The following is a conversation between Eric Kessler, the Founder and Senior Managing Director of Arabella Advisors, and Denver Frederick, Host of The Business of Giving on AM 970 The Answer in New York City.
Eric Kessler
Denver: There are not many harder decisions than to start an organization, see it grow and prosper, and then, while still remaining involved with it, decide to hire a CEO to run it so you can pursue something else that has captivated you. But that is more or less the story of my next guest. He is Eric Kessler, the Founder, and now Senior Managing Director of the Good Food Practice at Arabella Advisors.
Good evening, Eric, and welcome to The Business of Giving!
Eric Kessler: Thank you so much.
Denver: Tell us about Arabella Advisors, how you got it started, and the mission and work of the organization.
Eric: I started Arabella Advisors out of a personal experience with philanthropy. I came from a very philanthropic family and recognized early on how hard it is to be good at giving money away. Through the frustrations that I faced as a young philanthropist, I decided to build a firm that provided a set of support services to some of the nation’s most significant philanthropists – families, individuals, big corporate foundations, and large institutional foundations. And we as a firm wake up every day to help philanthropists have the greatest impact possible with our resources.
I think that the next decade of philanthropy is going to be all about partnerships between donors. It’s going to be about different vehicles for getting things done; it’s going to be about market-based solutions. And thankfully, it’s going to be about a massive influx of resources into the social sector.
Denver: Looking at the future of philanthropy for a moment, are you observing anything now that might provide a window on where philanthropy is headed over the next 5 to 10 years?
Eric: Well, if we look at where it’s been, it’s pretty remarkable the transition that we’ve already made in the last 10 years. When I started Arabella 12 years ago, the words ‘impact investing’ didn’t exist. The Gates Foundation was a small family foundation. Warren Buffett hadn’t really entered the scene as a philanthropist. And the last decade has really seen a huge transformation in philanthropy.
Now what we’re seeing is younger generations getting involved, the blurring of the lines between for-profit and nonprofit, donors thinking about new and creative structures for their philanthropy. It’s not all about setting up a foundation. There are different finance vehicles and different ways to have impact. And so, I think that the next decade of philanthropy is going to be all about partnerships between donors. It’s going to be about different vehicles for getting things done; it’s going to be about market-based solutions. And thankfully, it’s going to be about a massive influx of resources into the social sector.
Denver: Sounds exciting. So as I mentioned, you stepped away from leading the organization and decided to look at Good Food. What inspired you to get involved in food and agriculture?
Eric: Well, I stepped away as part of the original plan with the firm, which was, I knew that after 10 years, having no prior experience as a consultant or running a business for that matter, I would have gotten it as far as I could. So I decided early on that at the 10-year mark, my partner and I should really relinquish day-to-day management to somebody who had a different skill set and different perspective and fresh ideas.
That coincided with my growing interest in the food sector, so I had the opportunity to move out of that chair and into a new one that I created, allowing me to work with our clients that care most about our food system. That, for me, came from several years of work with some of the biggest foundations focused in that area, and a real fascination with the notion that our food system is really at the root of so many problems in our society – from immigration issues to human rights issues, to economic development and jobs, to women’s health, to community development and economic development. So, yes, I care about food, but I also care about the impact that our food system has on all of these other deep-rooted challenges in our society.
I had the opportunity to work with a number of clients over the years. It came time for this transition, and I had asked myself: Am I going to go sailing? Or am I going to dive into food full time? and I—
Denver: Decided to do both.
Eric: I’m doing both as it turns out. But principally food.
Our food system is deeply broken in many ways. If you look at the entire good food supply chain, from how food is grown and produced, to how it’s picked and delivered and purchased and consumed, there are serious issues at every step of the way.
Denver: Right. Well, there’s increasingly more and more talk, Eric, about systems change. How you can no longer optimize one part and then optimize another. You first must understand how they relate to one another and how the system works before you can make effective change. So let me ask you: Is our food system broken, and if so, how is it broken?
Eric: Our food system is deeply broken in many ways. If you look at the entire good food supply chain, from how food is grown and produced, to how it’s picked and delivered and purchased and consumed, there are serious issues at every step of the way. And we’ve gone from obviously a place where people knew and respected their farmers to a place where most consumers are so distant from how their food is grown, there is really no connection. We think of food as what we pick up at the 7-Eleven, not the farmer’s market.
The good news is that the solutions aren’t hard, unlike so many other issues – climate change, education reform – where it’s really, really complicated. The solutions to our food system actually aren’t that complicated. I think given the massive demand for what I call good food… meaning, coming from a food system that focuses on health and nutrition and sustainability and affordability and accessibility, the massive demand for that sort of food system in America has enabled a pretty clear set of choices and a pretty clear set of solutions.
Now, getting to those won’t be easy as we know, but we can sit back, and if you ask 10 different people from 10 different perspectives to imagine a better food system, those visions end up being remarkably similar.
I believe – that there are three ingredients for a good food system: Demand for good food, infrastructure that supplies good food, and then policy that enables good food.
Denver: Well, that’s got to increase the frustration. The fact that it is so doable and it creates the urgency too that we can actually tackle this and do something about it if we could just get focused and make it happen. One of the essential ingredients to a good food system is a culture that demands good food. Do we have such a culture at the moment?
Eric: That’s exactly where I think we’re winning. Over the last decade, and you could almost time it with the launching of Top Chef on television, but also the growth of farmers markets and the growth of retailers who focus on this, and media coverage of our food system and health and nutrition issues, the demand for good food is off the charts. So we believe – I believe – that there are three ingredients for a good food system: Demand for good food, infrastructure that supplies good food, and then policy that enables good food. And we’re crushing it on the demand. Demand for good food is at an all-time high, and it’s just going up.
Denver: With everybody, but especially young people, it seems.
Eric: For sure. It’s certainly generational. But now you see this demand increasingly across almost every demographic. The demand for good food is strong among rich and poor and black and white and urban and rural, and so it really is sort of cross-demographic at this point.
Denver: No pesticides, humane treatment… all of those things are really becoming hot issues, I would say.
Eric: Absolutely.
Denver: It’s astounding to me, Eric, that 40% of the food in this country is wasted. Forty percent! Let’s start with the consumer. What are some of the reasons that Americans waste so much food?
Eric: Well, it’s interesting. We live in a country of great abundance, and perhaps, most abundant country in the world. And I think in many ways, the notion of– We grew up with our parents saying, “Don’t leave any scraps on your plate.” Those days are long gone for most of America. So I think we’ve become overly reliant on that abundance. At the same time, there are real practical challenges, which is, if you go to the grocery store and you’re looking in the dairy aisle, it’s impossible to make heads or tails of the date labels on food.
Denver: Well, let me ask you this: If I see a container of milk that says August 26, does that mean: sell it by that date, best used by that date, or don’t drink it after that date?
Eric: And I have no idea. The reality is the date labeling is complicated. But what’s great.. to my earlier point about easy solutions… everybody wants to fix this. Industry wants a standard, consumers want a standard, retailers want a standard. So most of that waste actually happens at the retail level because they are throwing away stuff that is perceived to be bad. So right now, just this week, we had a number of celebrity chefs in Washington, D.C. advocating with policymakers for standardized date labeling in the grocery aisles. And I think that’s actually likely to succeed, which will be the single biggest factor in reducing food waste in America.
Denver: What about the cosmetic standards, like consumers’ demand with their fruits and vegetables? You know, it has to look just so. And I think we’re living in an era right now with camera cuisine, where everybody’s putting a picture of what they’re eating on Facebook, so it almost raises that standard a little bit.
Eric: Yes. At the same time, I think you’re starting to see places where it’s cool to have the conjoined carrots or the strawberry that isn’t shaped like a heart. And you look at companies like Imperfect Produce out in California, and there are others around the country, that I think are making ugly produce sexy. So we like that trend. At the same time, the reality is, even if mass consumers aren’t going to buy the ugly peppers, what we are realizing is that that same produce that may not look perfect… there are huge markets for those in value-added products and in commercial kitchens. So what used to be left on the field is now finding a new home in commercial kitchens, and that’s an important part of the solution.
Denver: Let me ask you another question about labeling: Where do we stand as it relates to GMO labeling… the labeling of genetically engineered foods?
Eric: This is now sort of in the hands of regulators in Washington. The Department of Agriculture is writing the rule that will determine exactly how it’s labeled and what it looks like. It’s stalled right now, and I think everyone on the industry side and the advocate side, is encouraging the Department to speed that up because regardless of where you are on the issue… and whether you think GMOs are an issue or not… what everybody wants is certainty in the market. So that’s where I think the advocates and the industry have come together and just, “Let’s provide certainty.” Their vision for what that certainty is, is of course very different, but that’s an issue that I think we really need to resolve and get off the table so we can move on to things that, in my opinion, have much greater impact on health and nutrition and sustainability.
Denver: Yes, I would agree. There has been an inordinate amount of attention paid to this one issue at the expense of so many others which are equally, if not greater, or more important. We talked about waste and the consumer. What about along the supply chain? From the farm to the factory to the retailer? Where is some of the big leakage there?
Eric: Well, there’s leakage at every step of the supply chain. But what we’re seeing is the farmers and the distributors who are really squeezed the most in our food economy are, I think, doing the greatest work to reduce that. The grocery world is a tough business to be in, so everybody is highly incentivized to reduce waste.
What we need to do is to get each of these different parts of the supply chain to talk to each other to make it more seamless. But everyone has—This is a great case where everybody has the same goal, which is to reduce waste. Nobody benefits from food waste.
Denver: Is food waste recycled generally?
Eric: In some places, it is. It’s mandated in some cities. And certainly, chefs are doing more. We have some great restaurants here in New York, elsewhere in the country, that are making a point of using scraps from the kitchen in stews and soups in ways that they couldn’t get away with a decade ago, but now is very much in vogue.
Denver: Your involvement with food is beyond Arabella Advisors. You’re connected with the James Beard Foundation obviously. And you started something called the Chefs Bootcamp for Policy and Change. What is that initiative about?
Eric: It started about eight years ago when we were trying to push for better food policy in Washington, D.C., and we realized that legislators weren’t really paying attention to the advocates as much as they used to. That some of the messages were a little stale, that some of the spokespeople had been around for a long time, and we needed to figure out a new way to get the attention of policymakers on these issues. So we looked around to figure out who had a captivating voice that we think would get attention… who also had a real stake in this issue.. and very quickly looked at the rise of celebrity chefs.
Denver: Oh my god, they become stars.
Eric: They are stars. So I was very happy with the James Beard Foundation, this board I sit on, to create this program that now trains chefs to be policy advocates and teaches them how to use their voice and their Twitter feeds and their restaurants and their TV appearances to really lay down the line on what a good food system looks like and the policies required for that.
Just this week, we had chefs in town lobbying on food waste policy. In a month, they’ll come in to lobby about the Farm Bill, and it’s pretty remarkable. In the old days, when Bono would walk the halls of Congress to lobby on African debt relief, everybody would come out of their offices to get autographs and get their picture taken. When Tom Colicchio goes to the Senate building, it’s the same thing. It’s pretty remarkable with people asking for autographs and pictures, and they really are celebrities, and they are really looking for opportunities to get out of the kitchen and to engage beyond just their restaurants. And we’re really pleased that the James Beard Foundation would give them that opportunity.
Denver: Yes. It shouldn’t make such a difference in Congress, but it really does when you have a Michael J. Fox or a Christopher Reeve; it really gets the attention and changes– moves the needle.
Eric: The messenger matters.
Denver: It really does. One of the major objectives of the work you do at Arabella Advisors is to increase the flow of capital to support a good food system. Are investors stepping up to the plate?
Eric: Investors are absolutely stepping up to the plate, on multiple levels. So individual investors and family philanthropists are putting more and more philanthropic dollars and investment dollars into food businesses. We manage a small private club of investors who are putting money into startup food companies in the good food supply chain.
But you also look at the other end of the spectrum. Industries stepping up. So you have large, traditional food companies from General Mills to Campbell’s Soup who are all making their own sort of venture investments in good food businesses… and from the acquisitions that they’re doing, to R&D on new products. So from across that spectrum, from industry to individuals, there’s a lot of capital on the sidelines looking for opportunities to have an impact.
Eric Kessler and Denver Frederick at the AM970 The Answer Studio
Denver: Yes, these companies have to do it. You said the culture is changing; the demand is there, and for their very survival, they just better get involved in that line of business. Give us an example of one or two companies that are engaged in this work that could really benefit from the flow of capital or who have benefited from that flow to help support their enterprise.
Eric: Well, we look at about 200 companies at a time that are raising money, and I mentioned that Imperfect Produce is a great company out in California we like a lot that has raised money for their business. We just helped some clients of ours make investments in a company called Rebound which is creating some really innovative refrigeration technology, and the cold chain is a critical part of our food system. We’re looking at sustainable agriculture companies. One of the biggest challenges in the food world is the conversion from traditional agriculture to organic agriculture, and so there’s some great investment funds and companies that are providing financing to bridge that gap where farmers have to grow organically but don’t yet have the benefit of the organic label.
Denver: They have to do it for a number of years so they have to pay the piper, but they don’t get to charge the premium, and that can be a tough catch.
Eric: That’s exactly right. So we have a group called Good Food Ventures we created which is a small private club of individual investors who we think are making direct investments into some of the most innovative companies in this sector. And there are hundreds of them. And there’s such a need for innovation in the food world. It’s a pretty remarkable time to be an investor in the food sector. I make a number of my own private equity investments in food businesses as well, and it’s a really exciting time.
…everything that we talk about on policy needs to be translated into economic development and jobs. That is what matters to policy makers, and that’s the currency in Washington.
Denver: Sure is. Let’s turn our attention to food policy at the federal level for a moment. When you have an issue, Eric, that cuts across so many different departments and dozens of agencies, what’s your strategy for getting effective policy measures enacted?
Eric: Well, right now, we need to think about food policy in terms that resonate with the current political reality in Washington. And whether we like that reality or not, it’s the reality in which policy is being made. So we may feel passionately about organics; we may feel passionately about community development, but right now, everything that we talk about on policy needs to be translated into economic development and jobs. That is what matters to policymakers, and that’s the currency in Washington.
The good news is: virtually everything that we care about in food policy can be translated into economic development and jobs because the consumer demand is at an all-time high. And so this is all about an economic argument… which is to say businesses and policymakers need to rise to the occasion of giving consumers what they want. Whether they’re urban or rural or rich or poor or black or white or Republican or Democrat, the demand is there and we need to provide a policy environment that enables a good food system to meet that demand.
Denver: Yes, and notwithstanding the need for a comprehensive approach in dealing with this from a systems approach, is there a particular piece of legislation or reform that is currently at the top of your priority list?
Eric: Well, the biggest piece coming up is the Farm Bill. Most Americans don’t know there is a Farm Bill, much less the details of it, and I’m jealous of them for that. But the Farm Bill is a piece of legislation. It’s one of the largest funding mechanisms in the federal government. It provides crop insurance; it provides all of what used to be called food stamp dollars – it’s now stamp dollars. The Farm Bill is really the economic engine of our food system in America, and it has to be everybody’s first priority at the moment because it is under attack.
All of the programs in the Farm Bill that support a good food system have a target on their back. So everybody has lots of other ways to use those dollars, and these are dollars that pay for conservation programs… so that enables long-term sustainability for agriculture system. It provides funding for farmers markets so that farmers markets in low economic areas can provide greater amounts of fresh produce to communities that perhaps need it most.
So that is absolutely the center of everybody’s priority list right now. It’s coming fast and furious, and if you watched the sort of food movement, you will start to see in this Fall a real focus on Farm Bill advocacy that will carry into next year. It’s a tough political environment. So our goal right now is really just to not take away anything. We just want to keep it going. It’s working well; we’re showing progress; we’re moving people off of food stamps; we’re seeing conservation go up and sustainability increase, and so we just don’t want to turn our back on programs that work.
Denver: Yes. Let me talk a little about your journey at Arabella. I know when you start an organization or a firm like this – it’s a B corporation now – it becomes your baby in a way. And although you said that 10 years ago you planned on stepping aside and having someone else lead the organization, that is usually a very, very tough and difficult decision when the time actually comes. What was it like for you in going through this process that ultimately had you act on that decision?
Eric: Well, letting go isn’t easy, and as a serial entrepreneur, I certainly can attest to that. At the end of the day, I was really motivated by what was best for myself personally, for our clients, but most importantly our staff. I think bringing in fresh leadership with a different perspective and a different skill set was right for everybody.
Over the two years that our CEO, Sampriti Ganguli, has run the company, that’s certainly been proven to be the case. So our CEO, coming from a professional services background, has enabled our team to do their job better than we have before. Our clients see the results of that. And for me, personally, it’s enabled me to focus on the things that I’m best at and that I care most about. I still get to opine, and I still get to help influence, but I’m pretty proud of having been able to… perhaps for the first time in my life, actually let go of something that I’ve built. And it’s working incredibly well. So the decision is reinforced every day.
So we believe that when you look at our culture and our benefits and professional development opportunities– the way in which we aggressively promote people and leapfrog their careers– that it’s pretty unique.
Denver: That’s great. You know, Arabella Advisors has an exceptionally high rating on websites like Glassdoor where employees weigh in on what it’s like to work in a particular place or organization. Tell us about the corporate culture of Arabella Advisors and why the people who work there say such wonderful things about it.
Eric: It’s good to hear. I’ve never actually looked at Glassdoor.
Denver: You should.
Eric: I also don’t look at Yelp reviews for the restaurants that I’m invested in, but it’s good to hear. From the beginning, my partner, Bruce Boyd, and I have really focused on building, we think, a pretty unique culture, and one that we aspire to be the best place any of our employees will ever work. I’m not sure that we don’t still have a lot of work to deliver on that promise, but it’s a promise we made and something we aspire to every day. For me, that comes from a deep family history with a family-owned business that really prioritized this before it was in vogue. So we believe that when you look at our culture and our benefits and professional development opportunities– the way which we sort of aggressively promote people and leapfrog their careers– that it’s pretty unique.
Nowadays, hiring and managing millennials, that sort of culture is now commonplace and is demanded among them. I hope we’re over-delivering on that. Again, we certainly have more room to go, but when we do our annual retreat every year, and we bring our 150-some people together and our in-house band– which comprises 20 people from across the country, plays their one gig of a year, and it’s the best corporate party ever thrown, those are the moments that we really cherish as a firm.
Denver: And the firm is really putting a lot of energy into building diversity and equity and inclusion from the inside out at the moment.
Eric: We are. And I’ll be the first to say we’ve got a lot of work to do there. We’re working hard. I think we’re making some progress, in some ways… lots of progress in other ways. We’re the first to say that we, along with I think most people in our sector, have a long way to go to account for inherent bias in the social sector… in the philanthropy world that isn’t necessarily known for diversity, equity, and inclusion. So I would modestly say that we’ve made some progress, but we’re trying to hold ourselves accountable to where we really need to get to, which is much further forward than where the sector is today.
Denver: Well, that’s the hallmark of great culture: You’re never satisfied.
Eric: Yes.
Denver: Let me close with this, Eric. There are some 40- 50 million people in this country who are food insecure – unsure in many cases where their next meal is going to be coming from. And many of those people live in food deserts where healthy and nutritious foods simply are not available in the neighborhoods.
How quickly can this situation be successfully addressed? And what are the one or two things that need to happen immediately to see that it is done sooner rather than later?
Eric: Well, there’s a lot that is being done. Food access is a real inherent problem in our food system, and it’s tied directly to institutional racism and economic disparities in America. I’m really happy to see some companies standing up. One company, that I’m a personal investor in, called Brandless, and other grocers that are really focusing on democratizing food and making good food accessible for all.
So I think part of it is looking community by community and understanding what the particular needs are of that community. I sit on the Food Policy Council for the mayor of Washington, D.C., And in our city, we have a significant part of the city that really is food insecure with remarkably poor food access… where really, the only choice is to grab a candy bar from the convenience store. The issues are tough. They’re really entrenched in some of these much bigger societal issues. The solutions aren’t as tough, in that we know that what we need is different formats of stores. We need them in places that really matter to people, that really speak to the needs of the community who may be taking two buses home, may not have a car; they can’t go to Costco.
So there’s a lot of good stuff happening. Part of it is institutional framework and investing in these businesses and enabling them to set up shop in places where there isn’t great food access. A big part of it is policy change and using good policy to eliminate the roadblocks to food access, but also to incentivize food access and incentivize businesses to go into these communities that need it the most. So I think the trend is in the right direction. I think there is so far to go, and it’s certainly something that Arabella and our Good Food team and so many of our foundation and philanthropy clients is focused on right now. And for that, we’re really proud to be at the center of trying to put these solutions in place.
Denver: Well, Eric Kessler, the Founder and Senior Managing Director of Arabella Advisors, I want to thank you so much for being here this evening. For people who are interested in learning more about this topic or more about Arabella, where can they go to get that information?
Eric: ArabellaAdvisors.com.
Denver: There you go. Well, thanks, Eric. It was a real pleasure to have you on the program.
Eric: Thank you so much.
Eric Kessler and Denver Frederick
The Business of Giving can be heard every Sunday evening between 6:00 p.m. and 7:00 p.m. Eastern on AM 970 The Answer in New York and on iHeartRadio. You can follow us @bizofgive on Twitter, @bizofgive on Instagram and at http://www.facebook.com/BusinessOfGiving