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Big food’s need to nurture will make start-ups succeed
There’s an idea that many people have that “big food” – as the much-reviled large food companies of the world are often called – can’t manage and grow small entrepreneurial brands, and can’t respond fast enough to consumers’ desires for products that are natural and organic.
As one online new source put it: “Big US food groups are struggling to adapt”. However, as is often the case with popular wisdoms, this one isn’t exactly true.
In fact, in today’s viciously competitive supermarkets, start-ups without partnerships with entrepreneurially-minded big food groups might just disappear.
The relationship between organic food pioneer Annie’s Homegrown and General Mills shows just what’s possible when David and Goliath co-operate and gives a clue as to what might happen next now that dairy giant Danone has taken a 40% stake in Michel et Augustin, the best-known small entrepreneurial brand in France.
General Mills – the world’s 10th-biggest food company, with sales of $12.5 billion (€11 billion) – acquired Annie’s in 2014. Since then Annie’s has expanded far beyond its earlier constraints, growing to nearly $300 million (€265 million) a year in sales from about $200 million (€177 million) when General Mills bought the company in late 2014.
Annies – beloved by parents for its organic kids foods – is showing its new owners how to formulate better-for-you products, how to tap into enthusiastic consumer bases around organic foods, and is providing the larger company with a new growth engine.
General Mills has got Annie’s into new outlets such as schools and is enabling Annie’s to win more customers by extending its trusted brand to other segments beyond its core of macaroni and cheese and kids’ crackers. Annie’s has used the extra resource to double its number of new product launches.
“We got a lot of blowback from customers when the announcement came out that we’d sold,” Annie’s CEO John Foraker told New Nutrition Business.
“There were 20,000 posts on Facebook about it very quickly, and 99% of them were negative. It was less about hating GM and more about loving our brand and not wanting it to change. Once we were able to tell our story and reassure everyone that we were very much committed to our values—that we were going to stay in Berkeley [California] and most of the same people would continue to run Annie’s—the fear died down and we haven’t seen a negative impact on our business.
“And if anything, we’re bringing a larger number of Annie’s consumers into the fold.”
Foraker said that General Mills has stuck to its promises to let Annie’s run itself without compromise. “We haven’t been asked to compromise once on our products, what we stand for, what we message about—for example, we continue to be strong advocates for GMO labeling, and General Mills hasn’t tried to silence that at all,” he said.
For the parent company, Foraker added, acquiring Annie’s—to add to its lineup of organic brands that also includes Larabar, Cascadian Farms and a handful of others—“was a pretty significant signal that the company understands there have been really big shifts in consumers, and as a consumer-first organisation, they wanted to lead with consumers where they’re going.
“Also we bring a different culture—faster, more entrepreneurial, more willing to take risks.” Annie’s is helping General Mills with acquisitions of other better-for-you startups, such as the very recently purchased Epic Provisions, which makes meat bars (see NNB February 2016).
Foraker has stayed as president of his company since the acquisition and now also is in charge of General Mills’ “center of excellence” for organic and natural foods.
“We’re taking the best practices and our knowledge of the industry and how to stay relevant across channels and apply those best practices at [General Mills] brands and leveraging those across operating units to drive growth,” Foraker told New Nutrition Business.
Putting Epic, the meat-bar startup, under Annie’s and Foraker is another way that General Mills is capitalising on its ownership of Annie’s. “It’s a good example of a big company identifying a real cool brand that can do lots of cool stuff but which is very small,” he said.
“They want to incubate it and build it out like we did Annie’s. So they put it under us because we know how to operate brands like that. They see the opportunity to leverage best practices and acquire growth assets earlier in their development. It’s a big transition.”
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