The (Ethical) Taste of Success

JULIA KENNEDY: Welcome to Just Business, a series of interviews on global business ethics. I'm Julia Taylor Kennedy, and today on the program we're talking about multiple facets of running an ethical global consumer company.

Here with me is Ashok Vasudevan of Tasty Bite and Preferred Brands International. Between his prior experience at Pepsi and Unilever and then founding and running Tasty Bite since 1995, he has a wealth of knowledge on what it takes to build an ethical consumer company. Plus, he does it from a position of success. Tasty Bite has seen more than 35 percent growth over the past two years.

Ashok, thanks for joining me today on Just Business.

ASHOK VASUDEVAN: Thank you. It's great to be here.

JULIA KENNEDY: First, tell me a little bit about Tasty Bite and the products you offer and how you founded the company.

ASHOK VASUDEVAN: The company is actually called Preferred Brands International. We started essentially as a marketing and distribution company. What we basically do is manufacture and market natural, convenient specialty foods under the brand name Tasty Bite.

The kinds of foods we manufacture, if you look at cuisine, it's mainly Indian, Thai, sub Pan Asian, and some fusion products. We sell nationwide here in the United States and in Canada, also in Australia, through club stores, grocery stores, and natural stores. We also do some private-label business. Geographically, we are in India, we are in Australia, and we are in North America.

JULIA KENNEDY: What is private label? What does that mean?

ASHOK VASUDEVAN: You manufacture products for other brands.

JULIA KENNEDY: So there's Preferred Brands International, but there are three corporations behind Tasty Bite?

ASHOK VASUDEVAN: Right.

JULIA KENNEDY: How does that structure work?

ASHOK VASUDEVAN: Preferred Brands is kind of the world headquarters in Stamford, and that’s the parent company, Preferred Brands International. Then we have two subsidiaries. One is a 100 percent wholly-owned subsidiary in Australia called PBA, Preferred Brands Australia. And we have a 75 percent subsidiary in India, and that's called Tasty Bite Eatables Ltd. That's a public company. The balance of 25 percent is held widely by the public shareholders.

JULIA KENNEDY: You've been working in consumer brands for a long time now. What lessons did you learn at Unilever and Pepsi that helped you as you founded Tasty Bite?

ASHOK VASUDEVAN: You know, I like to say I learned everything that I know in business from Unilever, and most of the time in Pepsi I just practiced it, or maybe I taught a little bit.

The most important thing, I think, from Unilever that I learned clearly was a focus on the consumer. That is very, very important. And in my view one of the most ethical corporations that I have ever come across.

All my ten years in Unilever were in Unilever in India. The manner in which they ran their business made a deep impression on me.

I was in corporate for the most part, a little bit in international business and a little bit in the agribusiness. That's really, if you asked me what did I learn, that’s one piece that I did learn.

JULIA KENNEDY: What specifically did you learn about running an ethical business?

ASHOK VASUDEVAN: There is a myth that doing business in India is hard if you just follow the straight line. That was a myth then. It's a myth today. Being on not as a ringside view but really being on the inside, I became completely persuaded that that is absolutely not true and that it is possible to do business exactly like you can talk to a child, almost in every aspect of the business, without exception.

JULIA KENNEDY: Are there hurdles to doing that, and how would you get over them?

ASHOK VASUDEVAN: Yes and no. There are hurdles in any society. There are hurdles in every country, here as in Australia, as in India. But the "surround sound" on Indian corruption is obviously much bigger and is well-deserved, meaning it—

JULIA KENNEDY: It exists.

ASHOK VASUDEVAN: It does exist. But having said that, it is not as difficult as people make it out to be. If you define that early enough and you get involved in the community in some very fundamental ways, that's not an issue that keeps coming up every day. It doesn't.

If every once in a while it comes up, it’s like a fly—you just swat it and you keep moving. But honestly it’s not as hard as people make it out to be.

JULIA KENNEDY: When was the turning point for you where you said, "Okay, I've had this experience, I’ve learned, I’ve taught, I want to start my own."?

ASHOK VASUDEVAN: Actually, I wish there was a grand strategy behind it. But the truth is it was just serendipitous, because Tasty Bite was actually born within Pepsi in a manner of speaking.

JULIA KENNEDY: I see.

ASHOK VASUDEVAN: At the time when Pepsi came into India, the liberalization in India hadn’t started.

JULIA KENNEDY: When was this, roughly?

ASHOK VASUDEVAN: This was in 1990.

So the government of India had imposed several obligations as part of their industrial license to Pepsi. One of those obligations was that almost 50 percent of the revenues had to be in exports. As a result, the largest division within Pepsi was not the beverage business or the snack food business, but really was the international business. That is the one that I was heading up at the time. So we were doing a whole bunch of products.

But, more importantly, the condition also said that not only must 50 percent be in exports, but 80 percent of that must be agriculture. As a result, we were exporting commodities—rice, to beverages, to Pepsi concentrates, and tomato paste. Tasty Bite was one of those that came across my desk at the time.

Subsequently, in 1994, when I was still at Pepsi, Coke entered India but did not have the same conditions, because by that time India had liberalized. So, obviously, we made a petition to the government and we won it. So we asked for a level playing field, either the same conditions be imposed or the conditions be removed.

The export obligation disappeared. So that obligation became an opportunity for me sitting here, because by that time I had begun to understand the U.S. grocery business well. I knew the positioning of Tasty Bite. I had always been energized by building this global brand, consumer brand, out of India, because I genuinely believed India had a competitive advantage. So that's how it started.

JULIA KENNEDY: Now, one thing I want to discuss with you are the different elements where you can see values and ethical aspects of the Tasty Bite as a brand.

The first one I wanted to talk about—and this kind of leads into it—is the product itself, that it doesn't use chemicals; you have kosher, gluten-free, organic options. Did that exist when you took over Tasty Bite or is that something you implemented?

ASHOK VASUDEVAN: A little bit of both. Let me explain that.

The first chart that we ever made when we started the company was a little Venn diagram. We drew three circles. Let me explain that.

You know, the grocery business at the time was a little over $400 billion in the U.S., growing at half-a-percent or three-quarters-of-one percent. So it's a boring business. It’s an old business. There’s no romance or sex appeal in this business.

So we said, "What are we going to do in this business?" So we said: "The way to think about it"—and I teach that in school today when I teach entrepreneurship—"is think about megatrends, where is the world heading, and see if what we are seeing today is going to be relevant 15 years from now."

JULIA KENNEDY: Because in 15 years the grocery business has changed quite a bit.

ASHOK VASUDEVAN: Indeed it has changed fundamentally.

So that's the very first chart we drew. What we said was: What are the megatrends in the U.S. society at large? These could be economic trends, they could have been sociological trends, political trends, technological trends. But we picked one.

The first trend we picked was what we call health and wellness, or you can call it natural. If you looked around, gym memberships were increasing, Diet Pepsi had suddenly become very important, you could see people cycling, micro beers had formed.

JULIA KENNEDY: Whole Foods was just starting to expand.

ASHOK VASUDEVAN: Whole Foods was just starting. People were suddenly talking about the importance of natural ingredients and turning their backs on products that had chemicals, preservatives, additives. And the FDA had just started their labeling regulations for the first time. So there was a lot of activism in that sense. So we said, "This is a megatrend." We saw that.

The second interesting one was we said people were spending less time in the kitchen, mainly because the women had begun to join the workforce. In the 1980s more women joined the workforce than I think in the previous several decades combined.

JULIA KENNEDY: Since World War II, I think.

ASHOK VASUDEVAN: Yes. So, as a result, the impact of that was beginning to be felt by spending less time in the kitchen.

You know, I had this statistic, which I'm not sure where we got it from, but the average cooking time in the last 15 years has dropped from 48 minutes to 12 minutes in America. It's huge. That's a big trend, people are going to spend less time in the kitchen, they're going to be more focused on convenience foods—but they had to be healthy at the same time.

The third was what we call "palate on the move." You know Americans love choice. You can't just go there and say, "Give me a sandwich." They say, "What kind of bread and what kind of cheese and what kind of meat?" So we realized that not only was it about choice, but it was also about choice of cuisine. So the term we used is "Cuisine Index." How many cuisines in a week of breakfast, lunch, and dinner times seven, 21 meals — how many cuisines do you actually travel through?

Today, Americans travel through four cuisines a week, which is the largest in the world. So you might have a Thai dinner and you might have a Mexican lunch, you might have a salad—it goes on and on.

On top of that, we are also not cuisine-loyal. We may take a cuisine and take it in any direction that our palate deserves. So if you want to go for a chicken sandwich—and let's call chicken salad American for the purpose of this discussion—as you go to the counter, they might say, "What kind of bread?" and you might say, "I'll have it in a tortilla." It suddenly goes south of the border.

And then, as he's putting in the butter, you said, "Wait. Let me take some hummus." And now you’ve gone across the Atlantic to the Mediterranean.

And when the chicken comes in, you’ll say, "Can I have a chicken teriyaki?"

So the next thing you know, you took a perfectly normal chicken sandwich and you've made that into a non-cuisine. So we realized that that is the way Americans were beginning to eat and there wouldn't be a focus on specialty.

So the three megatrends were health and wellness, convenience, and specialty.

JULIA KENNEDY: Got it.

ASHOK VASUDEVAN: We found that Tasty Bite actually sat in the center of that Venn diagram. So that's how we positioned it. So that was the first positioning strategy, and that still remains true even today.

JULIA KENNEDY: Let's also talk about labor, because you have an interesting relationship with your employees in all three continents where you’re working, so in Australia, North America, and South Asia.

One interesting facet of that is your health care policy, that you provide free health care for employees and then the option for them to add their spouses and kids under 18 for all employees.

ASHOK VASUDEVAN: All employees.

JULIA KENNEDY: First, why did you implement that? Let's start there.

ASHOK VASUDEVAN: You know, everything we do in the company is governed by what we call our mission statement. Companies use vision statement, mission statement, strategy statement, to mean different things, and we do too. So we have one statement that is our vision, our mission, our strategy. That statement has five parts to it, but the whole thing reads as one. So I'll take you through that for a minute.

• The first is we say, What is the overarching purpose? Are we doing this to become rich? Is that the overarching purpose for setting up this organization? So there is the purpose.
  
  
• The second is scope, which simply says: What business are we in?
  
  
• The third we added as a promise: Who do we make a promise to amongst all the stakeholders and what is the promise and how do we know the promise is relevant to that stakeholder?
  
  
• Fourth is our competitive advantage, which goes to the heart of the strategy: How are we different from others and how will we get better tomorrow than we are today?
  
  
• Finally, what is the environment in which we want to see ourselves every day?
  
  

So those are the five.

The sentence itself reads, "The purpose is to create a values-driven organization that will make Tasty Bite a household name."

The scope is "manufacturing and marketing natural convenient specialty foods that offers consumers"—that's the promise—"great taste, good value, and a range of cuisine achieved through what we think is our competitive advantage, product innovation, low-cost manufacturing, and customer partnerships in an environment that is knowledge-driven, energetic, and fun." It starts from there.

So everything we do really stems, every single department—we have 13 departments—each business unit or function has their own mission statements. So they take these key words from the mission statement, like "value-driven," "household name," or "great taste," "good value"—these are all what we call key words—and they give rise to goals that are long term, which give rise to annual objectives, which then give rise to quarterly deliverables.

JULIA KENNEDY: So then tell me about the insurance program specifically and how that fits.

ASHOK VASUDEVAN: Okay. So take the value ecosystem, if you like. We think of the value ecosystem as a tree with three branches.

• The first branch is the people, which is how do we relate to each other as employees in the company. All of us are employees in the company.
  
  
• The second is the community, how do we relate with the community at large wherever we do business.
  
  
• The third has to do with the consumer, how do we relate with our consumer, because she or he is the reason for our existence.
  
  

In terms of the employees, we have three programs: one is health and wellness; one is learning and growth; and the third is rewards and recognition.

In the health and wellness, we decided early on that we were not going to debate how much we were going to be able to afford for health care, because I had come out of Pepsi, from a large corporation, and it was my first exposure to the American health-care system, and it left me cold. I'm not saying they had a bad system, but relative to what I was used to or what I had anticipated in my mind, it was a little bit of a hard landing in the U.S. I remembered that and I didn't want the employees to be thinking the way I was thinking about our own health-care system.

So one of the first early things that we did was, whether or not we could afford it, we said the business must be able to afford that people are taken care of, basic things are taken care of, so that we can concentrate on what we are good at and not have to worry about certain things that you take for granted. You take clean water and air for granted. You take roads and infrastructure for granted. You should take your health care in the same way. You have the right to take it for granted. I think of it as a fundamental right.

JULIA KENNEDY: What is the culture around health care like in India? Do companies generally provide health care or not?

ASHOK VASUDEVAN: Yes, large companies do. For example, when I was in Unilever, we had complete health care for me and my wife. That was the policy for the longest time. We didn't differentiate between an eye and a tooth and an ear. It was health care. So, in a sense, I was used to that.

Having said that, that is not necessarily universally the case. Lots of Indians don't have health insurance. The government does provide certain health insurance for government employees. So there are insurance companies that are beginning to come in and provide insurance. It's not a pretty situation in India. I don’t want to romanticize that it’s a great program in India. No. It's good-quality medical care, that's for sure. But do we have good-quality universal health coverage? No, we don't.

JULIA KENNEDY: Has it been difficult to afford this health care over the company's history?

ASHOK VASUDEVAN: I try not to think about it. I've been a little bit in denial, because honestly I don't like to see it as a line item which we should focus on, because you start worrying about cost. Of course you've got to be careful about how you spend your money. But I like to think that we shouldn't be focusing on that.

If my eyes are on that line item, then there's a problem. I should be thinking about revenue generation. I should be thinking about creating an environment for creativity within the organization. I shouldn't be worrying about one line item. I don't want that tail to wag the dog.

But it is becoming expensive. It is a big-ticket item. But like I mentioned, I don't want to look at it.

JULIA KENNEDY: Let's talk also about your education program, which is fairly unique. Explain to me how that works.

ASHOK VASUDEVAN: The education program works in a couple of interesting ways.

As far as the U.S. is concerned, we encourage people. Because of our environment, trying to keep it knowledge-driven, we encourage employees to go take courses all the time.

JULIA KENNEDY: How many employees do you have?

ASHOK VASUDEVAN: Worldwide we have 450 employees.

But we encourage people to go for advanced education, go for continuing education. So it's a big part of our push. We encourage them to do that.

If they will go away for a week's course, it doesn't come off from their annual vacation. That's not what we like to do. So you can happily go.

In certain cases, when it is relevant to the business or relevant to the function, we will absolutely support it fully. But if they want to learn Eastern Medieval dancing, we might not financially support it, but we are not going to stop them from going there by debiting their vacation. No. We say: "Go. Do what turns you on. That’s important."

In Tasty Bite in India, we have a good program for education even within the company, and also for their children. But that goes to the second branch of our ecosystem, which is our relationship with the community. So we have a program where we support one dollar for every dollar of the workers' cooperative education fund for the workers' children.

At the time when we took over Tasty Bite as a manufacturing unit from Unilever, actually as it turns out there was a little bit of an illiteracy issue within Tasty Bite's workforce. We of course laid off nobody. But today there is nobody in the company who can be remotely called illiterate, no way.

But we were more concerned about their children, because that's the ecosystem, that's the society that we live in. So we decided to support that.

We do it dollar for dollar. We do that through primary school, middle school, high school, undergrad, and grad, meaning there is no end to it. Just keep studying and we will support it dollar for dollar, just so that the next generation is well-educated, and not because they don't have the wherewithal.

JULIA KENNEDY: I would imagine this also shows itself in employee loyalty. So do you see that employees stay longer with the company due to these benefits?

ASHOK VASUDEVAN: We do. We don't measure the impact of any of these measures because this is not done for a specific business reason. It is done only because we just do it. So we don't measure the impact of this on anything specific within the company.

But having said that, yes, we have people who have stayed in the company for a very long period of time.

JULIA KENNEDY: You also have a lot of initiatives dealing with sustainability at Tasty Bite.

How did you start to look at your footprint?

ASHOK VASUDEVAN: Just becoming more sensitive to the environment. Like most other people, I was not sensitive to the environment. I just came across a series of reports, and one of them particularly really struck me, which was a McKinsey report.

I always knew that the food industry is a prodigious consumer of water. Today we consume close to 1 million liters of water a day. So we put a recycling program in place about—I want to say five years ago. I'm amazed we didn’t put it in sooner. Today we recycle a little over 30 percent. But we have a target to recycle completely by 2018, 100 percent recycled. Which is kind of theoretical, because you never will recycle 100 percent because there's going to be some drainage and evaporation losses. But in terms of the actual activity, we want complete recycling.

That 300,000 liters of recycling has come with a certain investment. But more importantly, that is an investment we do measure in terms of the return. I am totally persuaded that is the right thing we did, especially because our factory is in a rain-shadow area, and therefore we are dependent on both the government water and the canals close by. So the less we draw, the better it is.

We’ve got a very robust recycling plant. In fact, the effluent treatment plant, which normally in a food factory is probably the dirtiest, in our case is a little garden. We will have gladioli growing around it. It's a beautiful place to visit, even if it's an effluent treatment and you've got to hold your nose every once in a while. But it is a beautiful place.

The recycling is a big part of our program. So that’s one area.

The second area is renewable energy. We generate our energy. Eighty percent of our energy is generated through renewable resources. So we must be—I don't know this for a fact, but we must be the highest in the food industry in India.

We use vegetable waste and we use sugarcane briquettes as the starter fuel and as the fuel for our boilers. All the steam we generate, which runs everything, all the kettles and all the pressure vessels in the company, is generated using 80 percent renewable energy. That number is not going to go up significantly, but it is going to remain about that. That’s another big area that we are involved in.

JULIA KENNEDY: Tell me about your demonstration farm.

ASHOK VASUDEVAN: We have a 25-acre farm. When we acquired that whole property, there was just bramble. So one of the first things that we did was to say that there’s nothing worse than keeping land under bramble with our cultivation—I mean that's a crime, it shouldn't happen, and certainly not in India. So the first thing we did was to try and get that fallow land back. So we started cultivating it.

Then it took us a long time to understand, because we are not farmers. But we were living in rural heartland. The state where we live in is the country’s largest food- and vegetable-growing state, and India itself is the largest food- and vegetable-growing country in the world. We were living in the district there. So we started farming.

Now, when we started farming, we realized that there were certain things that we could do both to protect our prices and also strategic crops. Some of them are very strategic, in the sense we want to grow spinach but we want the iron content in spinach to be retained, very important. We want to grow eggplant, but eggplant is famous for worms, so we’ve got to make sure that we have eggplant that are grown without worms. Certain other things, like tomatoes for example, fluctuate wildly, sometimes they can fluctuate one to ten within a given year, and therefore we use that as a base for protecting our weighted average price during the year.

So we started with that, with these, and then obviously all the herbs. We began to grow the herbs. When we started getting into Thai food, we didn't want to import the herbs from Thailand, so we started a little herb garden within the farm. So we started there.

But then we found that, because we were in the heart of farming country, we could do something. Most of our workers and employees came from within a 20-30-mile radius, which is all farmland. So we said, "Why don't we use that as a demonstration farm?"

We didn't know enough to be teaching the farmers. So we said, "Okay, let's get better first before we start doing anything else."

And then we started collaborating. So we now collaborate with the University of Wisconsin in Madison. They helped us rethink our whole strategy about our farm and how we could make that into a demonstration farm. We started having farmers coming in.

We also give them practical practices. So we tell them the seed, the variety, the timing, the sowing, the schedule, so that when it does come up for harvest and it meets the quality standards that we have, they become the Tasty Bite farmer in their village—which is a big deal, because we are the largest buyers of vegetables in that area.

JULIA KENNEDY: So in a way you're almost training some of your suppliers.

ASHOK VASUDEVAN: Absolutely.

This is not about doing good, though, Julia. I must say this one sentence. It’s a complicated sentence but I say this every time people talk about CSR. We don't have a department of CSR. If you have a department called corporate social responsibility, in a sense you're almost suggesting that you have departments that are corporate socially irresponsible. We’re saying, "No, no, no. This is knit into the DNA of everything we do."

So the sentence I often say is—and it’s kind of a long, complicated sentence, but I have to say it—is if you continue to do what you're good at rather than chasing what is good, you will not only get better at what you're good at, you may also end up doing more good.

So the focus is not on doing good; the focus is doing what you're good at, just do what you're good at. Fundamentally, I believe we are good human beings, we want to be. So fundamentally if you continue to do what you're good at, you will end up doing more good, rather than chasing what seems to be PC.

JULIA KENNEDY: Here we get to the work/life balance question, because that also affects your personal life, right?

ASHOK VASUDEVAN: Of course.

JULIA KENNEDY: So explain to me what you think about that term, "work/life balance."

ASHOK VASUDEVAN: It's a term that everybody uses. But underneath that term is a fundamental divide that people have created which does not exist, which is that there is work on this side and then there is life on this side, life being defined as non-work, and therefore you’ve got to balance the two so you don't over-work and you don't over-live. That really is the underlying assumption when somebody uses the term "work/life balance."

You really want equilibrium in life. You want equilibrium within. It doesn’t matter if it happens to be at home working or at work calling home. You still need equilibrium.

So what we are looking for in general is equilibrium. You're looking for internal equilibrium. You're looking for internal balance. You're not looking to see how you can spend more time with the family by not overworking or how you concentrate at work and don't bring your problems here.

JULIA KENNEDY: I think it also sets up a dichotomy that there is a way that you live and there is a way that you work and those aren't necessarily the same.

ASHOK VASUDEVAN: Exactly.

JULIA KENNEDY: So for you it seems that those are one and the same.

ASHOK VASUDEVAN: It is one and the same.

I've had a couple of interesting arguments about this. Folks have told me, "The reason you’re saying this, Ashok, is because you're married to Meera, who also happens to be your business partner, and therefore you guys work together, you live together, and therefore you’ve found your work/life balance in that same way."

I'm saying maybe that is true and maybe that is why I am saying it. But actually I know I am not saying it because of that.

JULIA KENNEDY: You're letting them off the hook.

ASHOK VASUDEVAN: I’m just letting them off the hook. I can argue with that for a long time.

But the truth is that you've got to figure out ways. You live life intensely, people like to live life intensely, people like to live life with passion; people like to work intensely, people like to work with passion. If you find that in everything that you do, you’ve already found a balance in life. You're not finding the balance between two. It's not a binary world of work and life. It's your life.

JULIA KENNEDY: I want to ask you about another binary, which is your profit and these initiatives that we've been going through.

ASHOK VASUDEVAN: Right.

JULIA KENNEDY: A lot of companies say, "Well, we can't afford to have health care because we have our investors to answer to." How do you balance those?

ASHOK VASUDEVAN: You know, the governing principle which sits above the mission statement also has one sentence which I didn't mention before, which is to maximize the intrinsic value for the enduring shareholders. We are fully, completely aware of that and we take that as our governing principle.

But the important word is "enduring" shareholders. I'm not so concerned about the day traders. I'm not concerned about the quarterly results. It leaves me cold when the Street forces people to think in quarters. It's no different from the congressman thinking in two-year terms so they spend their time in raising money before their first year is over, or sometimes even the first year. It's exactly what you see in corporations; they start looking at their share price in the first quarter.

We are talking about building a sustainable, responsible organization. It has to be disciplined, it has to be aggressive without question, but it has to be responsible. These are not in conflict. Being aggressive, being disciplined, and being responsible are not in conflict in the long term. If you keep looking down, yes, they appear to be in conflict.

It's like trying to ride a bicycle. When you're riding a bicycle, you are told "don't look down, look ahead. If you look down, you will probably fall sooner or later. Look ahead."

Running a corporation is exactly that. You can't keep looking down every quarter, every day; you have to keep looking ahead to where you are headed.

So to that extent, if you are talking about enduring shareholders—not day traders, not people who are in for the first quarter, but you are talking about enduring shareholders—all of these are consistent, they are not in conflict.

It's not as though in all these months we have never had a loss. We have had losses. That doesn't mean that we will cut back on some fundamental things. It doesn't work that way, and it shouldn't. You've got to take a longer view.

JULIA KENNEDY: Ashok Vasudevan, thank you so much for these insights. You're a very organized thinker. I appreciate your laying them out for us. It has been very helpful.

ASHOK VASUDEVAN: Thank you, Julia. This is an honor to be here, it really is.