Seventh Generation: Alan Newman and Jeffrey Hollender. A Partnership that Flourished—until it Failed. (2021)

What It Covers

Alan Newman and Jeffrey Hollender co-founded Seventh Generation in 1988 as a mail-order eco-friendly catalog, scaled it to $150M+ in revenue, and sold it to Unilever in 2016 for $600-700M. Their partnership collapsed in 1992 when Hollender ousted Newman during a business crisis, mirroring patterns that later led to Hollender's own ouster by the board in 2010.

Key Questions Answered

• •Co-founder agreements in writing: When Newman took a six-month sabbatical in 1992, no written document defined his return terms, role, or expectations. Both partners left the conversation with entirely different assumptions about the outcome. The absence of a formal written agreement — specifying duration, responsibilities, and re-entry conditions — created the gap that allowed Hollender to terminate the partnership without warning. Any co-founder departure, even temporary, requires a signed document outlining exact terms.
• •Sell the benefit, not the feature: Newman's early catalog success came from reframing eco-friendly products around economic savings rather than environmental values. Low-flow showerheads were marketed as money-savers first, planet-savers second. This sequencing — answer "what's in it for me" before introducing mission — drove catalog sales from $1M in 1989 to $7M in 1990. Founders selling mission-driven products should lead with tangible consumer benefit and layer in values afterward.
• •Catalog-to-retail pivot strategy: Hollender shut down the mail-order catalog in 1995 — which represented 80% of revenue — to concentrate entirely on retail distribution. The decision was driven by rising postage and paper costs, low conversion rates (1 buyer per 100 catalogs mailed), and the higher lifetime value of repeat retail purchases. Seventh Generation entered Whole Foods in 1998, which triggered growth from roughly $10M to nearly $50M within five years.
• •Failure reward culture: Newman instituted a weekly prize for the employee who admitted the biggest mistake, typically a dinner voucher. The practice was designed to eliminate fear-based concealment, which he identified as the primary obstacle to fast-growing company performance. When mistakes are hidden, the same errors repeat across teams. Rewarding public admission of failure accelerates organizational learning and is now standard practice at companies like Google, but Newman implemented it in the early 1990s.
• •Demand-supply sequencing in new markets: When Newman launched Magic Hat Brewing in 1993, he deliberately allowed demand to exceed supply for 18 months before scaling production. This created sustained consumer pull rather than push-based distribution. The brewery reached the top 10 largest craft breweries in the US using this method. Founders entering crowded markets can manufacture scarcity early to build brand desirability before committing to capital-intensive production expansion.
• •Board alignment as a survival skill: Both Newman and Hollender were removed from Seventh Generation partly because they failed to maintain active board relationships. Newman delegated all investor relations to Hollender; Hollender pursued public activism and employee ownership expansion without securing board consensus first. In both cases, the board acted decisively once trust eroded. Founders should treat board management as a core operational responsibility, not a secondary task delegated or ignored during growth phases.
• •Complementary roles prevent co-founder conflict: Newman's most successful partnership — with brewer Bob Johnson at Magic Hat — worked because roles never overlapped. Johnson controlled brewing; Newman controlled business growth. Neither entered the other's domain. By contrast, Newman and Hollender both wanted ultimate decision-making authority at Seventh Generation. Before formalizing any co-founder relationship, map each person's decision rights explicitly and identify where authority is singular, not shared.