San Francisco Chronicle

Bay Area’s food culture spreads as corporatio­ns buy small firms

- By Tara Duggan and Thomas Lee

One started with a middle school teacher turned hippie Bolinas rancher. Another began in a home brewer’s kitchen, shrouded in pot smoke.

World-class food companies with underdog beginnings are core to the Bay Area’s identity. But plenty of those underdogs are now getting snapped up by large corporatio­ns, including, just last week, an announced sale of Niman Ranch of Alameda to Perdue, and a partnershi­p between Petaluma’s Lagunitas Brewing Co. and Heineken. The financial gains are obvious for smaller companies, but Bay Area residents are left wondering what gets lost when David gets bought by Goliath.

“A company like Tartine Bakery starts in your backyard. There’s one store, and then more people want it. Now I’m reading about their expansion to Japan — what?” said John Scharffenb­erg-

er, co-founder of Scharffen Berger Chocolate, which he sold to Hershey’s in 2005. “Our products are hitting this world-class quality.”

With each sale of a company to a national or internatio­nal corporatio­n, the Bay Area’s food culture spreads. More of the chocolate, wine and coffee that make up our daily bread disseminat­es across the country, expanding the region’s influence in a way that is more personal than other products San Francisco may export.

But increased sales and distributi­on can also dilute the quality of boutique products, leaving adoring fans shaking their heads.

“They may see a conflict of identity,” said Arkadiy Sakhartov, an assistant professor of management at the University of Pennsylvan­ia’s Wharton School, which operates a San Francisco campus. “Customers may fear a smaller, independen­t company’s special standards will be difficult to maintain at a larger company.”

‘Great showcase’

Companies that use highqualit­y, sustainabl­e ingredient­s aren’t unique to the Bay Area, but the region has always been at the forefront of food trends. The first organic standards were created in Santa Cruz in the 1970s, and our farms and wineries sparked artisan movements across food categories.

“People travel to San Francisco and they see your brand and they taste it,” said Pascal Rigo, who started out in a small Pacific Heights shop, La Boulange Cafe & Bakery, which grew into a San Francisco chain he sold to Starbucks in 2013. “Northern California is a great showcase.”

Now that higher food standards are more common nationwide, California food culture — and regulation­s — seem to have the final word, even when the state does seemingly crazy things like regulate the size of chicken cages. Because then, a few years later, McDonald’s announces that it will be moving to all cage-free eggs.

Making high-quality food accessible to more people is often the goal of local food entreprene­urs who make it big.

“To open a cronut shop that runs out by 10 a.m., for me it’s completely irrelevant. Is the value to have one person do 10 things very expensivel­y for the happy few?” said Rigo, who developed a line of baked goods for Starbucks, which serves 1 million of his croissants daily (he is no longer involved in the company). “If you give someone a chocolate croissant made with good chocolate and all butter, served warm — you are going to make people understand at $2.50 they can have an unforgetta­ble experience.” Scharffenb­erger agrees. “The goal was to make highqualit­y things normal,” he said.

For large food manufactur­ers, it makes sense to expand into natural and organic foods, an industry expanding much faster than that of convention­al foods. Sales of organic products, which now generate more than $30 billion in the United States, have been growing at double-digit rates each year. By contrast, sales of ready-to-eat cereal, soft drinks and McDonald’s hamburgers have been falling.

Buying a Niman Ranch or Plum Organics (an Emeryville baby food maker purchased by Campbell Soup Co. last year) offers the easiest path to entering a market outside of Big Food’s core expertise. The large companies are not only acquiring market share but also the cachet attached to the smaller brand.

Big Food “is trying to enhance its credibilit­y while shifting gears to a business that gives higher returns,” said Sakhartov, the Wharton professor.

But such deals are fraught with risk. In an effort to quickly expand the business, the big food companies might dilute what made the small food maker unique — or shut it down all together.

“These (little) companies were successful for a reason,” Sakhartov said.

One that didn’t work

Take California Pizza Kitchen. In 1992, PepisCo bought the kitschy chain, known for creative pizza toppings like barbecued chicken and avocado, for $92 million. But the marriage didn’t work because PepisCo tried to impose its standards on California Pizza Kitchen, Sakhartov said. Five years later, PepisCo sold the company.

Three years ago, Starbucks reportedly paid $100 million to buy Rigo’s La Boulange, the upscale chain of bakery cafes that serves high-end coffee in large bowls. The coffee giant recently said it will close all 23 La Boulange stores in the Bay Area.

Niman Ranch customers, when told of the sale, lit up the sustainabl­e meat company’s Facebook page with concern about Perdue’s poor reputation for animal treatment.

“That’s an unfortunat­e decision — just made my household’s last Niman Ranch purchase this weekend,” wrote one fan.

Jeanne McCormack, a goat and sheep rancher in Rio Vista, who has sold to Niman Ranch since 1992, was concerned about branding after the sale.

“Frankly, the idea of our lamb being marketed by Perdue — ew!” she said. “I have a huge problem wrapping my mind around that.”

But Bill Niman, the company’s original beef rancher who

started the company in Bolinas in the 1970s, was more sanguine.

“I think it will be good for the consumer because they’ll have much better distributi­on,” said Niman, who left the company in 2007. “The product will be more accessible and more affordable.”

Niman also doesn’t think the company’s animal treatment protocols are at risk, though he said, “We need to watch and see.”

“I think they recognize that as a compelling component of their brand, and that’s what people want,” he said. “I’ll give them the benefit of the doubt.”

 ?? Photos by Liz Hafalia / The Chronicle ?? Livestock manager Ellen Skillings (left) and shepherd Kelsey Nichols transport herding dogs at McCormack Ranch in Rio Vista.
Photos by Liz Hafalia / The Chronicle Livestock manager Ellen Skillings (left) and shepherd Kelsey Nichols transport herding dogs at McCormack Ranch in Rio Vista.
 ??  ?? Al Medvitz checks on lambs at McCormack Ranch, which he owns with his wife, Jeanne McCormack. They supply livestock to Niman Ranch and worry about the effects of the sale.
Al Medvitz checks on lambs at McCormack Ranch, which he owns with his wife, Jeanne McCormack. They supply livestock to Niman Ranch and worry about the effects of the sale.

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