March 14, 2016
by Monica Watrous
Executives discuss how and why multinational companies should acquire startups in the natural and organic category.
ANAHEIM, Calif. – “Star-crossed lovers” is how the founders of Epic Provisions describe their relationship with General Mills. Before the Minneapolis cereal giant acquired the Austin, Texas-based meat snacks company in January, Katie Forrest and Taylor Collins said they were “super anti-corporation.”
It’s a sentiment many consumers and companies within the natural and organic food category share — a distrust of Big Food and the fear of “selling out” when a small brand marries up with a multinational corporation. However, as several executives expressed during a panel discussion on March 11 at Natural Products Expo West, these acquisitions are essential for improving the food system.
|Jeff Church, co-founder and CEO of Suja
The co-founder and CEO of Suja, a San Diego-based organic cold-pressed juice brand, said his company braced for backlash when the Coca-Cola Co., Atlanta, bought a minority stake last August.
“We were concerned when we made the announcement that we were going to take a lot of heat,” Jeff Church said during the presentation. “Our whole thing is if you want to grow organic, you can’t as a little brand really make a big difference in the long run. A tiny niche brand can get so far but not make a difference…
“With Coca-Cola, we tried to take the best of the big company, with the volume, the mass, the distribution, the access to cost structure, but also keep the best of the little company, which is the speed-to-market, the innovation, the marketing.”
IThe Coca-Cola Co. recently bought a minority stake in Suja.
John Foraker, president of Annie’s, Berkeley, Calif., saw a similar opportunity when General Mills acquired his natural and organic food brand in October 2014.
|John Foraker, president of Annie's
“When the opportunity came to partner with General Mills, I thought about it this way,” Foraker said. “I’ve been (wanting) my whole life for more organic, more transparency of food, and I have the opportunity now to marry up with someone who can give me the resources and capabilities for Annie’s to (open doors) that would have been impossible for us to get through on our own.”
In the first year together, General Mills helped Annie’s launch into organic soups, organic yogurts and organic cereals. Annie’s has leveraged General Mills’ manufacturing and technical resources, knowledge, category management and robust sales capabilities to unlock new opportunities. Importantly, General Mills has allowed the Annie’s brand to remain true to its core values, Foraker said.
“The way I think about it is this,” Foraker said. “Who owns the Annie’s brand? On paper, General Mills owns it. But guess who really owns it? Millions and millions of moms and dads, and if they see us sway off the path and compromise, the brand is dead.”
In the first year together, General Mills helped Annie’s launch into organic soups, organic yogurts and organic cereals.
Steve Young, a vice president at General Mills, said his company’s goal with Annie’s, Epic and the other natural and organic brands in its portfolio, including Larabar, Food Should Taste Good and Cascadian Farms, is to “marry that spirit of the small with the power of the big.”
|Steve Young, a vice president at Genral Mills
“We are very committed to (the idea that) Annie’s is going to retain the right to do what it wants to do with Annie’s, and Epic is going to retain the right to do what it wants to do with Epic,” Young said during the presentation. “I would love to get to a point where consumers and the industry are less worried about that because they trust big companies are going to do the right thing. And I believe we can.”
In an interview with Food Business News, a sister publication to MEAT+POULTRY, during Expo West, Young and Foraker shed more light on the keys to successfully growing a natural and organic business like Annie’s within a portfolio as prolific as General Mills’. By 2019, General Mills expects to reach $1 billion in net sales from natural and organic products, and to support that goal the company recently announced plans to more than double the organic acreage from which it sources ingredients.
“To me, that was one of the biggest impact opportunities that (General) Mills could help us bring,” Foraker said. “What matters to us as much as having a successful business is driving big impact, and one of the biggest ways to drive impact is to convert more land to organic and sustainable ways of farming. To me, that’s the mainstreaming of natural and organic and why big companies are so important to the mix because small companies are not going to be able to expand the supply chain in the way necessary to make organic be a mainstream, affordable option for the masses, and that’s our goal.”
For General Mills, the partnership with Annie’s has inspired a more entrepreneurial approach to product development, Young said.
“What we’ve really learned is the speed-to-market; when you are truly mission- and purpose-driven, it gives you a lens for every decision you make, and you can make them fast when that’s the case,” he said. “We move faster. In the past, we may have said, ‘Well, we’d better research this; we’d better test this.’ What we’re doing now is saying, ‘We know this is right. We’re going to go.’”
Critical to fostering growth in a brand like Annie’s or Epic is allowing its leaders to retain autonomy in decision-making, Young said.
“We don’t want to buy these businesses and kiss the old team that was running it goodbye,” Young said. “That’s not how we operate anymore. We want to grow with these people, so part of what we look for is a talented team, who are mission-driven and purpose-led in what they do, good business people, good partners.”
Epic is operated under the Annie’s division at General Mills.
Epic is operated under the Annie’s division at General Mills, with Foraker helping to guide and grow the business.
“What are we doing with Epic?” Foraker said. “Katie and Taylor are running it. We’re leaving it in Austin... We’re solving the problems they have, like helping them improve quality, and getting behind the mission.
“We’re just giving them what they need and getting out of the way.”