Former executives: Keurig social investments wane

UNDERHILL – Rick Peyser, the man most responsible for the social conscience of Keurig Green Mountain, is making a cup of coffee with a Chemex brewer, the antithesis of the K-Cup made famous by Keurig.

Standing in the kitchen of his Underhill home, with a cinematic view of Mt. Mansfield off the back porch, Peyser slowly and patiently pours hot water into the simple brewer, letting it drip through the coffee grinds. Peyser probably could have whipped out a dozen K-Cups by now, but he's in no hurry.

"I'm not philosophically opposed necessarily to Keurig," Peyser said. "I just like the aroma of this method and other methods where you fill the kitchen with the smell of coffee. The K-Cup brews a decent cup of coffee, but I wasn't impressed by the aroma."

Peyser recognized the convenience of K-Cups, but missed the ritual of the Chemex brewer.

"If I don't have four or five minutes a day to enjoy the aroma of good coffee, then there's something wrong with my schedule," he said.

He's got time now.

One year ago, Peyser gave notice at Keurig Green Mountain after nearly 27 years working at the company that was Green Mountain Coffee Roasters when he was hired in 1987 by Founder Bob Stiller. At the time he left, Peyser was director of social advocacy and supply chain community outreach. He left, he said, because Keurig's values no longer aligned with his.

Keurig spent $55.7 million on social and environmental programs in 2014, nonetheless Peyser is concerned about Keurig's future support for coffee farmers in Central America and elsewhere. The company has long been renowned in the industry for its philanthropy in coffee country.

"I don't want to be the cranky old guy in the corner saying, 'That's not the way we used to do it,' but to be honest, things really became about shareholder value," Peyser, 65, said.

Good for the world

Beginning in mid-1990s, Peyser was instrumental in creating the outreach programs for coffee farmers that would allow Green Mountain Coffee Roasters to emblazon its semi-trailers with the slogan, "We realized good coffee could be good for the world," and actually mean it.

Stiller supported Peyser's efforts wholeheartedly. The founder instituted an unprecedented policy of committing 5 percent of pre-tax income to doing good. That would amount to hundreds of thousands of dollars at first, and eventually tens of millions of dollars to help farmers and others in the supply chain, both domestically and overseas. Larry Blanford, the company's second CEO starting in 2007, picked up where Stiller left off, supporting his policies.

But today, Peyser said, the 5 percent commitment has quietly gone away. Keurig no longer talks about it, he said, whereas previously that commitment had been mentioned at every opportunity. Peyser also saw funding for his projects reduced.

The change came, Peyser said, after Blanford retired in November 2012, and was replaced by former high-ranking Coca-Cola executive Brian Kelley.

"I remember being in a meeting with Brian Kelley and Brian said, 'Gee, that 5 percent is a lot of money,' and he was right, it was a lot of money," Peyser said. "But my feeling was that it had always been a lot of money. It was a commitment the company had made. This is the way we do business. We're committed to our communities, both here and where our raw materials come from."

In addition to the 5 percent commitment, Green Mountain Coffee was also paying a premium for Fair Trade coffee, which bumped the overall expense on philanthropy to considerably above 5 percent. Kelley took note.

"So what happened was the company decided, 'We're not going to talk about the 5 percent any more, we're going to talk about the whole ball of wax, including the Free Trade premium,'" Peyser said.

Dan Cox, owner and president of Coffee Enterprises in Burlington, and a former Green Mountain Coffee executive who worked with Peyser, said the company's generous nature was part of its appeal for consumers. Green Mountain Coffee was the "go-to" company for everything from responding to emergencies such as tsunamis, to helping Nicaraguan farmers deal with diseases like coffee rust.

"The history of Green Mountain Coffee is a three-pronged approach," Cox said. "One, great products; two, great profits; three, give back. That third leg is really important because that's why people buy us. It's the same approach Ben & Jerry's and a lot of companies take."

It's not the approach, however, that major investors take, Cox said.

"What the investment community says is, 'I want to make money. I just want to see quarter-over-quarter profits, new products, and market dominance,'" he said. "That's what big shareholders want."

Related: Keurig 2.0 flopped, can it rebound?

'Here's some seeds, plant a garden'

Over time, Keurig's policy evolved to committing some amount of money to social and environmental programs depending on its own financial performance, not a flat allocation of 5 percent, according to Peyser.

"Which I understand, but it made it difficult, because for most of the programs we were supporting, such as combating food insecurity, we need time," Peyser said. "It's not a question of going into a community and saying, 'Listen, here's some seeds, here's how you plant your garden, see 'ya.'"

Asked to comment on Peyser's assessment of Keurig's changing approach to social outreach, the company provided a written statement from Monique Oxender, chief sustainability officer:

"Sustainability has been an essential element of Keurig Green Mountain's culture, values and business performance for over 32 years. Keurig has been and remains a leader in the area of assisting coffee farmers and source communities, an area Rick was instrumental in developing."

Oxender went on to praise Peyser's work and vision. She said the company's charitable work continues in new ways. "As our business has grown in size and scope, we have expanded our approach and broadened the lens of our sustainability programs."

Keurig has announced four areas of focus related to sustainability practices: "Resilient Supply Chain, Sustainability Products, Thriving People and Communities, and Water Stewardship."

Keurig also points out that the $55.7 million the company spent on social and environmental programs and investments in fiscal 2014 represents almost 6 percent of pre-tax income, which includes the Fair Trade premium.

"By establishing a long term view of sustainability, we are making responsible choices which maximize our impact across more of our business initiatives," said Suzanne DuLong, vice president corporate communications. "The rationale is to invest as needed and where needed."

But Peyser said the 6 percent Keurig spent in 2014 is significantly less than the company would have spent were the 5 percent commitment still in place, in addition to the Fair Trade premium. Peyser's analysis of publicly available numbers shows that nearly 60 percent of the total of $55.7 million is attributable to the premium. He estimates that the commitment to spending pre-tax earnings on philanthropy is down to less than 3 percent.

In terms of the dollars spent on "supply chain communities," the tiny hamlets and villages in Central America where the small coffee farmers live, Peyser said an analysis of Keurig's sustainability reports show the company spent $10 million in 2012, $10.5 million in 2013, and $8.9 million in 2014.

"So it's down," he said.

Dan Cox is also the founder of Grounds for Health, a Williston-based nonprofit that screens and treats women for cervical cancer in developing countries, and especially in coffee country. Cox said Keurig gave the organization $300,000 yearly for three years before dropping its contribution by two-thirds to $100,000 last year. Keurig is still deciding how much it will give next year. The nonprofit's entire budget is about $1 million, Cox said.

Cox said he can't complain about an organization giving him $100,000, "But then again, why drop it? Weren't we doing the work?"

To its credit, Cox said, Keurig warned him three years ago that it would be re-evaluating the company's $300,000 annual commitment after three years.

The final straw for Peyser came when he returned from his last trip to Central America for Green Mountain Coffee Roasters in spring 2014 to find an email from Monique Oxender instructing him to cut two of his four staff members.

"Maybe I was just hopeful, or maybe I was in denial," Peyser said. "But I got to the point where I felt like I was spending a lot of time trying to keep things whole and then worrying even about my staff."

Keurig said today the company has a three-member supply chain outreach team. "In addition we had added sustainability team members focused on our four practice areas as we continue to invest in our sustainability programs," the company said.

Meet the Coffee Kids

When he was hired by Bob Stiller in 1987, Rick Peyser was 37 years old and had just left a company called Gardenway, the predecessor of both Country Home Products and Gardener's Supply. Peyser's first day of work at Green Mountain Coffee was Oct. 19 — Black Monday, when the stock market crashed, dropping by 508 points, nearly 23 percent.

"A little ominous I guess," Peyser said.

Still Peyser dove into his job as mail order maven, working directly for Stiller, who was just down the hall. The company only had about 35 employees in Waterbury. Stiller had started Green Mountain Coffee Roasters in Waitsfield with a retail coffee shop that attracted the attention of skiers.

A market for the mail order business sprung up when skiers returned home, and wanted Green Mountain Coffee shipped to them. Stiller started adding retail stores — at one point the company had a dozen, including one in Illinois —and moved the roasting facility to Waterbury.

Peyser started using the retail stores to grow his mailing list.

"Anyway, a year later, I was literally licking stamps — I don't mean figuratively, I mean literally licking stamps — when Dan Cox, who was our vice president of sales, invited me into a meeting," Peyser said.

The meeting Cox invited Peyser to attend in 1988 was with Bill Fishbein and Dean Cycon.

Fishbein, who owned a coffee shop in Providence, R.I., had founded a nonprofit, with the help of Cycon and others, called Coffee Kids. Fishbein traveled to Guatemala to see where his coffee came from, visiting many small-scale coffee farmers. His fledgling nonprofit was aimed to improve the quality of life for those farmers. Fishbein was shocked by the level of poverty he had seen.

"Bill Fishbein handed me a brochure," Peyser remembered, "The brochure showed pretty graphic poverty."

Four years later, in 1992, Peyser took his own trip with fellow Green Mountain Coffee employees to a coffee estate in Costa Rica.

"We were way up high, you could see mountains 40 miles in the distance, it was beautiful, just beautiful," Peyser said. "If you looked down from the veranda there was a kidney-shaped swimming pool surrounded by manicured coffee plants."

Now Peyser had contending visions in his head.

"I had these two worlds of coffee, the image in Costa Rica and the Coffee Kids brochure," he said. "Which is the real world here? It tortured me."

Welcome to Fort Apache

In 1995, Peyser returned to Latin America for a week-long trip in Guatelmala and Chiapas, Mexico that finally put everything into focus. This trip was on his own dime, at the invitation of the owner of an organic coffee company in San Diego.

Peyser visited an estate in Guatemala that rivaled the estate he had see in Costa Rica. Only this estate was fortified against a civil war that was raging in Chiapas at the time.

"They opened the gate like we were going into Fort Apache," Peyser remembered.

It was upon leaving the compound that the true situation in coffee country became clear for Peyser.

"I don't think we were 100 yards from that gate when on the right side of the road there was a pole barn," Peyser said. "There was a little stream running alongside the front of the pole barn where Guatemalan women dressed in their very colorful outfits were washing their clothes. Families were living in this pole barn. That's where the workers on the estate lived."

The image is vivid for Peyser 20 years later.

"I came back from that trip totally moved," he said. "You know how people talk about a life-changing experience? That was it for me."

Now Peyser began his education in earnest. For the next five years he used his vacation time every year to travel to Mexico — the first year in Chiapas and the following years in Oaxaca — to attend language school. He paid for the trips himself.

"It was something I wanted to do and felt I needed to do for my job," Peyser said. "I don't regret it at all. I felt like I was investing in myself. I wanted to be able to communicate directly with farmers."

Even though he was paying for the trips himself, Green Mountain Coffee was supportive, Peyser said, giving him extra time to visit projects the company was funding in supply chain communities. Peyser began to form some of the relationships the company still has today.

'We will do Fair Trade'

About a year after Green Mountain Coffee went public in 1993, Peyser was tapped to oversee the company's public relations, another job, like mail order, he had never done before.

Peyser's first public relations coup was to get Green Mountain Coffee involved in Fair Trade, which provided a minimum floor price on beans for coffee farmers to guard against significant drops in the market. He remembers a meeting to hear a pitch from a Fair Trade advocate.

Some were against the idea. Internal battles broke out. Why get involved, just to put a seal on Green Mountain Coffee bags? Bob Stiller settled the matter, decisively.

"Bob put his fist down on the table, and said, 'We will do Fair Trade,'" Peyser said, banging his fist on his kitchen table. "I was so happy. I'd never seen Bob put his fist down on the table for anything. He's just not that kind of guy."

Sure enough, Green Mountain Coffee soon found itself paying significantly more for Fair Trade coffee than the market price, which had naysayers shaking their heads.

"But the silver lining in this was all of the sudden Fair Trade caught on fire," Peyser said. "This is exactly why you needed Fair Trade. These farmers were struggling. We got all kinds of great press. Whatever that differential was we were paying it was making a difference for those farmers, and it also put the company in a positive light."

Dream job

In 2006, Stiller's last running the company, Peyser got his dream job — director of social advocacy and supply chain community outreach. A long title that described everything that was important to Peyser.

"When I got out of bed in the morning, honestly I couldn't wait to get to work," Peyser said.

Peyser wasted no time in revealing one of the dirty secrets of the specialty coffee business. Small-scale coffee farmers were not only poor, they were starving for significant stretches of the year.

"When this role came in 2006 I thought I had a pretty good sense of what was going on in these farming communities, in the households," Peyser said. "At the same time I recognized this was my own experience, kind of anecdotal. If I'm going to be spending hundreds of thousands of dollars at that time, which grew into millions of dollars, I wanted to make sure we were not just hitting the target but that we were really hitting what would benefit the company and the farmers."

"I wanted to be right in the dead center of that bull's-eye."

Peyser hired CIAT, the International Center for Tropical Agriculture, based in Cali, Colombia, to find the center of the bull's-eye.

"We asked them to design a questionnaire we could use to get a sense of what was going on not at the coop level but at the household level, right down to the farmer," Peyser said.

The resulting questionnaire had 22 questions on everything from family size to levels of education and farm information.

"Then it was about life," Peyser said. "Have you ever thought about migrating? Have you ever thought about doing something other than coffee? Did you have any health problems in your family last year? Did you have any periods of extreme scarcity of food in your household and if so, what did you do about it?"

Peyser asked CIAT to look at Green Mountain Coffee's supply chains in Nicaragua, Guatemala and two states in Mexico. He dove into the interview process himself. His first interview was in a tiny hamlet in Nicaragua.

"I still remember there was a card table with a blue-and-white checked tablecloth, and a woman sitting across from me who had a little pocket in her skirt," Peyser said.

Peyser made his way through the questions.

"I get to the last question about periods of extreme scarcity of food in your house and tears start to well up in her eyes and she starts to cry," Peyser remembered. "She takes out this yellow wash cloth and she's wiping her tears away. She said she and her family had three to four months of extreme scarcity of food in their house."

Peyser questioned her further. Had they fallen on hard times?

"She said, 'No, it happens every year,'" Peyser said.

The woman explained that the coffee harvest starts at the end of October and usually ends in February. By May all of her earnings from coffee were depleted, and the prices of staples like corn and beans were going up because the harvest doesn't come in until fall.

Peyser asked the woman how she coped. One of three ways: eat less; eat different food that might be growing on their land, like bananas or other fruits; or borrow from friends, neighbors or relatives, creating a cycle of debt year after year.

"Anyway, I'm thinking maybe her family is an exception," Peyser said. "The next guy comes in. I get to that last question. Same answer. I heard the same answer all week long."

As a result of Peyser's groundbreaking work, a movement took hold in the specialty coffee industry, called "The Thin Months," or "Los Meses Flacos," with Green Mountain Coffee Roasters in the center of efforts to help. The general idea was to encourage coffee farmers to diversify their crops beyond coffee to generate cash and help feed themselves.

The payoff for Peyser came on his last trip for Green Mountain Coffee in 2012 to visit Juana and Cesar Vaye in Nicaragua. Peyser had last visited the couple in 2008, when Juana had started making marmalade from fruit trees on the property to sell in the local market.

The couple earned $3,000 to $4,000 annually from coffee, which meant three to four months of extreme scarcity for them and their four children. In 2012, Juana took Peyser through the coffee fields to another field of passion fruit trees with fruit hanging heavy on wires connecting poles like a vineyard. Juana told Peyser the fruit was bringing in $700 to $800 a month, double the couple's coffee earnings. The family had closed the window on the thin months, with food on the table all year long.

"It made my day," Peyser said.

Diverging values





Paul Comey joined Green Mountain Coffee Roasters in March 1986 as a consultant, hired by Founder Bob Stiller to deal with an air pollution problem the company had with the U.S. Environmental Protection Agency. Comey had experience designing clean-burning wood stoves.

Comey went on to become vice president of engineering, then vice president of environmental innovation at Green Mountain Coffee. Stiller also gave Comey responsibility for corporate social responsibility, or CSR, which put Rick Peyser under his management.

Comey left the company in March 2013 after Brian Kelley took over as CEO. He didn't want to deal with another CEO, he said. Comey said it had been hard enough to make the transition from Stiller, to whom he was close, to Larry Blanford.

"After Larry realized I was a straight shooter it worked out great," Comey said. "Larry had the interests of the company at heart. He got the corporate social responsibility aspect. He wasn't a huge proponent of it but he understood the company was founded on it, it worked, and shareholders liked it."

Comey believes Keurig is dialing back its spending on the kinds of projects Peyser championed because it has become more of a technology company than a coffee company. He says that's reflected in the name change and in the increasing importance of the company's "hub" in Burlington, Massachusetts, where Keurig was founded before Green Mountain Coffee Roasters bought the company in 2006.

"The Keurig guys know what they're doing and they execute well," Comey said. "There's no question the center of gravity is shifting to Massachusetts. It started to shift when I was there. When Brian came on board it accelerated."

"We used to be about coffee. Now we're about innovation."

Meanwhile, Rick Peyser is now doing for Lutheran World Relief what he used to do for Green Mountain Coffee. Peyser is senior relationship manager for coffee and cocoa for the Baltimore-based nonprofit dedicated to providing "lasting solutions to poverty, injustice and human suffering." Dan Cox said that as soon as Starbucks heard about Peyser joining LWR, it donated $350,000 to the organization.

"That's the kind of credibility this guy brings to the game," Cox said.

Peyser is philosophical about his departure from Keurig Green Mountain.

"I felt my internal clock was ticking," he said. "I needed to make a decision whether I wanted to stay in an environment where good work could still be done but I wasn't jumping out of bed feeling the way I had when my values were aligned."

"My values were tolerated, but they weren't the same as the company's. We just diverged."

Contact Dan D'Ambrosio at 660-1841 or ddambrosio@freepressmedia.com. Follow him on Twitter at www.twitter.com/DanDambrosioVT.

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