Think of the last time you went grocery shopping. You probably chose organic produce over regular fruit and vegetables, a baked snack over deep-fried chips, and you probably even skimmed through the ingredients listed on the packaging, when you bought…
Think of the last time you went grocery shopping. You probably chose organic produce over regular fruit and vegetables, a baked snack over deep-fried chips, and you probably even skimmed through the ingredients listed on the packaging, when you bought prepared, frozen food, or cereal.
You aren’t alone – consumers around the world have become increasingly conscious of not only what goes on their plate, but also the journey that it undertook to get there. This is why locally sourced, organic produce has never been more popular, and if the bread left out on the kitchen counter doesn’t spoil in a few days, as it should, consumers will begin to wonder why. Given the growing demand for natural and organic products, organic food sales have reached record numbers in the past 5 years, according to the Organic Trade Association. The organic food industry has been projected to grow at a 14% CAGR till 2021.
This shift in consumers’ tastes has posed a problem for some iconic food brands across the world, that have now come to be associated with ‘too much sugar’ or preservatives. Some legacy brands are just not attractive enough to the millennial consumer.
So how does Big Food win over this new, ever-swelling, customer base which demands all-natural products that need to not only taste good, but also be nutritious and sustainably sourced?
Some companies have tackled the problem by acquiring smaller, health-focused, natural, or artisanal brands.
Legacy brands like General Mills, have purchased smaller players like Annie’s, a packaged food company that uses organic and natural ingredients. The company also bought Brazilian yoghurt maker, Carolina, in 2015. Between 2011 to 2015, General Mills achieved a CAGR of 4.3 percent, which was significantly above the market average. It now has seven organic or natural brands with net sales that have exceeded $570 million.
Over the past years, other similar acquisitions and investments have included Coca-Cola’s minority stake in organic, cold pressed juice brand, Suja Juice, as well as Keurig Green Mountain, formerly known as Green Mountain Coffee Roasters; Campbell Soup’s acquisition of both Garden Fresh Gourmet and Bolthouse Farms, which focused on expanding into condiments and fresh foods respectively; Hain Celestial’s acquisition of Rudi’s Organics for $61.3 million; Mondelez’s acquisition of Enjoy Life Snacks, and Hershey’s purchase of Krave Pure Foods.
Interestingly, most acquirers have chosen to keep the acquired brand intact, and even have the acquired company continue to operate independently in some cases. According to SDR Ventures’ 2016 Food and Beverage Report, a good way to navigate the change in consumers’ preferences is to adopt a focused approach that balances strategic acquisitions and forward-thinking investments, with an emphasis on refocusing capital towards promising growth opportunities rather than historical ones.
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