IN THE SPOTLIGHT
Welch’s Daniel Dillon swaps
crops, but stays in agriculture
By Patricia DaughrityM
Editor’s note: Daughrity is a freelance
writer and a member of National Grape
Cooperative/Welch’s, who lives in Ripley,
New York.
ith his retirement in
November, Welch’s
CEO Daniel Dillon
gave up purple grapes,
but not agriculture.
Dillon, 61, and wife Sherry are now
growing “baby” gourmet vegetables on
their 32-acre farm near Sudbury, Mass.
Their spread is comprised of equal parts
of managed forest, open pasture and
fresh vegetables.
The farm was founded by Thomas
Bent, who began farming it in the 18th
century. It was later taken over by John
Stone and held in his family for five
generations. To honor its heritage, the
Dillons have named the operation Bent-Stone Farm.
Dillon is building a 900-square-foot
greenhouse for his specialty-crop hobby
farm. Baby cucumbers with delicate
blooms, heirloom tomatoes and ultraruby
crystal lettuce will be some of his
initial crops. He plans to sell the vegetable
gems to area restaurants, which
will use them for unique garnishes. Not
entirely done with fruit, he plans on
converting the pastureland to fruit
trees, and, of course, grapes.
Turbulent days for juice industry
The tranquility of Bent-Stone Farm
contrasts with the turbulence of the
overall juice industry as it struggles to
halt declining consumption. The juicegrape
market has been particularly turbulent,
leading to some speculation that
this may have caused Dillon to retire
sooner than planned.
Not so, says Dillon, noting that he
informed his board three years ago that
he would retire before he turned 62.
“Working with the board, we had a
well-thought-out succession plan. I was
clear that I didn’t want to hang around
after I announced I was leaving – particularly
when my successor was an
internal candidate.” (David Lukiewski,
senior vice president of sales and marketing,
was named the new CEO in late
October.) Dillon, who had been with
Welch’s since 1982, says his time there
constituted “a most enjoyable career.”
Enjoyable, but volatile.
Enjoyable, because Dillon is credited
with restoring the company’s competitiveness
and building demand for the
products of Welch’s, which is the processing
and marketing arm of the
National Grape Cooperative. Twentyfive
years ago, Welch’s was a $200-million-per-year business
on the downturn.
Today, it does
$600 million in
annual sales and is
owner of one of
the most respected
food brands in the
world.
“In the early
1980s, we seriously
considered not
accepting more
than 225,000 tons
[of grapes] because
we did not have
demand for more
than that. In 2006,
we received over
400,000 tons and
our members were not ‘inconvenienced’
in the least in implementing that
accomplishment,” Dillon recalls.“Welch’s has provided a secure market
for our members’ quality grapes. We
are fulfilling our mission better than at
any time in our past.”
Volatile, because low-carbohydrate
diets and escalating input costs have
combined to create a severe market dip
for the “grape-juice rollercoaster.”
These pressures were made worse with
a bumper crop of sour grapes delivered
in fall 2003.
The cumulative result was an estimated
20 percent customer drop-off.
The co-op is still in the recovery mode.
“Today we can look back at over $70
million in cost increases in three short
years.” Because of challenges posed by
the 2003 crop and declines in juice category
sales, it was obvious that Welch’s
could not pass through
these cost increases with
price increases. “In other
words, if we did nothing,
proceeds would be reduced
by $70 million.”
Implementing a company-wide recovery plan,
Welch’s closed its
Kennewick plant in
Washington state, cut compensation,
reduced staffing
and cut capital investments.
Adding to the instability
was an unexpectedly large
2005 crop, weighing in at
about 414,000 tons—100,000 tons more than a
normal crop and 40 percent
more than the previous year
—and a very high-quality
crop.
It cost an additional $6
million to receive and market
that crop in fiscal year 2006,
money which was not in the fiscal plan for that year, Dillon
concedes. “We are not happy with the financial results, but
we are very proud of how we managed these issues for the
long-term good of the enterprise. We can now look forward
to FY ’07 and beyond with optimism. Obviously, we can’t
‘get it all back’ in one year…but the negatives have been
managed and the turnaround is well underway.”
Secure market, brand name benefit members
The co-op’s grower-owners have made clear that the ability
to deliver their entire crop to Welch’s—year after year,
regardless of any industry surplus—is important to them.
One of the biggest challenges Dillon faced as CEO was communicating
the cost of this “secure market” benefit to co-op
members. Recent price estimates range from $6 million to
$10 million per year, due largely to costs of crop storage,
product development and marketing. Dillon estimates the
cost of market security ranges from $100 to $125 per ton.
Dillon offers this advice to his successor: “The strength of
the Welch’s brand name is what differentiates Welch’s from
less-successful co-ops. Support that brand reputation in
everything you do.” He further cites Welch’s brand power as
one of the reasons the company remains ranked the “best
agricultural cooperative in America,” based on Standard and
Poors financial rating and
consumer ratings.
Additionally, Wal-Mart
recognized the growerowned
company as
“Supplier of the Year”
twice in recent years.
Before he retired,
Dillon offered one more
“berry of wisdom” regarding
the organization’s board
structure. National Grape
Cooperative and its Welch’s
marketing arm benefit from
a “two-board” system. The
National Grape board is
100 percent comprised of
growers, while the Welch’s
board blends growers,
management and outside
directors. Dillon likens the
system to the U.S. House
of Representatives and
Senate, both in terms of
governance and rate of
progress.
Though the wheels sometimes turn slowly, he is a proponent
of the quality decisionmaking that he says results from
the two-fold board configuration. He cautions against tampering
with the structure.
“The two-board system is a unique advantage that this
organization possesses. Don’t let the system erode. The roles
and responsibilities of the two boards should not be allowed
to blur.” He further illustrates that this system works best
when there are strong-willed people with strong opinions
around the board table.
“As I retire from Welch’s, I number among my friends a
number of grower-directors. I hope the majority of growerdirectors
respect me and my contribution to the co-op as
much as I respect theirs,” he concludes.
Following some leisure activities ranging from a trip to
Disney World with his grandchildren to international sightseeing,
Dillon plans to dote over his “infant vegetables” and
to continue service on various industry, philanthropic and
for-profit boards, including the Ad Council and Grocery
Manufacturers of America, among others.
Says Dillon, “I think retirement is going to be exhausting,
but we are looking forward to it.”
