Annie's Inc. and General Mills

In October, General Mills bought Annie’s Inc. for $280 million. Annie’s Inc. is a specialty food maker that creates organic goods free of artificial flavors and other preservatives. On the other hand, General Mills is not known as a natural food maker and creates foods that are full of preservatives. Now, almost a full year later, Annie’s Inc. under General Mills has expanded its products and is actually about to sell a new organic yogurt this week. Because General Mills has provided experience and equipment, Annie’s Inc. is able to launch its new products at a much faster rate. Although Annie’s Inc. accounts for a small portion of General Mill’s overall revenue, it still is a very important cog of General Mill’s goal to become more of a natural food maker.

However, General Mills and Annie’s Inc. have encountered issues over control. For example, General Mill’s research and development team wanted to use a natural chicken flavoring with yeast extract, which would make the soup taste better. Annie’s Inc. knew that its customers wouldn’t like this flavor enhancer and had to ask General Mills to keep it out.

It is hard to tell if Annie’s Inc. is doing better or not since being acquired by General Mills. In the 12 months through August 8th, Annie’s Inc. has increased its distribution by 11% and increased sales by 9.4%, but Annie’s market share has only increased by 0.34% due to increased competition. It is a very hard balance for a natural brand company like Annie’s Inc. to work with a conventional food industry company like General Mills because the conventional food industry company may overpower the natural brand company and hurt the natural brand company. If General Mills and Annie’s Inc. are able to maintain friendly terms, then this acquisition should benefit both companies.

-Patrick Wei