Natural Foods Merchandiser

The Path of Kahn

Gene Kahn used to own a piece of a mountain. Then he gave it away.

To Kahn?s supporters, giving away the mountain is a metaphor for his decision to sell his organic food company, Small Planet Foods, to conventional food giant General Mills. They believe it illustrates Kahn?s philosophy that those who have reached the peak of the organic food chain should be willing to climb back down and bring their message to the masses clustered at the bottom of the hill.

To Kahn?s detractors, giving away the mountain is a cautionary tale, the story of a man who reached an ideological summit and then jumped off—a man who sold out.

To Kahn, the mountain is simply a mountain. It was once the boundary of the plot of land in northern Washington, wedged between the Cascade range and the Skagit River, which became Cascadian Farm. Now it?s part of the Nature Conservancy?s 212-acre Skagit Land Trust, established when Kahn donated the development rights for his mountain to create a bald eagle preserve.

It?s fitting that a man who says, ?I?ve always been a scale freak. I?ve always had an obsession to be big,? would own a mountain. And it?s fitting that someone who is so committed to philanthropy that he personally employs 18 people to teach impoverished Hondurans about agriculture would be able to give away the mountain he paid so much to acquire.

For Kahn, there will always be mountains to summit and descend. That?s what led him to turn a 51-acre abandoned farm into a $17 million operation. That?s what inspired him to be the first to process and sell frozen organic foods. And that?s what drives him now to try to turn a multibillion-dollar corporation into a sustainable entity. In short, that?s what makes him a natural legacy.

?Gene operates on a level where he?s at 30,000 feet and always looking out and beyond,? says Katherine DiMatteo, president of the Organic Trade Association and a longtime friend of Kahn?s.

Chaucer and farming
Like so many other natural foods pioneers, Kahn made his decision to lead a more activist lifestyle after the 1968 Democratic National Convention. Kahn, who had just graduated from college, attended the convention in his hometown, Chicago. ?It gave me a really compelling sense that something was amiss in this country. I saw American culture and society coming to a disastrous shift, and I needed to get away from it,? he says. ?I wanted to go out into the wilderness, go to a rural area and live off the land.?

But first he made a detour to the University of Washington to work on a doctorate in English literature, with an emphasis on Chaucer. It was a route that made him uniquely qualified to be an organic farmer, he jokes. ?Majoring in English or philosophy is great for organic farmers. It means you have zero scientific background and know nothing.?

In the fall of 1971, Kahn signed a lease on an abandoned farm near the foot of the Cascades, gave it the tongue-in-cheek name New Cascadian Survival and Reclamation Project, and quickly learned how little he really knew about agriculture.

First of all, he had chosen to farm in an area that has 80 inches of annual precipitation. ?It?s basically a temperate rainforest,? he says. ?If I wanted to find the worst place to farm organically, that was it. Every weed known to mankind grows there.?

Kahn?s problems didn?t end there. The farmhouse was falling down. The cropland had been turned into a garbage dump. The power lines had been ripped out, and Kahn didn?t have the money to replace them. ?When I first met Gene, he was sitting in a pitch-dark house barely illuminated with kerosene lamps,? says Sarah Huntington, who worked with Kahn at Cascadian Farm and Small Planet Foods for 30 years. But Kahn persevered, beginning what he calls ?my illustrious career of numerous crop failures and disasters.?

He lost eight acres of apples to a plant disease. A grain crop was ruined when a herd of elk decided the field was an excellent place to wallow and frolic. Seeds rotted in the wet, cold soil. The first crops of potatoes and carrots that did survive were bitter. And Kahn had to take a job in a cedar plant to support himself and his farm.

Kahn didn?t want to ask his conventional farming neighbors—who, he says, viewed him as ?one of those good ol? workin? hippies?—for advice. After all, they used pesticides and chemicals. He decided to research how to become a good farmer. He began collecting as many types of potatoes as he could find, and at one point had 300 varieties that he grew on his farm every year to produce seed. He amassed a 4,400-volume library of agricultural books published between 1560 and the early 1900s. ?I?ve been told by the National Agricultural Library people that it?s one of the top 10 collections,? he says.

?Gene is a real thinker, and a strategist too. He?s a serious researcher. I?ve seen him reading Japanese marketing texts,? says Joe Smillie, vice president of organic certification agency Quality Assurance International and a consultant to Cascadian Farm in the 1980s.

Bob Scowcroft, executive director of the Organic Farming Research Foundation, has seen the fruits of Kahn?s obsession with agricultural education. ?He continues to challenge me on my thinking—research, policy, size and scale of farming. He?s one of no more than 10 of the early pioneers who had a bigger vision than farming, one who had the skill to take that vision to a higher level.?

By the mid-1970s, Kahn had learned enough to successfully farm 450 acres of organic potatoes, raspberries, strawberries and carrots. He had also learned that he might have taken the wrong attitude toward conventional farmers. ?I discovered that farmers used agricultural chemicals not because they were evil, but because they were living in 80 inches of rain,? he says.

?I?ve always hated the self-righteousness of organic farmers who, like me, didn?t come from a farming background—philosophy and English majors constantly bad-mouthing conventional farmers. Did we really think we could alter conventional food and agriculture without inviting their participation? We weren?t so perfect in the first place. We debated on organics to the point of dullness, had inconsistent standards and vilified conventional growers.?

Thus began what Neshaminy Valley Natural Foods Chief Executive Phil Margolis refers to as Kahn?s ability to ?blend the real world and the ideal world and come out with something appropriate for organics.?

Defining organic
Kahn?s philosophy toward organic farming has caused consternation in the organic community and has earned him much criticism. Fred Kirschenmann, director of the Leopold Center for Sustainable Agriculture at Iowa State University, has had cordial yet pointed arguments about the true definition of organic farming with Kahn many times over the years. Kirschenmann and other traditionalists believe in organics as defined in the 1940s: the farm as an organism, where everything is integrated into a whole. Waste is reused in another part of the farm. Processing is limited to what can be done in a farm kitchen. Food is kept as whole as possible, with minimal time between harvest and consumption. Distribution is restricted to the region near the farm.

?Organics cannot feed the world with this philosophical approach. An ecological-based system is not willing to sacrifice philosophic principles to increase sales,? Kirschenmann says.

That?s diametrically opposed to Kahn?s goal to bring organics to as many people as possible. ?Gene is a wonderfully energetic individual and has a very clear, ideological and almost rigid view of what he wants to accomplish,? Kirschenmann says, admitting that ?Gene?s side of this issue has essentially carried the day. There?s not much difference in appearance between a Cascadian Farm chicken TV dinner and a nonorganic one. There?s too much homogenization and mass production. We?ve lost much of that romance when food was whole, supplied by the local family farmer.?

Smillie argues the opposing side, pointing out that unlike some organic farmers, Kahn has been able to realize that ?conventional farmers aren?t the bad guys, that we should give the opportunity to be organic to all farmers, not just the elite few. Pure organics shouldn?t be only something the highly qualified, super-farmers can do.?

As Kahn?s philosophy toward conventional farmers changed, so did his opinion about mainstream distribution. ?By 1975, it became clear to me that many farmers were getting screwed, and I would get screwed too if I didn?t get closer to the consumer,? he says. He started making Cascadian Farm jam and pickles in his barn and distributing the products nationally. ?It was my first effort to redesign the distribution system,? he says. ?We aspired to develop an alternative food system.?

Kahn envisioned a distribution system in which farmers, manufacturers, truckers, retailers and anyone else involved in the food chain were part of vertically integrated cooperatives. All the groups would then work together, forming what Kahn calls the ?co-op of co-ops.?

Kahn teamed up with Roger Weschler of Community Produce, a Seattle-based worker-managed distributor, to distribute Cascadian Farm products. But by the 1980s, many of the co-ops involved in the distribution system faced financial pressures that caused them either to morph into private companies or to cease business altogether. What Kahn calls the ?grand theoretical concept? of a vertically integrated cooperative distribution system turned out to be unsustainable.

Kahn believes co-op-based distribution represented an interesting experiment and a critical personal experience in attempting to redesign the food system. ?The magnitude of the task became clear as we encountered the daily problems of just surviving in business,? he says. ?We became more focused, more realistic and less we-them oriented.?

The result, he says, is ?I still believe that the vertical integration of farms represents a viable business alternative, but [I] also understand more fully what it takes to accomplish this task in today?s business climate.?

Freezing profits
While Kahn was trying to redefine food distribution, back at the farm an excess of fruits and veggies was causing problems. Sarah Huntington, who went from a Cascadian Farm volunteer to full-time production planner in the mid-1980s, remembers when Kahn came up with the idea of freezing and selling the excess crops.

?We tried doing this mortally hokey little thing: putting strawberries in plastic Ziploc baggies with a label that said ?Organic Strawberries,?? Huntington says. ?We tried to sell them to the co-ops but they sat on the shelf. Nobody wanted lumpy bags of frozen strawberries.

?Next year [1976], we took the margarine-tub approach, putting the strawberries in opaque tubs. That worked better.?

Ten years later, Cascadian subcontracted with a frozen foods processor and started selling frozen corn and diced potatoes up and down the West Coast. They sold so well, the farm quickly added frozen peas, green beans and diced carrots.

The Cascadian crew soon realized that retailers wanted product lines rather than just one type of frozen fruit or vegetable, so the farm bought blueberries and blackberries to supplement its homegrown raspberries and strawberries. That was the beginning of Cascadian?s shift toward becoming a processor and marketer for other farms.

?I was interested in proving to myself and others that conventional farmers can become organic farmers. I wanted to displace theology with a contract to grow for Cascadian,? Kahn says. ?The least successful farmers [nearby] were into it—the others kind of thought it was a cute idea, but they laughed.? Still, they were curious. By 1989, Cascadian had revenues of $17 million. ?We were the largest farm around in terms of dollars,? Kahn says.

Cascadian would contract with a grower, buy acres of a crop and arrange to deliver that crop to a local processor. ?We sought out business as a bulk ingredient provider so we could get to the minimum processing volumes that a small processor would do,? Huntington says. ?Necessity was the mother of invention. Necessity was Gene Kahn?s jumping-off point.?

But buying so many crops was risky. ?Cash was always an issue. We were always growing,? Huntington says. ?Gene was always looking for funding. I remember one time when the farm?s credit with a local bank was tapped out, Gene?s credit was tapped out and we needed blueberries. The employees pooled $8,000 of our own money and we bought them.?

Going corporate
In 1989, the Environmental Protection Agency declared Alar, a chemical growth-regulator used widely on apples, a carcinogen. A freaked-out public suddenly discovered the phrase ?Don?t Panic, Get Organic.? ?Our customers were screaming for product,? Huntington says. Kahn borrowed heavily to finance expansion and planted a huge crop of potatoes. But by the time the potatoes were ready for harvest, the Alar scare was over and demand for organics had plummeted. Cascadian Farm couldn?t pay its bills or its growers. So when the National Grape Cooperative Association, parent company of Welch?s, made an offer for a 55 percent share of Cascadian, Kahn sold.

?It was a huge turning point. I lost controlling interest,? he says. ?I was a corporate guy. It was a big adjustment reporting to the CEO of Welch?s.? Still, after years of financial struggle, Huntington believes the Welch?s sale was mainly a relief for Kahn. ?Gene is very effective at letting go of whatever isn?t working and coming up with a proposal for the next stage,? she says.

In other words, if life gives you sour grapes, turn them into grape juice. Kahn focused on the benefits of the sale. ?I was a farmer-activist owned by a national grape co-op reporting to 50 grape growers in the most successful farmer co-op in the country,? he says. ?I had money. I could pay my workers.?

Huntington says she watched the ?continual mental struggles Gene has gone through to keep alive his idea of converting modern Western agriculture to organic. The bottom line is, if a company goes out of business, the idea dies. You have to adapt or die, and [going corporate] ultimately is the way he adapted.?

Eventually, Welch?s sold part of its interest in Cascadian to the General Electric Employees Pension Fund and Shamrock Capital Advisors Fund, and with that money behind him, Kahn and Cascadian bought Muir Glen and Fantastic Foods and formed the umbrella company Small Planet Foods in 1997.

Throughout the ?90s, Kahn turned more of his attention to helping develop organic standards and working on boards and committees. He served on the National Organic Standards Board and was treasurer of the Organic Trade Association. He?s worked with various organic certifying agencies and was a member of the Washington State University Agriculture Advisory Board. He currently serves on the boards of the Governor?s State of Washington Sustainability Panel and the OTA?s Center for Organic Education and Promotion.

He also stays close to the soil by attending Ecological Farming Association conferences. ?He?s always able to fit in the farmer groups and talk compost and cover crop like any grower,? OFRF?s Scowcroft says. ?It?s critical that both Gene Kahn and two-acre farmer Joe Smith participate in the food system.?

?He?s been more active in the organic community than some of the other folks. A lot of people into the business end of a branded product don?t talk about agriculture so much,? OTA?s DiMatteo says. ?I think people take potshots at him because he exposes himself. He should be admired, because there are a lot of people [in the organics industry] we don?t hear from.?

Moving to Minneapolis
The majority of the potshots at Kahn were reserved for his 2000 sale of Small Planet Foods to Minneapolis-based General Mills, the $11.5 billion food conglomerate that also owns Betty Crocker, Pillsbury, Green Giant, H?agen-Dazs and Old El Paso.

Kahn loves to debate with his detractors the idea of Small Planet becoming a corporate lackey. ?People say we sold out. It?s true—we sold something and got paid. But what does that mean? I don?t want to make light of their concerns, but I suggest that they move more into the world of facts instead of the dramatic, knee-jerk reaction against the evil corporation.?

The problem, he says, is that ?people don?t know how some corporations work. They think of them as big gangs, all-consuming giants. But corporations are extremely risk-averse. They?re not interested in diluting the values of their acquisitions. GM?s standards for Cascadian and Muir Glen are twice as rigorous as the national [organic] standards.?

Kahn says Small Planet is in ?great hands with GM. We had a lot of suitors, but GM was the coolest of all the food companies. I loved the people, and they understood what I was trying to do. They were very committed to me and the company and culture.?

General Mills, like Welch?s and General Electric, allowed Kahn to remain as president of Small Planet Foods—a difficult feat for anyone who has sold a company, but particularly for an ex-hippie in a corporate environment. But it was hard to argue with success: By the time of the sale to General Mills, Small Planet was a $60 million company.

?The new owners made attempts to replace him, but he handled it gracefully. He was able to prove to each new owner that his leadership was a vital part of what they were buying,? says Sheldon Weinberg of Weinberg & Associates, an Anacortes, Wash.-based organic business-development consultant group.

?He?s one of the best examples of taking a pioneering organic company into the world of acquisitions by going into a conventional company. He held onto his presidency and responsibility the whole way,? says Debra Boyle, president of Pro Organics, the largest Canadian distributor of fresh foods. ?He helped conventional food companies really realize what organics is all about—how they could make money but not lose the heart and soul.?

DiMatteo believes Kahn wooed corporate honchos with his passion and conviction about organics, coupled with his communication style and willingness to see all sides to an argument.

?He knows, or he?s learned, that you have to step people through your thinking—that there are stages to go through. He can take his vision and break it down,? she says. ?He?s also willing to say he may have misjudged something, that his enthusiasm got away. That is the most beautiful part of working with and knowing Gene. He?s willing to engage in debate until he finally knows another point of view, and if he sees a better way than what he had originally been thinking, he?ll grab it, find the information, be a driver in strategic thinking, do outreach and become the cheerleader, the pusher.?

But those same qualities can be disconcerting to people who don?t know Kahn. ?He?s so direct about how he feels about things that sometimes he?s a bull in a china closet,? says Kahn?s longtime friend Theresa Marquez, chief marketing executive at Organic Valley Farms. ?He would be the type that speaks out when no one else would.? She jokes that ?oftentimes I would want to reach across the table and choke him.?

DiMatteo adds, ?He?s a complex person. Depending on the side of him that you may be looking at, you may get expectations that may be dashed.?

Sustaining the vision
In September 2003, Kahn stepped down as president of Small Planet Foods and took the newly created job as General Mills? vice president for sustainable development. His goal? To make one of North America?s largest corporations a responsible partner with the environment.

He began with a company-wide assessment on how General Mills impacts the environment, from solid waste disposal to water consumption to use of energy and gas. Next, his plan is to rethink all General Mills packaging.

?I?m a supply chain guy now,? he says. ?That?s really cool to me because that?s where I came from.? Some wonder just how much difference Kahn can make in a many-thousand-employee corporation. But he has a powerful aid: public opinion. ?American companies have typically been rather slow in picking up the sustainability charge, but over the next decade or so, there?s going to be pressure on large companies to have a position on sustainability, to be involved in sustainability,? Weinberg says.

Weinberg and Kahn are partners in another venture that?s important to Kahn: Robinhood Consulting, a newly formed nonprofit organization with the slogan ?Enable the Rich to Empower the Poor.?

Robinhood?s goal is to bring experts in the organic food business together and allow them to pass on their knowledge to nonprofit organizations. ?The principles in a not-for-profit echo the principles we got into organic for,? Weinberg says. The execs educate charities on marketing and sales, finance, supply-chain management, distribution, warehousing and business-contract development, with the goal of helping the organizations develop business plans and become sustainable.

Robinhood?s first project is aiding Burlington, Wash.-based Tierra Nueva Hispanic Ecumenical Ministries in developing a line of tortillas that the charity can eventually sell nationally. ?It?s a great example of Gene?s genius—an idea that works well on the local level that can be a training ground for the Hispanic community,? Weinberg says.

Through that work, Kahn has learned more about farm workers? and immigrant?s plights and about alleviating hunger and poverty.

?I wanted to see how I might help,? he says. ?I went to Honduras, and my mind was blown away by the people and how easy it is to make a difference.? He personally employs 18 local promoters to teach Hondurans sustainable agriculture—composting, drip irrigation, how to plow a contour rather than downhill—so they can make a living at home instead of succumbing to the lure of emigration.

The millions of dollars Kahn made from the sale of Small Planet to General Mills have allowed him to fund his interest in charity. ?I?m very serious about philanthropy. I dream about it at night,? he says.

But even back in the days when he was a struggling farmer, Kahn was a philanthropist. ?When the plane ticket was needed or the meeting had to be attended or the papers had to be copied, Gene was always there with financial and logistical support,? OFRF?s Scowcroft says.

Organic Valley?s Marquez, who co-founded The Food Alliance with Kahn in 1993, says ?Gene is a visionary and a very deep thinker about our goals,? which include awarding ecoseals to farmers who reduce their use of pesticides. ?It rewards farmers who aren?t necessarily organically certified for farming environmentally,? she says.

Kahn?s means of communicating his vision about the world?s food chain is now more often a pen than a plow. He?s moved his base of operations from a kerosene-lit barn to a fluorescent-lit office. To some, that means he?s sold out. But his supporters believe that?s simply narrow thinking. To reach the top of the mountain, they say, you have to be willing to change routes when your original path is blocked. You have to understand you?ll leave a few pieces of flesh along the way. You?ll find yourself explaining why you ever wanted to climb the mountain in the first place.

But in the end, when you?ve reached the top, you can see for miles. And that?s what drives Gene Kahn. Once you?ve owned the mountain, you?re a visionary.

Vicky Uhland is a free-lance writer based in Denver.

Natural Foods Merchandiser volume XXV/number 3/p. 42, 44, 46, 48, 50, 52

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