Frontier Natural Products Co-Op

3021 78th Street
Norway, Iowa 52318
U.S.A.
Telephone: (319) 227-7996
Toll Free: (800) 365-4372
Fax: (319) 227-7966
Web site: http://www.frontiercoop.com/

Cooperative
Founded: 1976
Employees: 250
Sales: $49 million (2006)
NAIC: 311423 Dried and Dehydrated Food Manufacturing

Based in Norway, Iowa, Frontier Natural Products Co-Op bills itself as the nation's largest supplier of organic herbs and spices, selling to natural products stores and specialty stores in the United States and Canada. The company manufactures products, sources agricultural products from around the world, and distributes the products of other companies. Frontier's offerings include a wide variety of non-irradiated spices, seasonings, and blends; natural and organic baking ingredients, including mixes sold under the Simply Organic brand name; supplement; loose-leaf teas; holistic and craft herbs; and the Aura Cacia brand aromatherapy and natural personal care products, such as essential oils, and body and bath products. Frontier prides itself on a progressive company culture and provides employees on site childcare and meal programs in addition to traditional health care and retirement benefits.

KITCHEN TABLE ORIGINS: 1976

Frontier was begun in Eastern Iowa in 1976 by a young married couple, Rick Stewart and Colleen Greenhaw. While Rick was a student at Kirkwood Community College in Cedar Rapids, they belonged to an area food cooperative, where Colleen worked on a volunteer basis. One of her tasks was ordering the co-op's herbs and spices. Disenchanted with the quality of the merchandise and the poor customer service from suppliers, she began to suggest that she and Rick could do a better job. Thus, the idea was already in the air when chance intervened. In Iowa City some 30 miles away, their co-op's distributor, Blooming Prairie Warehouse, was on the verge of eliminating herbs and spices altogether because their supplier planned to stop selling five-pound bags in favor of ten-pound bags. At the same time, the customers of the warehouse were clamoring for one-pound bags. Stewart offered to repackage the ten-pound bags into salable one-pound bags. He began bringing home the warehouse's large bags of herbs and spices, and on their kitchen table he and Colleen bagged them into smaller quantities and labeled them.

Satisfied with the job the couple had done, Blooming Prairie hired them to handle the ordering and invoicing of its herbs and spices business. Sales were meager at first, totaling just $26 in August 1976, but the $3,000 in sales generated in March 1977 made the Stewarts realize how much work was involved as well as the business potential. "We knew that no one else was going to do this for fun like we were," Stewart told the Cedar Rapids Gazette in 1992. "We either had to make it bigger so it could pay people to work or we had to get rid of it altogether." They decided to become wholesalers of herbs and spices, calling the business Frontier Cooperative Herbs. Seeing little opportunity to break into the Iowa market, they drove around Wisconsin, Illinois, and Michigan to visit local food cooperatives in hopes of drumming up customers. Their perseverance paid off in September 1977 when the food cooperatives of Madison, Wisconsin, agreed as a group to use the Stewarts as their supplier. The initial order of $4,000 was twice as much inventory as the couple had on hand and jump-started the business. Soon, employees were being hired and, having outgrown the cabin, the business was moved to the basement of Cedar Rapids' Good News General Store Co-op.

FRONTIER INCORPORATED AS CO-OPERATIVE: 1979

Sales were growing so quickly, reaching $18,000 by the end of 1977, that within a few months Frontier was on the move again, taking over a former grocery store in Fairfax, Iowa, 5,200 square feet in size. Sales continued to build, fueled in part by an expansion in what Frontier had to offer. It added a variety of uncommon herbs and spices and developed a network of supplier contacts. In 1978 the company responded to customer requests and began bottling essential oils for resale, and a year after that Frontier began selling products from other manufacturers, again at the behest of customers. As a result of its responsiveness to customer needs, Frontier quickly developed a reputation as an excellent supplier, leading to even more business. In 1979 Frontier was incorporated as a cooperative and was now owned by its customers. A year later, in March 1980, Frontier cut the first profit-sharing checks to its member-owners.

To meet demand, Frontier had to lease more space in Fairfax as well as erect portable buildings. To keep up with orders, the company installed its first computerized system in 1980. (Five years later personal computers would be purchased as well.) As business approached the $1 million mark, Frontier bought ten acres of land in Norway, Iowa, in February 1982, and constructed a 22,152 square-foot-facility, which was ready to be occupied in October of that year. Soon after that, a day-care center was opened for employees. As Stewart explained to the Gazette, "We always brought our children to work and we felt it was perfectly natural for our employees to do the same."

To help in running the business Stewart returned to college in September 1982, enrolling at Coe College in Cedar Rapids to take courses at night and on weekends. Finally in 1990 he had accumulated enough credits to receive a degree in business administration and accounting.

When Stewart was not learning about business principles in the classroom, he was gaining a practical education running a fast-growing business in a changing landscape. The allure of food cooperatives had dimmed with the years, so that by the mid-1980s far more were shutting their doors as were opening them. As a result, Frontier sales stalled around the $3 million level and Stewart decided that the company needed to pursue the business of non-cooperatives. Customer-members then voted to amend the organization's bylaws to permit non-cooperative customers to buy on an equal basis. Stewart expected that Frontier's reputation would extend to this new market and prosper from it. To accommodate more business, Frontier expanded its Norway facilities to nearly 32,000 square feet in 1984. But gaining acceptance with these new customers took time, as well as money to be spent on advertising in trade publications. Frontier's reputation was also enhanced in 1986 when it became the first herb and spice manufacturer to receive United States Food and Drug Administration certification for organic processing. Frontier further helped its standing in the natural foods industry in 1989 when it became the first to eliminate chemical fumigants to achieve greater purity by employing a natural carbon-dioxide process to ward off infestation in herbs and spices. A year later, the company opened the Frontier Research Farm to develop new ways to conduct organic farming. In 1992 the company turned its attention to processing, introducing cryogenic grinding to help preserve product quality.

COMPANY PERSPECTIVES

Our mission is to convert the world to natural and organic products.

With sales growing at a 20 percent clip each year in the late 1980s, compared to a 5 percent annual growth rate of the natural food industry, Frontier again had to expand its Norway plant. To do so, the company bought another 46 acres of adjacent land to add 5,800 square feet of space in 1988 and nearly 20,000 square feet a year later. Some of that space would be needed because of the 1988 introduction of a line of package spices, again in keeping with the requests of customers. In 1990 Frontier unveiled a line of bottled spices. By the end of that year company revenues reached $9 million and business continued to grow steadily, spurred in July 1991 by the introduction of Frontier Coffee, a line of 100 percent certified organic, gourmet coffee. This business would soon be supplemented by the acquisition of a company that sold natural coffee filters. Frontier generated additional revenues in 1992 when it began to sell Frontier-branded products through natural food distributors, and continued to expand the coffee line two years later when a roasting plant was opened in Urbana, Iowa. In 1993 the company introduced organic Frontier beer and added a line of aromatherapy products by acquiring Weaverville, California-based Aura Cacia, founded in 1981. Frontier scored another first in 1995 when it became the first company to introduce a line of certified organic essential oils. As a result of product growth, the Norway facilities were expanded to more than 86,000 square feet in 1993, and by 1995 sales reached $29.6 million.

On other fronts in the mid-1990s, Frontier began hosting an August conference each year, starting in 1992, called Herbfest, a three-day event which attracted over a 1,000 people, who participated in seminars conducted by experts in herbs and spices and the natural living lifestyle, and also included farm tours, herb walks, and entertainment. In keeping with its family-friendly philosophy, Herbfest also included specialized activities for children. A botanical garden was created on the company's Norway acreage in 1993. Frontier launched the Goldenseal Project in 1996, its purpose to encourage the cultivation of goldenseal in order to prevent over-harvesting of the herb in the wild. Moreover, the project promoted alternative herbs as a way to protect the gold-enseal population. In 1998, Frontier bought 68 acres of land in Meigs County, Ohio, part of the state's Appalachian region, and started the National Center for the Preservation of Medicinal Herbs to conduct research on the way to cultivate native herbs, many of which were at risk of over-harvesting.

COLORADO OFFICE OPENS: 1997

Frontier enjoyed continued growth in the late 1990s, elevating annual sales to the $40 million level, which led to a further expansion of the Norway facilities to more than 115,000 square feet. The company also opened a marketing office in Boulder, Colorado, in 1997 and soon moved its corporate headquarters there and assumed the name Frontier Natural Products Co-op. As the decade came to an end, Stewart announced that he was retiring after 23 years at the helm. He said that he was stepping aside as a way to encourage the board to recruit a CEO with the experience and skills needed to take the company to the next step in its development. He was replaced on an interim basis by Tony Bedard, who had been with Frontier since 1991.

Several months passed before the Frontier board chose, in November 2000, Steve Hughes, former CEO of Celestial Seasonings, as Stewart's successor. Hughes, who had 20 years of experience in the food and beverage industries, quickly began putting his stamp on Frontier, bringing in industry managers and mapping a strategy to position Frontier to take advantage of the growing market for natural and organic products in mainstream stores. To help raise capital to fund this effort Frontier sold its organic coffee brand to Vermont's Green Mountain Coffee Inc. for $2.7 million in the summer of 2001. Then, late in the year, Hughes secured approval from the Frontier Board to establish a subsidiary, Frontier Natural Brands, to break into the mass market with a line of organic products under the Simply Organic label, including culinary spices and add-meat dinnertime pastas, and aroma therapy oils, lotions, and shampoos under the Aura Cacia brand. The goal was to transform Frontier into a natural consumer packaged goods company. Not everyone on the board was convinced this was the right direction for Frontier to take, and the restructuring plan was approved by only a single vote from membership. Some members were also upset when herb researchers were fired and their research gardens mowed over to allow for warehouse expansion. Herbfest was also discontinued, no longer deemed necessary by the new management team.

KEY DATES

1976:

The company is launched in Iowa by Rick Stewart and Colleen Greenhaw.

1979:

Frontier is incorporated as a cooperative.

1982:

Plant and headquarters are built in Norway, Iowa.

1988:

Frontier introduces packaged spices.

1992:

The first Herbfest is held.

1997:

The company's marketing office opens in Boulder, Colorado.

1999:

Stewart resigns from Frontier.

2002:

Simply Organic product lines are introduced.

2003:

Tony Bedard is named CEO.

Hughes' grand plan quickly fizzled, however. Simply Organic was launched in April 2002, but it was rushed to market and Frontier lacked the financial resources to stick to the plan when cash flow failed to meet expectations. Within a matter of weeks Hughes resigned, as did others in top positions, and the board's president, Andy Pauley, stepped in as acting CEO. Before the year was out the Boulder office was closed and the headquarters was reestablished in Norway, and steps were taken to return Frontier to its core business.

In May 2003 Bedard, who had left to become a production manager with Winnebago Industries, was reinstalled as Frontier's chief executive. In October 2003 he sold the Simply Organic boxed dinner product line to Annie's Homegrown, a Massachusetts company, but retained the Simply Organic bottled spice, seasoning mix, and flavor lines. In 2004 Frontier moved its Aura Cacia operation from California to Urbana, Iowa, making use of the old coffee roasting facility, which had been used for storage since the divestiture of the coffee business. Because of its proximity to Norway, the company hoped to expand the Aura Cacia business by taking advantage of the main facility's research and development and other resources. Later in the year Frontier introduced a line of alcohol-free, roll-on aroma-therapy sticks.

By the start of 2004 Frontier had recovered enough from the missteps of 2002 to resume making dividend payments to its customer-owners. In August 2004 the company once again hosted Herbfest, something Bedard announced as a priority when he returned to the company. Almost 1,000 people attended the event, a strong showing after a two-year hiatus.

Frontier returned to its philosophical roots as well. In 2004 it began offering what it called Fair Trade teas, organic loose leaf teas procured from suppliers who met a standard in providing wages and working and living conditions for the workers who picked the tea. A year later Frontier established the CONVERT program to find socially responsible supplier partners around the world. The first of these partners was an Indian vanilla supplier.

Although Frontier no longer experienced a 20 percent annual growth rate, business was on the rise again. Sales reached a record $43.4 million in 2005. To accommodate demand, Frontier was once more looking to add to its facilities and hire additional people. In 2006 the company announced plans for a $3 million expansion that would add 30,000 square feet of space to the Norway facilities.

PRINCIPAL COMPETITORS

Aveda Corporation; Levlad LLC; Natural Selection Foods; United Natural Foods, Inc.

FURTHER READING

Brand, Rachel, "Natural Foods Firm Explores New Frontier," Rocky Mountain News, May 2, 2002, p. 4B.

Eykyn, Sarah, "Merging Organic Products and Social Responsibility," In Business, July/August 2000, p. 18.

Ford, George C., "A Growing Concern Frontier: From Kitchen Table to Big Business," Gazette (Cedar Rapids, Iowa), April 12, 1992, p E1.

"Frontier Herb Chief Resigns," Gazette (Cedar Rapids, Iowa), December 23, 1999, p. B7.

Gutknecht, Dave, "Co-op Devolution: North Farms Folds, Frontier Falters, Blooming Prairie Faces Funk," Cooperative Grocer, September-October 2002.