By Lucas Witman
On September 8, General Mills made the announcement that it has entered into an agreement to purchase Annie’s Inc., the California-based natural and organic product manufacturer. A leading natural foods brand, Annie’s had net sales of $204 million in the past fiscal year. The Board of Directors of Annie’s has unanimously recommended that the company’s stockholders accept the acquisition offer.
“This acquisition will significantly expand our presence in the U.S. branded organic and natural foods industry, where sales have been growing at a 12 percent compound rate over the last 10 years,” said Jeff Harmening, Executive Vice President and Chief Operating Officer for General Mills. “Annie’s competes in a number of attractive food categories, with particular strength in convenient meals and snacks – two of General Mills’ priority platforms. Consumers know and trust Annie’s purpose-driven culture and authentic brand. We believe that combining the Annie’s product portfolio and go-to-market capabilities with General Mills’ supply chain, sales and marketing resources will accelerate the growth of our organic and natural foods business.”
Co-founded in 1989 by Annie Withey and Andrew Martin, Annie’s is well-known among specialty food shoppers for its line of natural, good-for-you mixes and snacks, as well as for its iconic bunny rabbit logo. The company offers macaroni and cheese mixes, meal mixes, canned pastas, frozen snacks and entrees, dressings, condiments, crackers, pretzels, granola bars and more – all manufactured without artificial flavors, colors, GMOs, growth hormones or persistent pesticides.
“Annie’s will remain dedicated to our mission: to cultivate a healthier and happier world by spreading goodness through nourishing foods, honest words and conduct that is considerate and forever kind to the planet,” said John Foraker, Chief Executive Officer of Annie’s. “Authentic roots, great tasting products, high quality organic and natural ingredients and sustainable business practices will continue to be the cornerstones of the Annie’s brand.”
Despite Foraker’s insistence that Annie’s will not waver in its commitment to natural and organic principles, many consumers are reacting with concern to the news that one of their favorite brands will now fall under General Mills’ purview. When the Organic Consumers Association sent out an initial action alert to its base urging consumers to boycott Annie’s, for example, it received 22,000 signatures on the first day, an indication of potential widespread consumer dissatisfaction with the move.
“Initial reaction was based on what historically happens,” said Katherine Paul, Associate Director at the Organic Consumers Association. “On the one hand, it’s further evidence of the growth of organics. The fact that these large corporations want to get in on the action is just further proof that the organic food sector is growing. Consumer demand is growing, and that’s a good thing. But typically what happens when a company like General Mills acquires one of these brands, we see the quality of the product over time deteriorate as lower quality ingredients are substituted for higher quality ingredients. That often happens unbeknownst to the consumer unless it’s a dramatic enough change that the flavor is affected. It’s the beginning of the decline of the quality of the brand. From that perspective, it’s not such a good thing.”
The lion’s share of the criticism being directed at Annie’s surrounds the company’s choice to be acquired by a brand that actively fights against GMO labeling laws. Whereas Annie’s has made the decision to source all of its ingredients from non-GMO suppliers and supports mandatory GMO labeling, General Mills regularly donates money to the fight against GMO labeling laws. This seems a clear conflict of interest to those consumers who seek to put their money where their mouth is and support companies that echo their personal values.
“We were very public and very vocal about the fact that here we have a company like General Mills that spends millions of dollars to defeat GMO labeling laws and then buys up a brand like Annie’s. This is a quandary for the consumer that was loyal to that organic brand,” said Paul. “In this case, Annie’s contributed money to GMO labeling campaigns to support labeling laws. But General Mills is a big contributor to campaigns to defeat those laws, in addition to being a member of the Grocery Manufacturers Association, which sued the state of Vermont for passing a GMO labeling law earlier this year. Conscious consumers don’t really want to support a brand whose parent company is spending millions of dollars to defeat GMO labeling laws.”
Another concern consumers have surrounding General Mills’ purchase of Annie’s is whether or not the acquisition could lead to the erosion of organic standards. “Often when a large corporation buys up organic brands, the corporation works behind the scenes in Washington D.C. to influence, and weaken organic standards in order to allow them to substitute cheaper ingredients and increase their profits,” said Paul. “The more organic brands they buy out, the more motivation they have to do this.”
For their part, leaders at General Mills have pledged that they have no intention of changing Annie’s or redirecting the way the company sources the ingredients that go into its products. In an earnings call to shareholders, General Mills’ CEO Ken Powell said that the plan was to continue to allow the team at Annie’s to “do their thing.”
Of course, Annie’s is not the first niche natural products company to come under the purview of a larger corporation, and most major food companies have at least a few organic products brands in their portfolio. Kellogg’s, for example, successfully operates vegetarian brands Morningstar Farms and Gardenburger, as well as natural foods scion Kashi. Coca Cola owns Honest Tea, odwalla and smartwater. And General Mills itself already has a strong organic presence, operating a number of brands in the natural products sector, including Lärabar, Cascadian Farm Organic, Food Should Taste Good and Muir Glen.
If General Mills is to successfully migrate the Annie’s business to its portfolio without alienating the brand’s loyal consumer base, it will be the company’s responsibility to prove that nothing is changed with the way Annie’s products are made or with the way its ingredients are sourced. This could be an uphill battle, however.
“You really can’t know if you can rely on the company,” said Paul. “You can read the ingredients to see if there are any actual changes in ingredients, but you will never know if there are changes to the sourcing for those ingredients and if fair trade practices are still valued.”
For consumers seeking out alternative sources for natural and organic products, there are a number of resources at their disposal. Online resource eatlocalgrown recently published a list of 21 alternative companies that shoppers should check out. The list includes Simply 7, Mary’s Gone Crackers, Follow Your Heart, Drew’s Organic and more. You can read the entire list at http://eatlocalgrown.com/article/13460-alternatives-to-annies-mac-and-cheese.html. Concerned consumers might also want to download the smartphone Buycott App that organizes everyday spending so consumers can support companies that follow their chosen principles and avoid those that do not. You can download the app at http://buycott.com/.
This story was originally published in the November 2014 issue of Gourmet News, a publication of Oser Communications Group.