By Candace Crawford (CEO, Maverick Brands, maker of Coco Libre Coconut Water)
A version of this article was delivered as the keynote address at the 2015 GHJ Food and Beverage Forum held Sept. 29, 2015 at the Grammy Museum in downtown Los Angeles.
GHJ’ whitepaper Women in the Food and Beverage Industry should be everyone’s business. The stakes couldn’t be higher; as industries go, food and beverage has the broadest impact on everyday life. Who doesn’t eat and drink every day?
We have a lot of choices at the shelf, and faced with those walls of products, it’s easy to forget that those represent only a small fraction of all the products that have been innovated. This year at Natural Products Expo West — now the largest natural products convention in the world — more than 2,000 new companies showed up. Statistically, only one percent of those will become a product that most of America gets to choose at the shelf. Only one percent will successfully navigate the business creation that makes product innovation more than a one-off. Only one percent will reach valuation, that big moment when all the hard work is supposed to pay off.
The selection we get when we stand at the store shelf is the result of layer after layer of choices made by the entire supply chain of people including producer, investor, brand manager, sales manager, distributor and retailer, who are each motivated by what’s good for their particular goals. The producer says, “I want to change the world with this amazing new product.” Is that what the investor says? The brand manager? The distributor? The retailer?
Sometimes when we go to the shelf, we don’t find what we want, and that can be the first step on the path of the entrepreneur. Many female company founders’ stories revolve around wanting to feed their families better, from the baby in the stroller to the kids’ school lunchbox to family dinners to her own snacks. Women like Lizanne Falsetto at ThinkThin or Janie Hoffman at Mamma Chia or Kristy Lewis at Quinn Foods, who was just named one of Fortune’s 2015 Most Promising Women Entrepreneurs. These women saw something missing in the market and were bold enough to say, “I want something better, and I’m going to do something about it.”
That entrepreneurial drive has already changed the range of choices available to anyone who walks into a store. Women are definitely having a hand in this transformation. Food and beverage is one of the easiest industries to enter, in part because at the outset it’s so hands on. If you’ve got a kitchen, you can create something new.
But a strange thing happens on the way to executive suite. Respondents to the GHJ survey tell us that less than 25 percent of leadership roles at their companies are held by women, and more of those roles are in “female friendly” positions like human resources and marketing. As their companies grow, women who are brilliant at innovating and marketing are not necessarily becoming Chief Executive Officers. Why?
One: Some women are never given the chance. When investors enter the picture, founders with no executive experience are typically moved aside and replaced by someone the investors trust to run the business. That can be true if the founder is a woman or a man. However, in my experience, male founders with no experience are more often given a chance to succeed and fail as CEO.
And two: Some women don’t want the chance to be CEO. I’ve heard founders say, “I’m not good at numbers. I’m not good at negotiations. Let someone else deal with all that.” Or, “The legal and financial stuff doesn’t excite me. I’m only interested in the creative side.”
What’s the problem with that? If leadership is a matter of true qualifications or genuine interest, then maybe things are just as they should be.
The problem is that the fate of the business and its employees rests with the CEO and the Board. Those are the key roles to be in if you want to affect the future of a business. A founder’s good intentions have no sway over a CEO and board who want to take the business in a different direction. Innovation and marketing, as important as they are, do not guide the fate of the business. That responsibility is the CEO’s. So when you cede interest in executive leadership, you are ceding control of the company’s future. That’s the bottom line.
It’s strange to think that women are the most powerful consumer group, wield the most control over household spending and are consistently the most coveted audience for food and beverage businesses. Yet the power and presence of women disappears the higher you go in most organizations. Open the door to the CEO or CFO’s office or the boardroom, and it’s easy to forget that women wield so much influence elsewhere. Why do so few women cross that threshold?
There’s a more fundamental fact I want to bring out here: Creating a product is not the same as creating a business. Those are two very different challenges, obviously intertwined but each demanding different skills and different perspectives. As a founder — whether woman or man — if you can’t see the difference, you won’t be able to make the leap.
I came to my role as CEO from a different side of the business — the accounting and finance side. When I entered public accountancy in the 1970s, I didn’t know of even one female partner or manager in my industry. Over the years, I’ve often been the only woman in a board room full of men. Generally, we’re all speaking “finance,” so it all works out, but what we’re talking about here is the system effect of that lack of diversity at the tables where the most significant decisions are made. What could women be bringing to those conversations?
Participants in the survey said that they think there are unique benefits to having women in leadership roles. That’s good. What are those unique benefits? Responses cited consumer trust and public image. So it’s good to have a friendly, trustworthy face to put forward, especially when things go wrong. Ask General Motors about that.
The research also cites the benefit of women’s “industry relationships, industry understanding, supplier relationships, relatability as a spokesperson and media relationships.” Relationships. Understanding. Relationships. Relatability. And relationships. Do you sense a theme here? Did you get the picture? What are women valued for in leadership? Not bold strategy. Not financial insight.
This is where the GJH research starts to hit home. It outlines three challenges that women food and beverage leaders face: 1) raising capital, 2) investor trust and 3) the ability to make deals. Those challenges “indicate that the credibility women bring to consumers has not yet fully translated to the financial market.” Why do we care about what translates to the financial market? Because it goes back to who is trusted to occupy the CEO seat.
Women’s value as leaders is opening the door to top jobs in HR, marketing and PR, and even innovation and operations. But let me emphasize: that doesn’t get anyone closer to the office of the chief executive officer or, I’ll add, the chief financial office or the boardroom — where the most vital business decisions are made.
Why is that? Where’s the disconnect? That’s what I want to explore. And rather than frame this up as a gender question, I want to think more broadly about what it takes to cross that threshold into executive leadership, whether you’re a woman or a man, in particular the profound disconnects in perspective that, in my experience, mostly go unnoticed.
You may have heard of a well-respected research paper co-authored by Wharton, Harvard and MIT management professors titled, Investors Prefer Entrepreneurial Ventures Pitched by Attractive Men. The first time I saw that title, I tallied up my experience, and, yes, that sounds about right. But viscerally, that feels all wrong.
Here’s how the experiment went: The research had men and women use the same script to pitch investors. Same words describing the same entrepreneurial idea. The only difference was the person delivering the pitch. In that scenario, men overall were 60 percent more likely than women to succeed with investors. Attractive men won the most pitches, average looking men won fewer, and women won the fewest. Among the women, attractiveness had no correlation to winning or losing the pitch.
The research is a great reminder about what we already know but so easily forget: no one is completely objective about decisions, particularly decisions that are bound up with risk, uncertainty and new ideas. How do we make decisions when we’re in unfamiliar territory? Intangible factors come into play. We look for anchors in what’s familiar to us. We rely on mostly unconscious rules of thumb about who and what to trust. Sometimes we call this instinct. This isn’t true just for investors. It’s true for all of us.
Investors bet as much on the people they invest in as the ideas they’re pitched. In Los Angeles, this is true in entertainment industry, too — another business famous for being top-heavy with men. Why? It’s a business of relationships, and when risk is high and information is too novel or complex to judge on face value, we start to literally look at “face value.”
As frustrating as that research is, it also reframes the idea that there’s some conspiracy to keep women out of the c-suite or to keep women from winning investment money. Instead, the research points to a lack of awareness among investors about their own decision criteria. And when lack of awareness gets institutionalized, it becomes a sort of laziness among groups of leaders who find it easier to work with and trust only the people they find familiar — that preference for “people like us” that can turn companies into echo chambers instead of engines for growth.
In that pitch scenario, the practical outcome was that fewer women could cross some invisible bridge of credibility and trust with the investors. They were saying the right words, but they weren’t being heard. Every one of us, in our own way, is pitching every day of our business lives. Whether we are heard or not has huge consequences. In my previous positions as CFO and now as CEO, I talk with people across the gamut of backgrounds and perspectives. I take it as a given that I have to be ready to change up my approach if I’m not getting through.
And equally — I do my best to listen with as much openness as possible. I may not like you, I may not understand how you think, but I need to hear your ideas. Who knows? Those ideas might make the difference between success and failure in some part of the business I’m responsible for.
Business journals recently have called for CEOs to improve their communication skills. That’s mostly interpreted as relationship-building with employees or the media, but that’s the least of it. Communication is a soft skill, but it a very hard soft skill to get right, and if we extrapolate from the pitch research, the stakes are high: When communication fails, trust fails, and merit and talent can be shut out. For most startups, if you can’t win investment money, you haven’t got a business. Game over.
Those hurdles to food and beverage leadership — raising capital, investor trust, deal making — all have to do with finance and investment. Those disciplines, unless you’re on the inside, can be intimidating. So if you’re not versed in finance or investment, how do you talk to an investor in a way that can get through to them? Finance always seems to be shrouded in secrecy. Deals always seem to be mangled up with jargon and clauses and complication.
Most people will tell you it’s a good idea to understand the financial side of business, but how many people outside of finance actually do? Too few. What they miss is not just a lesson in reading a balance sheet or knowing what EBITDA stands for. When “non-numbers” people successfully cross to the numbers side of the business, they can experience a profound shift in the perception of value. What do I mean by that?
Imagine a creative person at home, cooking something up in the kitchen. It’s amazing. Everyone says, “You should make more and sell it.” Next thing you know, a company is named, a logo is designed, friends and family chip in some start-up capital, and soon there’s a small warehouse with lots of bottles or packages of this new stuff. Maybe it’s on the shelf in one or two local stores willing to give a new product a shot. Where’s the value in this business?
The Innovator will tell you the value is in the product. It’s amazing. There’s a whole laundry list of amazingness. It’s going to change lives. The value is literally in the bottle or package. The business will grow because people will buy more. We’re going to sell a lot of this stuff.
Meanwhile, a finance person will tell you, “You’ve got a warehouse of product that’s going to expire in 120 days. Those two local stores are only selling a case a week. At that rate, there’s no sustainable value. That’s not a business.”
Now the business moves into a second phase. The Innovator realizes she or he needs someone to get distribution going and buy more ingredients to make more product. It’s time to seek investment.
Investors look at the product and say, yes, we see your vision. We believe in that great laundry list of amazingness. It’s a great thing to change lives. But how big is your potential market? Who’s the customer? Who’s the competition? Where and how will you expand? Have you patented any processes? Do you have any unique supply chain relationships?
Investors aren’t asking about value in the product. Investors want to know about the value in the business — and that transcends the product value. And that’s perspective they expect in a CEO and in the board.
It’s a fundamental shift in perspective that I have seen create huge gulfs between founders and board members who think they’re talking about the same thing, when in fact they’ve slipped into speaking two different languages.
When I was CFO at POM Wonderful, Linda Resnick once showed me three photographs of a pomegranate and asked me to pick out which was best. Linda, as I’m sure you know, is the marketing maven who effectively created the category of antioxidant beverages. All three photos looked exactly the same to me. I felt like a monkey looking at a watch. I picked one, but I really had no idea why — and she knew I had no idea why, so she pointed out the small details of lighting, focus, shades of color … things I could appreciate once she pointed to them but couldn’t pick out myself. Then she told me that one photo cost $5,000, one cost $15,000 and one cost $50,000 — and I had picked the most expensive one. It turns out I have good taste, even though I couldn’t tell you why.
That day was an object lesson in the visibility of different kinds of value. From my non-visual, financial perspective, choosing a $50,000 photograph over a $5,000 photograph looks like sheer financial irresponsibility. From Linda’s highly attuned sensibility — and her track record of marketing success speaks for itself — there was $50,000 worth of sales and marketing value in that photograph.
She saw value in that photo that wasn’t obvious to me, and I had to trust her on that. I couldn’t see it, but that didn’t mean it wasn’t there. Likewise, there are many people who can’t see the story of business value that’s being told through a forecasting system or a balance sheet. People in a company who don’t have a sense of its business value, who only see the company from the side of product, are working with half a picture.
That disconnect in perspectives becomes very obvious if founders take investment and treat it like a bank loan. When founders take in investment, they have actually handed over control of their business. The deal may be done in a way so that it doesn’t feel or look like this. But the fact is that the investors now control the checkbook — and whoever is in control of the checkbook controls how the business will scale and which priorities will be funded.
There’s a happy ending to that story, too, and it comes from everyone being on the same page about the broader business value that drives valuations in food and beverage today. Briefly, I know of four things that can help someone of any background get this broader perspective:
1. Be confident enough to say I don’t understand. Everyone thinks that if you say I don’t understand, you’ll look stupid. But if you’ve been paying attention, and the logic isn’t adding up, then it’s very possible no one else really gets it either. It’s a huge step to feel empowered enough to say this isn’t making sense to me. Can you explain this to me in terms I can understand? And if they CAN’T explain it to you, then they didn’t understand it either.
This is particularly important around negotiations and deal-making, because those conversations are both art and science, and everyone in the deal may have a completely different goal. Here’s a scenario I was involved in. In negotiating the sale of a company, the official line was that everyone wanted to sell the company whole. In fact, only the founder and one investor wanted to do that. Another investor wanted to sell off the IP. And for another board member, the best scenario for his portfolio was to let the company go bankrupt. The employees wanted to get paid and hoped for a payout on their stock options. How do you answer both fiduciary obligations and a sense of responsibility as a human being in those situations? If you find yourself in those conversations, read between the lines and ask the tough questions, because there’s always more going on than meets the eye.
2. Understand the value of business discipline. This is the stuff that can make your eyes glaze over, but this is business. If you think the value of the business is the stuff in the bottle or the package, walk a mile in my shoes. The value of the business is in the strength of the systems and the ability of those systems to sustain the business through growth.
Until a business is consistently above $15 million in revenue, it is still in a trial phase. That business could, in fact, be gone in an instant. Owner-operators with a fresh infusion of capital often can’t see the forest for the trees, and this is where Finance and Legal can be critical to keeping a business fundamentally sound. Founders who thrive on imagination often don’t want to hear the hard realities that Finance and Legal deliver. But if a company’s net margins aren’t a minimum of 30 percent, that company will soon be out of business — no matter how visionary.
3. Understand the industry’s rules of the game. I see so many new entrepreneurs full of optimism and that “if I build it they will come” attitude. But this is not a field of dreams. It’s an industry of established corporate systems that have structures and timelines that every producer must find a way to fit into.
4. Understand investors’ rules of the game. Investors want to make money. Founders tend to be in business to make some sort of a difference, and they need investors’ money to help that happen. It’s a relationship with inherent tensions, but founders need investors, and investors need founders. The fastest way to damage investor trust is to treat investors like an ATM. Investors in food and beverage startups tend to be people who want to be involved, who have opinions and want to be heard. Just like the founders do.
The GHJ research concludes with the optimistic note that more women will naturally be entering the ranks of leadership, in part because Millennials are growing into their leadership years. This may be about experience or diversity or ambition. But since my theme here is perspective, I want to call out a different part of the generational shift.
About a decade ago, consumer researchers noticed that Baby Boomers calling tech support about problems with their cellphone or their computer would start out asking some variation of what am I doing wrong? I can’t make it work. Millennials, on the other hand, would start out with something like what’s wrong with this thing? It’s not working.
Think about that. When you hit a problem in business, what’s your default position? Do you charge ahead and demand a fix? Or do step back and wonder about your own shortcomings? Part of what keeps people out of the c-suite — and perhaps particularly women — is this assumption that they don’t have what it takes. I’m not good at negotiations. I don’t understand the numbers.
I’ll let you in on a secret. A lack of understanding has never stopped anyone I’ve ever seen in a board room. If you always question yourself before you question the situation, you may be wasting a lot of energy and time that can feel like useful self-reflection but look to others like hesitation or self-doubt. Yes, self-awareness is critical — and so is the confidence to take a step forward into the unfamiliar and uncomfortable.
I want to address one other tired excuse for why there aren’t many women in leadership, that women aren’t as aggressive as men. I’ve been hearing that since the 1970s, and here’s what I know from my years in industries from construction to movie theaters to airlines to beverage: Aggression doesn’t make for good leadership. Persistence does.
I think we all need to be more persistent. More determined. Ask the tough questions. Don’t be deterred from getting the answers you need. Invent what you need. Engage with people who can help you understand the disciplines that don’t come naturally.
We are in a business climate where the idea of either — or is giving way to the idea of both — and. A wonderful product alone is not a business. But add operational discipline and well-managed capital — now there’s a business that, once up and running, has a chance of staying up and running.
Every business is a noisy pack of priorities all competing for scarce resources. The more I listen to the people around me and understand how they see value in the business, the better I am at making hard choices among priorities. We don’t always agree — and we don’t have to. But that’s when we see new ideas. That’s when we have a chance at greatness.
