BY ADAM BAKER
When I went to business chool in the 1990s, I was taught that I had a fiduciary responsibility to maximize
shareholder value—that profit
was paramount. Aside from a
business ethics class, we never
discussed whether businesses
had additional responsibilities
beyond making money.
But times change and, to remain competitive, businesses
also must change—not just their
products, but also their business
What necessitates a change?
According to Forbes (Jan. 20,
2015) “companies are fiercely
competing for millennial mind-share. There are 80 million millennials in America alone and
they represent about a fourth of
the entire population, with $200
billion in annual buying power.
They have a lot of influence over
older generations and are trend-setters across all industries,” including the pet industry.
Forbes commissioned a study
in 2015 to better understand millennials. One of the top 10 findings was that millennials expect
brands to give back to society.
“… Seventy-five percent said that
it’s either fairly or very import-
ant that a company gives back
to society instead of just making
a profit. They are sick and tired
of corporate greed. Millennials
love brands that support their
local communities.” It seems that
maximizing shareholder value is
no longer enough.
A concept that has gained
strength in recent years is the
“triple bottom line.” In addition
to making a profit, a company
also should concern itself with
social and environmental benefit. In 2010, Maryland became the
first state (of 3 0 states and Washington, D.C.) to authorize a Benefit Corp. A Benefit Corp. is a type
of for-profit corporate entity that
includes positive impact on society, workers, the community and
the environment in addition to
profit as its legally defined goals.
Another emerging practice is the
B Corp, which is different from
the Benefit Corp. The B Corp is a
certification process that requires
participating companies to meet
rigorous standards of social and
environmental performance, accountability and transparency.
How does the pet industry
measure up to the standards of
millennials who vote their value
system along with their dollars?
In my estimation, there’s room
I’m a relative newcomer to the
pet industry. I spent most of my
career making apparel and footwear in the Far East. I’ve worked
in China, Malaysia, Thailand,
Vietnam and Taiwan, to name a
few. I’ve seen the good, the bad
and the ugly of Asian sourcing:
difficult working conditions, toxic rivers, air that’s so polluted it
stings your eyes and burns your
throat, and land that’s so spoiled
it can’t be planted.
If millennials are demanding
more from the companies they
purchase from, then the China
sourcing model seems woefully
inadequate, which is why I’m
surprised to see so many pet
products still produced in China.
It is the epitome of the “maximiz-
ing shareholder value” business
model where companies exploit
low-cost labor in
and turn a blind eye
to the social and en-
cations. No one is
breaking the law, but
we’ve lowered our
standards to those
of the third-world
countries where we
very convenient. It
sounds harsh when
phrased that way,
but we all (including
millennials) know it’s
true, which is why
it’s time to change.
Of course, it’s also been noted that millennials are price
sensitive. How do we reconcile
their social and environmental
expectations and their desire for
best pricing? I believe the finding
that millennials are price sensitive is misunderstood. It’s not
that millennials are looking for
“cheap and cheerful” products.
On the contrary, they’re driving
the trend for premium pet foods,
natural products and made in
the U.S. products that tend to
command higher prices.
The issue is that millennials
have been raised with smartphones in their hands. With a
quick Internet search, they will
find the lowest price for the product they want. So perhaps the
concern over pricing is misplaced.
Price harmonization and channel
management are the real issues
and quite different from building
a product as cheaply as possible,
regardless of the consequences.
It could be that the pet indus-
try, like many industries, is stuck
in a prevailing, if not antiquated,
mindset. We assume that we have
to produce in China to be price
competitive, that we have to ac-
cept the negative consequences
of this sourcing strategy because
“that’s the way it is,” and that we
can’t change the Chinese gov-
ernment and its regulations. But
this outsourcing model has run
its course, and a shift already
is upon us. China won’t be the
workbench for the world forever.
Indeed, some Chinese suppliers
are beginning to build their own
brands for sale in the Chinese
marketplace as well as to compete
in Western markets—against the
brands they produce for!
I believe that America’s greatest strength is its ingenuity. The
most innovative companies will
find ways to bring production
back to the U.S. while remaining
cost competitive. These companies will fulfill the requirements
of the millennial consumer—to
pay a fair wage and be socially
responsible, to make choices that
are good for the environment, to
create jobs at home and to give
back to the communities where
they do business.
If we put our minds to it and
have perseverance, we can then
create new ways to have our
cake and eat it, too. If the customer is always right, then the pet industry needs to move toward the
triple bottom line.
The Triple Bottom Line
The pet industry seems to be stuck in a prevailing production mindset. The most innovative companies
ADAM BAKER is the founder and CEO of TRUE DOGS LLC,
will find ways to return production to the U.S., be cost competitive, pay a fair wage, be socially and
environmentally responsible, create jobs at home and give back to their communities.
maker of the SodaPup dog toy brand in Boulder, Colo.
We assume that we have
to produce in China to be
price competitive, that we
have to accept the negative consequences of this
sourcing strategy because
“that’s the way it is,” and
that we can’t change the
Chinese government and
its regulations. But this
outsourcing model has
run its course, and a shift
already is upon us. China
won’t be the workbench
for the world forever.