of move towards those in the entertainment industry to help us create
a real fun evening. And someone who you may or may not know that makes their living by
day one way, but their real passion is helping those real fortunate. And our first honoree
was Erin Gruwell, the Freedom Writers, the Long Beach Wilson high school teacher.
RH: Right. BH: And she did a phenomenal job. She has
a wonderful story and she’s a great storyteller. The second year we had John Ondrasik from
Five for Fighting who did a private concert and interweaved his passion for those less
fortunate and told us in a way through song about his beliefs and then ended with what
kind of world he’d want now. And then last year, we had Mark Schulman who is considered
the rocker’s drummer. He’s played with Def Leppard and Velvet Revolver and now is
Pink’s drummer. And Mark when he’s not touring with Pink or doing Cher’s show in
Las Vegas he’s in inner city school classrooms. He’s working with kids in the Department
of Corrections. He’s working a local Boys and Girls Club chapters and he’s taking
kids who have made poor decisions early on in life and trying to get through to them
using drumming as a metaphor to make better choices and really try to inspire them in
the arts. Some of these kids are incredible talented. So this year after a little self
promoting here Becky Baeling, who’s a Broadway star is coming to help us who has worked with
the Phoenix House which is a drug rehabilitation program actually throughout the country and
they have a local chapter in Santa Ana and we’re excited about it. But there’s 21
people from the community that partner with us, sit on our steering committee and help
make this happen. And I have a friend that has this expression, I think, his grandmother
said, “That a drip and a drip and a drip make a splash.” And that’s really kind
of our philosophy that if we’re willing to take on a leadership role and bring together
other like minded people we can really do amazing things. And this year “Good News
for Kids” will eclipse $1 million in fundraising. Plus really do a lot of good work in terms
of inspiring people to get out of their chair at home and go out into the community and
lend a hand where they can and where it’s needed.
RH: That’s tremendous. That’s tremendous. And it sounds like an ethos at GSF is not
only enjoy the work you do but to do good work.
BH: Absolutely, yes. RH: And that’s tremendous. Now, one of the
problems when you have a for-profit company that then wants to do social good is that
sometimes the profit starts driving things and the part for foundations and charities
begins to dry up or whatever. How do you guard against that? How do you keep a certain percent
that you want to be able to work through your foundations that GSF gives? How do they work
that? BH: I think again, it’s part of our ethos
as we have this, we approach things from a belief of abundance as opposed to scarcity.
And I think that kind of infiltrates throughout the company in everything we do. In order
to sustain our company and continue to be able to do what we’re doing we need to maintain
our profitability and we’re always looking for ways to increase it. But we find that
there’s actually solutions that bring these things together and achieve what ultimately
is a multiple bottom line. And we do that through critical thinking, collaboration and
really challenging ourselves to do the best and come up with the best solution. So in
my seven years at Golden State Foods I’ve never seen us really struggle with that. We
have a very unique relationship with McDonald’s and, of course, they’re very concerned about
quality. They’re also concerned about the environment and they want the lowest price.
So that’s the challenge they present us with that and they presented us with that
for 60 plus years. But the reason we’re as large as we are today and as successful
as we are today is because I think we’ve managed to that expectation very, very well.
RH: Chuck, any comment? CB: Yes, I agree because one of the things
the owners of Golden State Foods because we are employee owned, that comes right off the
top. So we talked about the foundation. It has never been discussed in 25 years of doing
not-for-profit work they’ve never approached it like this is something they have to do.
It is something that I literally have to go in sometimes and it is, “Chuck, what do
you need? We want to make sure this goes.” It drives our employees. We feel like they
are probably better associates because of their engagement with the foundation and the
owners see it as just part of what is their responsibility. It is a unique mix that has
never been one of is it a question of whether we will or won’t and when you think about
it coming right off the top, that’s pretty significant for the 90 plus owners of the
company. RH: Very much like good tithing habits.
CB: Yes, sir exactly. RH: It comes off the top first. Then you worry
about everything else later and that’s interesting because both Pepperdine and GSF have Christian
roots and Christian ethos. And one of the things that we value here at Pepperdine is
a program, educational programs that develop value centered leaders. It sounds like your
system automatically engenders that among people to think value first. And so what about--
do you know anything about turnover and keeping employees. My guess is that you must be much
higher than industry standards. BH: Well, from a turnover standpoint much
lower than industry standards. RH: Well, yes, lower turnover.
BH: We actually have a company creed and we have stated values that appear on the walls
in all of our facilities, they are on the back of all of our business cards and I know
a lot of companies have that. But what really intrigued me about Golden State Foods when
I was there as a consultant when I first started my career with the company and sat in on a
couple of meetings my first week is how those creed and values came into the meetings that
I sat in and became a filter to guide behaviors and do the right thing and give the customer
a fair deal and treat others the way we wanted to be treaty. So it’s not just words on
a business card or words on a wall. It’s really a philosophy that we all live by and
it’s foundational to what we do, the decisions we make and who we are as a company.
RH: Where do you see GSF headed in the next few years?
BH: Well, we’re a large company. And our customer McDonald’s has begun to slow growth
especially in the U.S. But we’re continually challenged to come up with new ideas to help
them be more successful not by growing stores but by growing top line revenues and becoming
more relevant and putting more meaningful menu offerings on the menu, more nutrition,
better value, those kinds of things. So that’s first and foremost that’s what we’re concentrated
on. We also have learned over our 60 year operating experience there’s a lot of things
that we do very, very well that we’ve-- disciplines that we’ve developed by working
for a very demanding large customer and being successful with that over the years. So we
began to diversify our customer base a lot more and we see a lot of opportunities to
do that. As we’ve kind of come out of just the McDonald’s umbrella and serving just
one customer for so many years we see that we’re very good at some of the things that
we do and that has economic value to a lot of other customers in the marketplace. So
we see lots of growth opportunities particularly in our distribution group and in our sauces
and dressings, we call it our liquids group, for continued growth. As far as our foundation
goes and I’ll let Chuck address that but we’re only six years old, seven years old.
CB: Seven. BH: And I know Chuck feels the sky’s the
limit. And I mean we’re just getting started. There’s so much more we can do and I’m
really excited about it. CB: Well, I think particularly, Bill, when
you talk about business customers you think about some of the people that you have sat
down with on the business side and how the alignment just-- and it’s-- I don’t want
to say magical, that’s not the right word. I’m not sure what the right word is but
you suddenly realize that there is this value system that you hold dear and I think about
Chick-fil-A as an alignment point. We also have-- we have found that even with some of
our suppliers when we talk about the foundation and they see the engagement of our associates
they have asked us is there a way that you can help us build that same model. So right
now, I think we have three other companies that we have either done business with or
are doing business with that we are helping them build the same model we have in that
whole giving back engagement. And it’s fun because then in communities like here and
when we did backpacks I mean that was not just Golden State Foods, that was our national
partner United Stationers that helped us deliver 5,000 plus backpacks over…
BH: Throughout the country. CB: Yes, in the last few weeks. So yes, I
think, that there is a great opportunity for us to continue to grow that model with other
companies. And that becomes kind of that pyramid all into itself that we can begin to work
in collaborative efforts. So yes, it’s cool stuff.
RH: Yes, that’s great. That really is. BH: Some other things-- it’s interesting,
we just earned in this kind of climate, a very challenging climate for many we just
earned 40 percent of the distribution system for Chick-fil-A which is arguably the most
profitable and fastest growing chicken restaurant concept in the country. And they are a faith-based
organization based in the Southeast with Truett… RH: Truett Cathy.
BH: …Southern Baptists. And just remarkable people with a real passion for foster children.
In fact, they have their own chain of foster homes around the U.S. And when we were going
through all of the business stuff and what it takes to really come to terms in a contractual
sense with a company and by the way this relationship was building over about three or four years
before we were finally rewarded the business. But what really resonated with both companies
was this match in terms of heart and the care for those less fortunate and belief that it’s
not only important to do well but do good. And I think that had a large part to do with
us being the successful bidder. Not only did we give them concept-- I mean confidence that
certainly we can do the business and do it as well if not better than anybody else but
the fact that we had this values match. And that tells us a lot about our character and
the fact that we can trust each other and it’s a relationship that’s built on trust
and like-mindedness as well as capabilities is really neat.
RH: And that’s a heartening word in this day and age of corporate greed that we almost
daily would open up the newspaper and read about and companies robbing their employees
and the public of their savings. And yet here is something that you found that’s a core
competency that you find translatable to partner with other corporations and strike that resonant
cord. And that helps you stay true to your vision too because now you’ve got someone
to say now, we want to do this the right away. And as you say then it’s a matter of saying
then how do we do that? How do we work that? Because that’s what guides us and so it’s
very heartening to hear it really is. But it’s been a real pleasure to be able to
share what your company is doing. And for those of you that don’t know GSF’s corporate
headquarters in Irvine are across from our Irvine campus where we have several floors
there for the Irvine Center. BH: That’s right.
CB: That’s true. RH: So it’s been a pleasure coming up to
visit you there sometimes too. And we hope-- wish you continued success and thank you very
much for the time today. BH: Well, thanks, Rick. Thank you for the
opportunity. It’s our pleasure. DS: This is Danielle Scott for the Graziadio
Business Report. Find us online at And you can find out more about Golden State
Foods and its foundation at