The last week has seen a frenzy of business activity in the natural products world, as two venerable brands and one up-and-comer have been purchased by mainstream conglomerates.
Kellogg Co. reported Nov. 6 it agreed to buy Irvine, Calif.-based Wholesome & Hearty Foods Co., parent company of Gardenburger, and Bear Naked, the Norwalk, Conn.-based maker of the top-selling granola in natural foods stores. The company said it paid a total of about $122 million for both companies. Also, Clorox Co. reported on Oct. 31 that it would pay $925 million for Durham, N.C.-based natural personal care manufacturer Burt's Bees.
Although Burt's Bees is Clorox's first foray into the naturals market, Kellogg is an experienced shopper, having already purchased Kashi cereals and the Morningstar Farms, Worthington and Loma Linda vegetarian brands.
Gardenburger was one of the last of the large, independent natural foods manufacturers to be bought by a mainstream competitor. Founded in 1985 by restaurateur Paul Wenner, the veggie burger company posted sales of more than $100 million at its zenith in 1997. But increased competition and financial problems resulted in plummeting revenues. Gardenburger stock was delisted by Nasdaq in 2001, and the company filed for bankruptcy in October 2005. It was reorganized in March 2006 into a privately held corporation, Wholesome & Hearty Foods Co., owned by New York investment firm Annex Capital Management.
According to several business Web sites, Wholesome & Hearty Foods posted sales of $46 million in 2005, down 5.2 percent from the previous year."It's no secret Gardenburger is having financial problems," said Scott Van Winkle, managing director of equity research for Canaccord Adams, a Boston-based investment firm.
That's certainly not the case with Bear Naked, which some analysts have predicted will have more than $20 million in sales this year, up 160 percent from 2006. Launched in 2002 by two 23-year-olds, Kelly Flatley and Brendan Synnott, Bear Naked sells natural granola, cereal, oatmeal and trail mix. According to market research firms SPINS and A.C. Nielsen, last year Bear Naked was the No. 1 granola in natural foods stores and No. 2 in mass merchandisers.
Burt's Bees was founded in 1984 by beekeeper Burt Shavitz and waitress Roxanne Quimby to market Shavitz's beeswax candles. It soon added soap, perfume and lip balm to its product line, and by 2003 was a $55 million company making a variety of natural personal care products. Quimby, who bought out Shavitz in 1999, sold 80 percent of Burt's Bees to international investment firm AEA Investors in 2003 for $155 million.
AEA expanded Burt's Bees into mass merchandisers and increased its sales to a projected $170 million this year, making it an attractive buy for Clorox, which has been attempting to "green up" its image. Oakland, Calif.-based Clorox, which along with its namesake bleach makes Hidden Valley salad dressings, Fresh Step cat litter, STP auto products, Glad plastic bags, Kingsford charcoal and Brita water filters, announced in early September it would debut a biodegradable, plant-based cleaning line called Green Works.
Quimby said she is"delighted" with Clorox's acquisition of Burt's Bees."Although at first blush the pairing might appear unusual, the Clorox Co. has done an excellent job of stewardship of its premier brand, Clorox, which has been a household word for almost 100 years.
?It was my dream, as founder of Burt's Bees, to create a 'household word' known and used by many Americans, and I believe that the Clorox Co. will support sustainable, patient and steady growth of the Burt's Bees brand."