General Mills to acquire Annie’s in $820m deal to expand natural & organics portfolio

Gen Mills: Annie's deal 'will significantly expand our presence in the US branded organic and natural foods industry, where sales have been growing at a 12% compound rate over the last 10 years'

General Mills has made a bold move to expand its presence in the fast-growing natural and organics market with an $820m deal to acquire Annie's.

In a statement released Monday, Minneapolis-based General Mills said Annie's (based in Berkeley, CA) would join its US natural and organic products brand stable, which generates sales of around $330m/year.

General Mills has been steadily vacuuming up natural and organic brands in recent years, acquiring Small Planet Foods and its Cascadian Farm and Muir Glen organic food brands in January 2000; the LARABAR line of fruit and nut-based snack bars in 2008; and the Food Should Taste Good line of savory snacks in 2012.  

Annie’s, meanwhile, would add around $204m a year in net revenues, said General Mills’ COO Jeff Harmening, who said General Mills' supply chain, sales and marketing resources would help ensure Annie’s products reached a wider audience, while General Mills would in turn benefit from Annie's "purpose-driven culture" and "go-to-market capabilities".  

CEO John Foraker to stay on for at least a year

Asked what would happen to Annie's senior management post the deal, a spokeswoman told FoodNavigator-USA: "We are pleased to say that Annie’s CEO [and co-founder] John Foraker has agreed stay on for a lengthy period of time – at least a year – to help position Annie’s for its next stage of growth. 

"He cares deeply about the Annie’s brand, and he’s excited about the growth opportunities that lie ahead. He wants to ensure that Annie’s continues to flourish.  We hope to retain many of the talented employees who have helped Annie’s grow."

And the head office?

"Annie’s will continue to operate out of their offices in Berkeley, California," she said.

Euromonitor: Adding Annie’s macaroni and cheese mixes, cookies, and crackers allows General Mills to reach affluent, health conscious parents

Euromonitor International senior US analyst Virginia Lee told FoodNavigator-USA that the deal will "likely lead to higher sales of the natural and organic food brand as General Mills expands distribution and boost marketing spending on Annie’s".

"Growth in the 'center store' categories such as breakfast cereal and canned foods has been minimal in the US. At the same time, center store brands with a natural and organic focus such as Annie’s and Larabar have been outperforming their peers. Adding Annie’s macaroni and cheese mixes, cookies, and crackers allows General Mills to reach affluent, health conscious parents who are looking to feed their children in a healthy manner while still appealing to the children’s taste buds."

The deal is expected to close later this year

According to Harmening, the deal will "significantly expand our presence in the US branded organic and natural foods industry, where sales have been growing at a 12% compound rate over the last 10 years".

He added: 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.”

Under the deal - which is expected to close later this year - General Mills will acquire Annie's for $46 per share in cash, valuing the firm at approximately $820m, he said. 

“General Mills will launch a tender offer within ten business days to purchase all outstanding shares of Annie's.”

Founded in 1989, Annie's markets more than 145 snacks, dressings, sauces, frozen meals, pasta dishes and meal kits, and is present in 35,000+ stores in the US and Canada. Its products are claimed to be free from synthetic colors, preservatives, and artificial flavors.

It is also a strong supporter of the Just Label It campaign to label foods containing ingredients derived from GM crops.

Annie's making 'excellent progress in driving mainline distribution in conventional channels'

Speaking on Annie's Q1, 2015 earnings call last month, Foraker said the firm continued to "make excellent progress in driving mainline distribution in conventional channels".

Recent positive developments included the launch of new frozen snack items at Target, he said: "We are excited by the potential for frozen snacks because they taste great, they have an attractive entry price point and the margins are better than our earlier frozen products.

"Retailers are aggressively reaching out to brands like Annie's and others that appeal very strongly to millennial consumers, households run by millennial parents and young adults, who really have been moving away from frozen in general."

However, Annie's had faced some challenges in the quarter including "sizable increases in the cost of organic wheat", he added.

General Mills - which generated net sales of $17.9bn in its 2014 financial year - operates in more than 100 countries and boasts a brand stable including Cheerios, Fiber One, Haagen-Dazs, Nature Valley, Yoplait, Betty Crocker, Pillsbury, Green Giant, Old El Paso, Wanchai Ferry, and Yoki.

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Comments (1)

Len Davis - 09 Sep 2014 | 08:35

Another one bites the dust

Eventually every food in this country will be produced by one of the massive conglomerates such as GM, Pepsi, Nestle, Mondelez and a few others. God-forbid you take some of their market share they just buy you up to reduce competition and then destroy the product.

09-Sep-2014 at 20:35 GMT

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