When a small company is sold, it's not always a sell-out. As this issue went to press, megacorporation General Mills bought organic icon Annie's for $820 million, another acquisition in an accelerating trend.
It’s the same old story, almost. A company selling for $820 million on a 37% premium over closing stock price would be a headline in any industry, but an organic food company pushing $1 billion would have been a much bigger story 20 years ago.
Last year, Happy Family sold for an undisclosed price reportedly in the “hundreds of millions of dollars” to Danone, which had already acquired Gary Hirshberg’s Stonyfield Farm, a pioneering force in organic. In 2012, Bolthouse Farms got picked up by Campbell’s for $1.55 billion.
Annie’s is just the latest chapter, immediately echoed by another story we’ve seen before—consumers worried the values that made Annie’s an icon of the organic movement will be diluted. As one commenter on the Annie’s Facebook page wrote: “We supported Annie's precisely because it WAS a small company that I felt could be trusted. It feels like you sold out and almost like a bait and switch move to make.”
That may be the story we don’t need to tell any more. Hirshberg stayed directly involved in Stonyfield and it stayed organic. When Seth Goldman sold his Honest Tea to Coca-Cola, bloggers immediately called it “Dis-Honest Tea,” but Goldman points to how the company expanded the fair trade program. Big corporations don’t buy the smaller organics to gut what made those companies thrive. Authenticity drives the premium. Big CPG knows that.
With these acquisitions comes scale and with scale comes, we hope, a drop in price. Undoubtedly, many millions of parents would buy Annie’s mac and cheese but reach for Kraft because of the price. If the price does come down with a bigger footprint in mass, millions of kids will eat healthier, less-processed foods. The accessibility challenge—making it more possible for more people to buy more healthy food—will be difficult to solve without the scale big CPG brings to bear.
General Mills didn’t buy Annie’s to kill it and sell more Hamburger Helper and, if change happens best when it comes from within, Annie's could lead the corporate mothership by example and the occasional "let's try it this way!" nudge. Between accessibility and shifting the business model from the inside, acquisition of smaller organics might be something consumers could cheer and not fear.
Maybe it’s not a “sell out” any more.
Maybe the correct term is “sell up.”