Picture a big bowl of sustainable mac and cheese. Cheesy and delicious, made with non-GMO, organic ingredients – 100 percent real cheese and no artificial flavors, synthetic colors or preservatives - this is a satisfying dinner you can feel good about eating. Hopefully you’re thinking of Annie’s iconic orange box. For more than 25 years, Annie’s Homegrown has married business and social responsibility to produce high-quality products that consumers love.
In 2014, Annies, Inc. and its sustainable mac and cheese was acquired by General Mills, one of the largest multinational manufacturers of branded consumer foods. According to John Foraker, then-CEO of Annie’s, “the Internet puked when General Mills bought Annie’s.” Diehard brand loyalists left more than 20,000 comments on Annie’s Facebook page. The key lesson for buyer and seller alike? Any brand – no matter who owns it on paper – is really owned by the consumers. This may be especially true for purpose-driven brands, which inspire strong consumer sentiment and brand love.
At SB’16 San Diego, Gil Friend of Natural Logic led a conversation about navigating M&As in the sustainability space. Foraker, now president of Annie’s, and Steve Young, VP of Annie’s & the Natural/Organic Growth Team at General Mills, discussed what make these unique acquisition relationships successful.
General Mills, on the other hand, has evolved to include sustainability at the core of its business practices. Key areas of focus include responsible supply chain management, with a goal of 100 percent sustainable sourcing of its top 10 ingredients by 2020. To put it in context, these top 10 ingredients represent 60 percent of all General Mills material purchases. Additionally, the company has committed to decrease water use, improve the sustainability of water across the supply chain, and reduce greenhouse gases emissions by 28 percent across the entire value chain – from farm to fork to landfill.
Where does Annie’s fit in to General Mills’ vision? Young said: “Food values in America have changed, and Annie’s is going to be at the forefront of that change for the company.”
Friend cited the startling statistic that more than 60 percent of acquisitions fail, and suggested that this might be a conservatively low estimate. Given the landscape of M&As, what makes them work?
Young shared that in his experience, the most successful acquisitions are when the acquirer asks “What can I give?” rather than “What can I get?” In acquiring Annie’s, General Mills was clear about what it could give – resources, the ability to expand distribution, and the potential to extend the supply chain.
Friend then asked what’s best for the “old guard” – to build its own sustainable brand, or to buy one? The panel agreed that there’s no one clear answer. Companies looking to expand their sustainable brand footprint should approach M&A strategy through multiple channels: internal brand creation, investing in small startup companies, and acquiring established sustainable brands.
Both Young and Foraker agreed that trust is key throughout the M&A process – trust that both parties will respect the resources and expertise of the other, and trust that they share the same business goals. If brands want to be growth-oriented companies today, winning in the sustainability space is mission-critical because it’s what the consumer wants.
Foraker stated that Annie’s vision is a world where 25-30 percent of what we’re eating is organic and the benefits of sustainable farming are broadly known: “If you believe in those things, you must be driven to make your brand bigger.” Following the acquisition, when consumers would say to Foraker “you sold out!,” he would reply that for us to change the food system, it has to come from within a model of success.
For emerging companies committed to producing sustainable products, and for the giants looking to expand more in the space, M&As represent a key strategy to increasing sustainable footprints. The demand for sustainable brands will only increase over time, which should drive interest around these relationships.
In closing, Young concluded: “You can’t not have a broader sustainability program. Not only is it the right thing to do, but it’s simple math that’s needed to service growth.”
Get the latest insights, trends, and innovations to help position yourself at the forefront of sustainable business leadership—delivered straight to your inbox.
Published Jun 9, 2016 5pm EDT / 2pm PDT / 10pm BST / 11pm CEST