By Annys Shin
Washington Post Staff Writer
Tuesday, June 6, 2006
Steve Case, co-founder of America Online, talks of living "more in balance" these days and not long ago bought his first hybrid car. He recently gave the keynote speech to a gathering of entrepreneurs in Santa Monica that included the inventor of an organic herbal throat spray, the maker of an immune-boosting tea and a psychic healer who talks to dogs -- the types of ideas his new company, Revolution LLC, is trying to pick through for products and services that might succeed in the mainstream.
"Some fringy stuff," Case said of the ideas he heard during the Southern California conference.
But then again, so was the Internet 20 years ago.
There's an uneasy courtship going on between corporate America and the diverse, sometimes idiosyncratic collection of companies that make up the "sustainable lifestyle" movement -- firms that promote their products as healthy and easy on the environment. Wal-Mart Stores Inc. has begun buying organic cotton; Colgate-Palmolive Co. owns natural products pioneer Tom's of Maine; prominent organic food brands have become subsidiaries of major agribusinesses.
In the midst of it, Case is trying to position himself as an honest broker, someone who can translate green practices into mainstream tastes and apply mainstream business principles in a way that green businesses and consumers can accept. The aim is to build a "Nike of wellness," but to get there Case is trying to meld ideas derived from talks with Berkshire Hathaway Inc.'s Warren Buffett and Virgin Group companies' Richard Branson with businesses developed by people such as Jirka Rysavy, who lives in a shack without running water and developed a line of yoga products that Case is backing.
Like the diverse line of businesses Branson has brought under the Virgin label, Case sees his year-old Revolution developing into a sort of meta-brand, a signal to consumers that the product or service is environmentally friendly -- but not too "fringy."
"Everyone wants to make choices that are better for the people around them. The problem now is the choices have a tendency to be overly preachy. . . . It feels like a club you don't belong to," he said. "People are intrigued with these ideas. They're willing to give it a shot if given a safe, comfortable way to do that and not be targeted by the yoga police."
Revolution Living, the lifestyle unit of his District-based holding and operating company, has planted a flag in the estimated $228 billion sustainable lifestyle market with a $20 million minority stake in Rysavy's Gaiam Inc., a retailer of health and eco-conscious products; and investments in multimedia portal Lime and car-sharing service Flexcar.
Despite their unconventional leanings, one of the more valuable assets of the companies under the Revolution umbrella may be their high-profile connections to the conventional business world. Former Chrysler Corp. chairman Lee Iacocca is a board member and investor in Flexcar. Ex-Hewlett-Packard Co. chief executive Carly Fiorina sits on the board of Revolution Health Group, which is focused on consumer-oriented health care.
Case, who admits to being better at "building companies than running them" sets the general direction by identifying trends. Day-to-day management of Revolution Living falls to Michael Crooke, former chief executive of Patagonia, who is credited with turning around the outdoor apparel maker by instilling basic business discipline without alienating core customers.
At the company's sleek offices on Rhode Island Avenue NW earlier this year, young MBAs pored over financial documents and gazed at flat-screen monitors while being pitched ideas by business partners -- a reflection of the hectic deal flow.
"Everything is a race against time. The secret is out," Crooke said, referring to growing corporate interest in eco-conscious consumers and products.
One of Crooke's first orders of business has been a "green audit" of all Revolution Living-owned companies. Anything not eco-friendly, down to the carpet and wall coverings, is being replaced, he said. Business cards are printed on recycled paper using soy-based ink.
"The worst thing we can be is poseurs," said Crooke, a former Navy Seal and forestry major who shuns meat and takes vitamins customized for him by alternative medicine guru Andrew Weil. "Once you're found to be poseurs, you're done."
The consumers Crooke is trying to attract value "lifestyles of health and sustainability" and are most likely to be baby boomers concerned with health and spirituality or Gen X- and Y-ers who grew up recycling and took Pilates in gym class.
"There are people who believe anything sold at Whole Foods is healthy, ecological and probably socially responsible. That is far from the truth. But from Whole Foods' perspective they've successfully engendered trust," said Joel Makower, a green-marketing consultant and founder of Green Business Network. "If Revolution can establish itself as the trusted brand of alternative lifestyle products and services, they'll come out a winner."
Green consumers, who can be hyper-vigilant whether they're reading ingredient labels or watching television commercials, are not easy to please. Their expectations are always rising, said Gwynne Rogers of the Natural Marketing Institute. Where organic coffee once was acceptable, now it must be fair trade, too.
At the conference Case attended in Santa Monica, market researcher Paul H. Ray told an audience of green entrepreneurs they "need to look more virtuous" than their competitors to survive.
"You need a lot of street cred to step into this space. You cannot buy your way into this space," said Lawrence "Axil" Comras, founder of GreenHome.com, which sells eco-friendly household goods.
Conference attendees even grumbled that Gaiam -- despite Rysavy's living arrangements -- sold yoga mats that included polyvinyl choloride, a source of the environmental pollutant dioxin. (The company just introduced mats made of natural rubber and jute.)
Promotional speeches by the event's sponsors inspired quips about "infomercials." Displays of organic roses flown in from Ecuador were criticized as a waste of fossil fuel.
Case managed to escape negative associations despite his brush with corporate scandal. Hardly anyone mentioned the accounting troubles that plagued AOL under his watch or the millions of dollars stockholders lost when AOL-Time Warner's shares plummeted following the merger. He was introduced at the conference as the man "who changed the way we all communicate."
Hank Wasiak, a veteran advertising executive who attended the conference, epitomized the reaction to Case in Santa Monica.
"We just don't know all the reasons why the AOL-Time Warner merger didn't live up to expectations. And now, the fact that one of the principals in that merger, Steve Case, is bringing his passion, energy and purpose to the business of [sustainability] should really have no bearing on his new company's authenticity or chances for success," Wasiak wrote in an e-mail. Having sat in on a presentation by Revolution Health, he added that Case and his colleagues have put forward "a clear vision of their corporate mission and ethos which they are following."
Green entrepreneurs at the conference seemed to agree with Case that their ideas are on the verge of mainstream acceptance, but they were divided over the implications. Some wanted to be the next Stonyfield Farm -- a small organic yogurt company that's now 80 percent owned by French multinational Groupe Danone -- and welcomed big business's embrace of their ideas and products. Others feared having to compromise their standards for the sake of expansion.
After someone brought up Wal-Mart's intention to sell organic cotton clothing, Laura Coblentz, vice president of marketing with the Wild Oats grocery chain, spoke of problems that have arisen with the "commodification" of organic food. She was referring to organic food companies that have adopted practices similar to their conventional counterparts to meet higher demand and ship food farther distances.
Rick Ridgeway, Patagonia's executive vice president for marketing, countered that getting a company such as Wal-Mart to go organic was a victory, even if it meant tougher competition.
Case's loyalties are clear.
Though the death of his brother Dan from brain cancer in 2002 spurred his interest in helping consumers make better health-care choices, he also drew heavily on mainstream business thinking to form his new company.
After stepping down as chairman of Time Warner, he went to Branson for advice on building a brand "from scratch," talked to Buffett about taking a 10- or 20-year perspective on businesses, and heard from Denver entrepreneur Philip F. Anschutz about keeping a controlling interest in his investments.
And when a waiter in Santa Monica told him that the greens on an asparagus salad had been picked earlier that day in Oregon by Chief Running Squirrel, Case's mind quickly wheeled.
"What do you do when Chief Running Squirrel gets sick?" Case deadpanned.
"I'm not trying to pass a test," he said later. "I'm just trying to make people aware of more choices."