- In a panel discussion at last week’s Natural Products Expo West, three executives — Justin Gold of Justin’s, Koel Thomae of Noosa Yogurt, and John Foraker of Annie’s Homegrown — talked about the reasons why they sold their brands to large food corporations like Hormel and General Mills, according to Food Business News.
- All three said they faced considerable consumer backlash after agreeing to sell, but that the deals were essential in order to help their businesses grow and protect themselves from unforeseen occurrences, like food recalls. The executives also said that the larger companies that purchased them have not compromised their values in any way.
- Acquiring fast-growing better-for-you brands has become a key strategy for large companies, Foraker noted. Because they don’t want to disrupt this growth, he and others noted, corporations are willing to take a hands-off approach.
Natural and organic acquisitions have become so common over the past several years that it’s difficult to find a supposedly “niche” brand on supermarket shelves that isn’t owned by a large food company.
For multinational corporations like Kellogg, General Mills, Unilever and others, these acquisitions add fast-growing brands to their lineup of mature legacy brands. It also firms up their commitment to healthy eating at a time when shoppers are showing increasing interest in less-processed foods, better-for-you foods.
Brands, meanwhile, are looking for scale. By partnering with a deep-pocketed corporation, they can expand the regions they serve, the lines they offer, and the number of retailers that carry their products. It also, as Justin Gold from Justin’s Nut Butters explained, provides a financial safety net in case of costly slips, like a food recall.
All three executives at the Expo West panel spoke about acquisition as a way of delivering on the essential promise of their brands: to bring healthy foods to more people.
But some consumers don’t see it that way. Many of them supported these smaller better-for-you brands because they weren’t large food companies. They offered products that placed values above profit, and by jumping onboard with multinationals and private equity, brand devotees believe, small companies are compromising those values.
These worries aren’t without merit. But as the panelists’ explained, companies like General Mills and Hormel have no interest in meddling with a winning formula. As Enjoy Life CEO Scott Mandel told the Chicago Tribune shortly after his company sold to snackmaker Mondelez International, “Mondelez bought us because of our brand promise, not in spite of it. This brand promise is not going to change.”
There’s also significant disruption happening with these large companies. Many are infusing their core business with the values imparted by these healthier brands, as opposed to the other way around. Kraft, General Mills and other companies are phasing out artificial colors, flavors and other additives in many of their most popular products.
There are compelling reasons for small brands to partner with large companies right now. Both parties just need to do a better job of communicating them to consumers.