Donations Machine
Despite CPI's operating troubles, Ben Cohen had a business that was up and running. He had built a machine that would pump money into the causes he believed in. At Ben & Jerry's, Cohen had found himself hemmed in. He couldn't give away as much money as he wanted to without running afoul of shareholders and the board. Cohen had looked at some proposed changes to Ben & Jerry's social mission--such as giving away more money--that in all likelihood, he says, "would be illegal."
CPI operated free of such constraints. It did business with close friends, social activists who cooperated to benefit one another's causes. The company's close ties to Cohen's favorite causes led to a curious, even byzantine, financing scheme. CPI had just two shareholders, Cohen and Jeff Furman, a longtime friend of Cohen's who was also on the board of Cohen's foundation, 1% for Peace, an organization lobbying to use 1% of the Pentagon's budget to promote peace through understanding. But a shareholder agreement precluded Cohen and Furman from making any profit on their equity position. Cohen says CPI was so closely held because "we set up the company to give away most of the profits, and we didn't want people making claims on those profits."
And yet, even though Cohen and Furman were originally the sole shareholders, they paid just $100 for their equity stake in CPI. The company was, therefore, capitalized almost entirely with debt, initially by a $210,000 loan from Cohen. But after five months, that was repaid when CPI sold $390,000 worth of debentures to various investors. The debentures yielded 10% a year in interest and, at maturity in approximately five years, would return twice the principal. Annualized, that amounted to more than a 20% return, attractive to investors but hobbling to a cash-hungry start-up like CPI.
CPI's backers were well-heeled people who could have assumed more risk than they did. Cohen, whose Ben & Jerry's stock is worth $17 million, reduced his exposure to just $30,000 in the high-yielding debentures after retiring his loan. A major buyer of the debentures was Working Assets Funding Service (WAFS), a San Francisco-based long-distance telephone company, which also promotes social causes. Laura Scher, the cofounder and CEO of WAFS, had met Cohen through the Social Venture Network, a group of entrepreneurs interested in promoting the practice of socially responsible business. WAFS bought $115,000 worth of debentures and found a buyer for $165,000 more. Scher ended up with bond holdings in her name of just $10,000. (WAFS and the other major debenture holder redeemed their bonds a year later, while CPI was still profitable.) Scher defends her actions by saying she acted more as a broker than an investor in CPI. "Ben needed debt financing, and we knew how to do it," she says, adding that the yield paid by the bonds was not overly generous, but fair. "There was a great deal of risk in this."
If investing in the start-up seemed risky to Scher, it also promised her and other insiders an upside. Through her participation, Scher gained 10% of CPI's stock, a seat on the board along with Cohen and Furman, and, more important, a pipeline into CPI's revenue stream. Of the 60% of CPI's net profits to be given away, WAFS's nonprofit designee, the Tides Foundation, which helps nonprofit groups and foundations with administration and planning, received one third--or 20% of total profits. Cultural Survival also collected a third, as did 1% for Peace.
And to insiders, that was a recipe for success. "No one expected CPI to do as well as it did in the first two years," says Scher, "but this was a company that had a real mission."
Hard Work, Fast Pace
Not only was CPI funding causes, it was creating jobs in an area of chronic underemployment. Linda Culpepper started at CPI in nut preparation in August 1990. She took the job because it paid well by Vermont standards and, unlike her previous job, offered health benefits. She was also single at the time and could work the second shift.
Culpepper, soft-spoken and mild-mannered, says that during the years she worked at CPI, "it was fast-paced and a lot of hard work. It was hard to keep people. It was not very automated." Many of those who came and went earned a few dollars above minimum wage and spent eight-hour days on their feet, toiling next to copper kettles that heated the candy to 300 degrees. But that didn't sap Culpepper's resolve. For her, Cohen's periodic visits eased the tedium, and her first profit-sharing check, for $1,125.59, based on four months' work in 1990, affirmed that working at CPI was not just another job. She couldn't believe her good fortune. "I just stood there in the middle of the plant staring at that check and crying," she says.
CPI's building seemed a nostalgic throwback to Ben & Jerry's early gas-station days. It lacked adequate air-conditioning, so that in the humid summer months the candy would clump together and be hard to work. The first winter a water pump to the bathroom broke and part of the plant flooded just as the Christmas rush was beginning. Former general manager Martha Broad recalls that the production-room floor was coated in a sheet of ice during the first winter. Sharlene Sazo-Strauss, CPI's national sales manager, remembers how she skidded on a trail of Rainforest Crunch, tracked onto the floor by production workers trooping between the kitchen and the rest room, and hurt her ankle.
Production required that workers knead, by hand, the Rainforest Crunch candy after it had been cooked and dumped on long cooling tables before them. The repetitive nature of the task led to a high incidence of carpal tunnel syndrome. One worker, Robin Griggs, labels it "extreme." "I worked three to four hours, and my hands would start to get numb. My hands would fall asleep on me all the time, and I didn't even work full-time on the production line."
