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Food for Peace

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    BONUS FEATURE Food for Peace Daniel Lubetzky wants to promote ethnic harmony-one business deal at a time. FORTUNE Thursday, December 16, 2004 By Elaine Pofeldt
    Message 1 of 1 , Jan 1, 2005
      Food for Peace
      Daniel Lubetzky wants to promote ethnic harmony-one business deal at a time.
      Thursday, December 16, 2004
      By Elaine Pofeldt

      Yoel Benesh had just shuttered his failing Israeli food factory when he got a
      phone call that changed his life. The caller was Daniel Lubetzky, a young
      American entrepreneur. Lubetzky had recently sampled Benesh's product, a
      sun-dried-tomato spread sold in nondescript glass jars. He loved the spread and
      was disappointed to learn, when he went back to the store for more, that Benesh
      had gone out of business.

      That was in 1993, and the two men soon met at Benesh's silent factory north of
      Tel Aviv. Benesh explained that he had been driven out of business, in part,
      because his Palestinian employees frequently could not get to work from their
      homes on the West Bank and in the Gaza Strip. Although the first suicide bombing
      was still years away, the Palestinian territories were often racked by clashes
      between Palestinians and Israeli settlers. During each outbreak of violence, the
      Israeli government would close the border. And each time the border closed,
      Benesh's factory closed too.

      Lubetzky, then around 25 and just out of Stanford Law School, saw an opportunity
      to make some money and a small contribution to peace. He was impressed that
      Benesh hired mainly Palestinian workers and that he relied on Palestinian
      suppliers for certain ingredients. He suggested that Benesh allow him to market
      the product in the U.S. under a brand name, Moshe & Ali, that would highlight the
      Israeli manufacturer's cooperative relations with his Palestinian partners. The
      label would feature two cheery cartoon characters, an Israeli chef named Moshe
      and an Arab magician named Ali, over the slogan "Cooperation never tasted so

      Perhaps because he had nothing to lose, Benesh decided to work with Lubetzky, who
      had no experience in the food industry. Benesh agreed to seek more Palestinian
      suppliers, while Lubetzky helped Benesh find cheaper replacements for the
      imported glass bottles and sun-dried tomatoes that had driven his production
      costs through the roof.

      Armed with the exclusive right to distribute Benesh's spreads under the Moshe &
      Ali label, Lubetzky went back to New York City and took a leave from his job at a
      law firm. He prowled the streets with a briefcase full of Moshe & Ali samples,
      pitching the product to food retailers all over Manhattan.

      Within a year Lubetzky had signed up hundreds of stores. The young entrepreneur's
      charm and persistence won over Scott Goldshine, general manager of the gourmet
      food emporium Zabar's. "I can be nasty and abrasive, and he didn't run away,"
      says Goldshine, recalling that he made Lubetzky come back three times before
      talking with him. "Very few people are as passionate about their business and
      products as he is."

      Lubetzky also incorporated a for-profit company called PeaceWorks, dedicated to
      importing foods from similar partnerships in troubled regions around the world.
      In short, he planned to do well by doing good.

      Fast-forward to 2004. has lubetzky been successful? In conventional terms, yes.
      Moshe & Ali spreads and a newer line of Meditalia pestos now sell in about 5,000
      stores in the U.S., allowing Benesh to turn a profit on $10 million in annual
      sales. PeaceWorks is also doing well. This year sales at the profitable company
      should be in the neighborhood of $5 million, owing in part to the success of a
      new line of Indonesian packaged foods called Bali Spice.

      Not surprisingly, Lubetzky, who owns 90% of the company, has long since left his
      law career behind. "The guy is really smart, really dedicated, high energy-and
      clearly his business has stood the test of time," says Ben & Jerry's co-founder
      Ben Cohen, 53, who sits on PeaceWorks' volunteer advisory board.

      It's more difficult to judge the success of Lubetzky's social mission. Benesh was
      forced to lay off all his Palestinian workers in 2000 because Israeli government
      checkpoints prevented them from getting to the factory. "Their situation is
      really bad," says Benesh, a 48-year-old father of three, who grew up on a
      kibbutz. "I would never want to be in their position."

      But Benesh still buys produce from Palestinian farmers, and he continues to
      market Israeli-Palestinian cooperation on his product labels. "Buying, selling,
      and interacting-this is one way of encouraging the two sides to make peace," said
      Benesh's 65-year-old olive supplier, Abdullah Ghanim, reached by phone during a
      break from working his fields on the West Bank.

      Ghanim estimates that 15% to 20% of his business comes from Benesh's factory.
      This is a tangible contribution to the Palestinian economy that justifies
      PeaceWorks' marketing claims. But the Israeli government is currently building a
      wall between Israel and the West Bank that it hopes will prevent Palestinian
      suicide bombers from infiltrating Israeli territory. The wall might prevent
      growers such as Ghanim from getting their produce to the factory. In that case,
      PeaceWorks will have to rethink Moshe & Ali's mission.

      Particularly since the collapse of the Internet bubble and the 9/11 attacks, U.S.
      entrepreneurs have been launching not-only-for-profit ventures at a rapid clip.
      The Social Venture Network, an organization for CEOs, investors, and nonprofit
      leaders, now has more than 400 organizations-up from 72 when it was founded in
      1987. At Harvard Business School, the social enterprise club is now the largest
      student organization on the graduate school's campus. Yet it's clear that while
      making money and changing society are not entirely incompatible, they are often
      uneasy bedfellows.

      For one thing, nobody can agree on how a not-only-for-profit company is supposed
      to measure success (see box, "Beyond the Bottom Line"). And in order for any
      company to stay in business, it must sell a product or service that people want
      to buy. "Nobody buys a product just for its mission," says Lubetzky. "Even if
      they tell you they do, they don't. It has to stand on its own."

      Finding the right product is tough in any business. But success becomes
      immeasurably more difficult if, like Lubetzky, you try to source your products
      from partnerships between ethnic groups that have spent generations in conflict.
      How companies such as PeaceWorks resolve such issues will ultimately determine
      whether social venturing is a fad or a phenomenon that will change the business
      world in a significant way.

      Around two years after Lubetzky started the partnership with Benesh, he tried to
      launch a venture in the turbulent Chiapas region of Mexico. Lubetzky lived in
      Mexico City as a child until his Latvian-born father, a Holocaust survivor, moved
      the family to San Antonio. Discrimination against the impoverished Chiapas
      Indians was so great in their native region in those days, Lubetzky says, that a
      Mexican of Indian descent had to cross the street if someone of European
      parentage strolled down the sidewalk.

      Lubetzky planned to help Indian farmers manufacture salsa using ingredients that
      they grew. He would then distribute the sauce in the U.S., using the salsa's
      production history to attract American consumers.

      Unfortunately, insurers would not cover product shipments because of endemic
      hijacking along the roads between Chiapas and the U.S. So Lubetzky manufactured
      the salsa in San Antonio, using ingredients imported from Chiapas. Honest to a
      fault, he chose not to mention this limited social benefit on the product label.
      As a result, customers had no way to distinguish PeaceWorks' products from other
      salsas on the market. And he assumed, incorrectly, that American consumers would
      embrace weird salsa flavors such as Raging Raspberry Chipotle. "I thought they
      were delicious, but the market wasn't ready," says Lubetzky. "They died a
      horrible death on the shelves."

      In 2001, Lubetzky started importing La Bici pasta chips from a Durban factory
      owned jointly by black and white South Africans. He was impressed that the
      factory offered job training to previously disenfranchised black workers. But in
      his zeal to support change in post-apartheid South Africa, Lubetzky overlooked
      key business details. The Atkins diet was catching on in the U.S., making it
      unlikely that the starchy snacks would fly off the shelves. And it was very
      costly to ship the chips to the U.S. because they were so bulky. Lubetzky
      scrapped the product two years ago.

      PeaceWorks hasn't given up on trying to foster business partnerships between
      groups in conflict. Last summer Lubetzky traveled to South Korea and China in
      search of his next social venture. But Lubetzky now channels 5% of his profits
      into a separate nonprofit called the PeaceWorks Foundation. The foundation holds
      forums that encourage Israelis and Palestinians to resolve their long conflict.
      With endorsement help from Hollywood stars such as Jason Alexander, Rhea Perlman,
      and Danny DeVito, these efforts have generated global publicity.

      To keep the foundation strong, Lubetzky has had to focus on distributing
      commercially viable brands. Bali Spice, the Indonesian food line that's taking
      off among the affluent foodies who shop at Whole Foods and other high-end
      markets, is a spinoff of Bali Kitchen, a line of curry seasonings and other
      products that are sold in 20 countries in the Middle East and Europe. When Bali
      Spice started marketing in the U.S. last December, Lubetzky projected $500,000 in
      sales for 2004. Sales reached that point in the first quarter and have continued
      to climb.

      Bali Spice product labels highlight the peaceful relations among the Buddhists,
      Christians, and Muslims who work together on the factory floor near Jakarta. But
      this is more an accident than a deliberate effort by the Indonesian family that
      runs the factory. "For us it is normal to have mixed races and religions," says
      business development manager Tjhie Lie Ming. "But if they want to highlight that
      on the packaging, that's okay too."

      Particularly since the Bali nightclub bombing, the work of Muslim extremists,
      that killed 202 people in October 2002, Americans have tended to associate
      Indonesia with religious conflict. Lubetzky hopes that his reminders about
      religious harmony in places such as the Bali Spice factory will help change that
      stereotype. "The case is that an overwhelming majority in each population are
      happy to work together and get on with their lives," he says.

      Meanwhile he is using the brand name, which PeaceWorks owns, to market coconut
      milk from a Sri Lankan factory where members of the Sinhalese majority work
      harmoniously with minority Tamils despite the country's long history of ethnic

      Lubetzky has also started distributing two new brands, Kind Foods and Be Natural.
      Neither brand comes out of a partnership between groups in conflict. Both are
      successful products that help Lubetzky raise money for the PeaceWorks Foundation.
      "We can have a lot of impact by coming up with a great product and donating a
      portion of the profits," he says. "The foundation may be our most important
      contribution to society."

      Lubetzky started with a plan for changing the world by changing the way business
      works. Yet PeaceWorks is now a profit-driven company that derives a marketing
      benefit from donating part of its earnings to charity. Of course, the same is
      true for any small business that sponsors a Little League baseball team for
      underprivileged kids. For all their revolutionary zeal, Lubetzky and his comrades
      in the social-venture movement may simply be reinventing an old wheel called
      business philanthropy.

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