NEW BRUNSWICK, NJ – The Hub City hosted some of the best and brightest in business this week—and the keynote speaker was one of Rutgers University’s own.
They came for a joint dinner meeting of the New Jersey chapters of Financial Executives International and the Association for Corporate Growth. As rain pounded the streets Tuesday night, March 28, dozens of dealmakers gathered inside New Brunswick’s Hyatt Regency hotel to sip drinks, eat salmon and listen to a story.
And what a story it was.
Mike Mardy, a legendary Princeton University basketball player who earned his MBA from Rutgers, began with a joke. “I should have you talk to my wife about all the nice things you just said about me,” he told Travis Epp, the FEI leader who introduced the speaker.
But Mardy’s career speaks for itself. He has worked in C-suites for decades, most recently serving as executive vice president, chief financial officer and board director of Tumi Holdings, the high-end luggage company purchased in 2016 by Samsonite for $1.8 billion.
Perhaps Mardy’s most curious gig, however, was with Green Mountain Coffee Roasters, known for its Keurig coffee machine and single-serve pods. Lucrative as it was turbulent, his time on the board put him in contact with Birkenstocks-clad farmers, fiery Securities and Exchange Commission regulators and astounding sales figures.
“I made money on Green Mountain—it was great—but, oh my god, it was a near-death experience,” Mardy told the room. “When you hit that little Keurig machine, understand that people—very good people—worked their tuckuses off to keep that stuff coming to you.”
The First Sip
You could say it was sparked by a joint.
Bob Stiller, the founder of Green Mountain Coffee Roasters, was an accountant at Columbia University who thought potheads would buy better rolling papers. So he founded EZ Wider, whose papers became the gold standard, and sold it for a few million bucks.
Then he moved to Vermont, where he in the 1980s bought the coffee company that became Green Mountain Coffee Roasters, Mardy said.
Bob Stiller, the founder of Green Mountain Coffee Roasters, speaks at an event.
Stiller thought about becoming the next Starbucks but instead opted to shut down the retail component in favor of selling fair-trade coffee. Soon enough, Mardy said, Stiller ran into a private-equity type who wanted to sell single-serve coffee machines—what became Keurig.
“Bob likes the idea, even though it’s not sustainable and they throw out all these pods,”
Mardy said, “and he becomes a licensed roaster for this little company.”
Stiller eventually gave Keurig a loan that included the right to buy the company. In 2006, Green Mountain acted on that, slurping up Keurig and going public.
“Before you know it, he becomes the big muckety-muck in single-serve coffee,” Mardy said.
As business boomed, Mardy joined the board as audit committee chairman.
A Different Kind of Flavor
Mardy’s first Green Mountain board meeting was, well, unusual.
The company’s stock was on a tear after $1 billion in acquisitions of other coffee-pod producers. Profit margins were kind and sales were through the roof. Stiller and his hippie-farmer friends were getting rich. But they were still very much Vermonters.
They came, dressed in flannel shirts and sandals or with Birkenstocks and beards, to the sweeping meditation room in which the meeting was held, Mardy said. And they began to ask questions.
“Why are there only two women on the board and no people of color?” one woman inquired. “So much of our fair-trade coffee comes from Somalia, so what are we doing about women’s rights there?” another person asked. A man wondered aloud when the company would begin to produce recyclable K-cups. Another questioned how much passive electricity each machine uses while plugged in.
Mardy turned to a nearby board member, a state senator, and said, “Hey, hold it. What planet am I on?”
But Stiller, the board and Green Mountain’s CEO worked to enact conscience-driven policies. Mardy said Stiller, for instance, would have traded value for a spot on a list of the top 100 places to work.
Meanwhile, Green Mountain was selling billions of coffee pods. In 2006, its share of the single-serve coffee market was as high as 90 percent, Mardy said. Keurig was becoming a household name.
In 2010, as Green Mountain continued its ascent, a naysayer emerged. He would cause a years-long headache that would cost tens of millions of dollars to quell.
David Einhorn, a hedge fund president, delivered a presentation alleging Green Mountain’s third-party distributor loaded trucks with coffee pods only to secretly return them through the backdoor. The takeaway: The company was a fraud.
That year, Green Mountain got a letter from the SEC saying that regulators had begun an “inquiry” into the company. The action wasn’t as serious as a formal investigation, Mardy said, but it caused stocks to “tremble.”
Mike Mardy tells the Green Mountain Coffee Roasters story this week in New Brunswick.
Mardy launched an independent investigation of every accounting practice in the company. He brought in outside counsel and a forensic accounting firm.
Stiller, meanwhile, was steaming mad at the SEC. Its regulators “had blood on their fangs” after they got the computer company Dell to pay a $100 million settlement, Mardy said. Now, they were convinced that Green Mountain was up to something nefarious.
Through it all, financial media like CNBC and Barron’s kept close tabs on the developing story. On-air analysts bashed Green Mountain and business slowed.
“Frankly,” Mardy said, “we weren’t doing anything wrong.”
At one point during the inquiry, Stiller made a decision that cost him and the company a lot of money. That’s when the board—Stiller’s easygoing Vermont buddies—decided to make Mardy chairman, a role he didn’t want.
He spent $23 million in cleaning the mess and brought to the board people from big-name companies, like Kellogg, Procter & Gamble and American Express. And, with breakneck speed, Mardy found a new chairman to take his place.
Finally, four years after the SEC inquiry started, Mardy and a team of consultants and experts convinced the government that Green Mountain hadn’t done anything wrong, save for one “technical” and “esoteric” matter that even the talking heads on TV largely balked at.
The feds soon sent a letter to Green Mountain thanking the company for its cooperation and clearing it of wrongdoing.
Einhorn, the rabble-rouser who instigated the episode, eventually took a financial hit after shorting the stock.
The board eventually moved to sell Green Mountain to a private firm for a whopping $14 billion. Stiller became a billionaire, many Vermonters became millionaires and Mardy walked away a winner, too.
They would’ve made even more cash, Mardy said, if not for a money-eating research and development effort that proved a dud.
After learning the beginner- and mid-level details at Rutgers and early jobs, Mardy had walked away from Green Mountain with a number of newly acquired lessons.
Among them, he said, “board assignments can be hazardous to your health.”
But even the tough ones sure can be a boon for your wallet—and your dinner-party conversations.