Natural and organic acquisitions heighten profitability
Industry leaders are investing in natural and organic brands to diversify their portfolios
In the most recent example of big business gobbling up natural and organic producers, General Mills announced it will shell out $820 million to purchase Annie’s Inc. to strengthen its portfolio.
According to Packaged Facts, this acquisition underscores the growing profitability and popularity of natural and organic food products.
“Looking ahead, the acquisition will ideally translate into Annie’s quickly expanding into new channels and product lines, an endeavor that would only further drive growth in an already booming food industry segment,” says David Sprinkle, research director for the market research firm Packaged Facts, which published Natural and Organic Foods and Beverages in the U.S., 4th Edition.
General Mills announced plans to purchase Berkeley, CA-based Annie’s in early September in an all-cash transaction.
Annie’s Inc., known as Annie’s Homegrown, was founded in 1989 and markets more than 145 natural and organic products. Known for its line of branded macaroni and cheese products, the company had net sales of $204 million in the last fiscal year. Annie’s will join other General Mills natural and organic products including Cascadian Farm, Muir Glen, LARABAR and Food Should Taste Good brands.
“This acquisition will significantly expand our presence in the US branded organic and natural foods industry, where sales have been growing at a 12 percent compound rate over the last 10 years,” says Jeff Harmening, General Mills executive vice president and COO. “Annie’s competes in a number of attractive food categories, with particular strength in convenient meals and snacks—two of General Mills’ priority platforms.”
General Mills, however, is not the first to make a move. The company is one of many to make a maneuver in what has become a series of recent mergers and acquisitions that bring more natural and organic marketers under the ownership of larger corporations. Packaged Facts experts say these moves “allow large marketers to polish their ‘green’ image and expand their brand portfolios into faster-growing, higher-margin segments.”
General Mills has not being shy about its intent to diversify its portfolio. In July, General Mills executives announced the launch of 150 new products during the fiscal 2015 year. Among these are a number that reflect the company’s embracing of gluten-free lifestyles and a focus on ancient grains, plants and seeds.
Other companies that made acquisitions in 2014 include Hillshire Brands Co., the Hain Celestial Group and Boulder Brands, Inc.
According to the Packaged Facts report, retail sales of natural and organic foods and beverages in the US experienced a 53 percent sales growth over five years, making it a $54 billion market.
Sales are projected to increase by 62 percent from 2014 and 2019, with total annual sales growing to $87 billion in 2019.
Among the natural and organic foods being purchased, fresh produce is expected to account for the largest share, followed by dairy products (including milk and milk alternatives, yogurt and eggs) and beverages (including coffee, tea and juices).
According to Packaged Facts, packaged and prepared foods like those produced by Annie’s are expected to account for about 10 percent of the market’s sales. Researchers say the new association with General Mills will be interesting to watch and see how Annie’s utilizes the association to potentially introduce new products.