Can Established Food Brands Stomach a Change in Customer Demands? When food giants acquire small brands, the results are a mixed bag.
While sales of legacy brands are stalling at America's leading packaged-foods companies, mission-driven "healthy" brands are boasting double-digit growth. But keeping up with soaring consumer demand is harder than it looks. While additive-free, non-GMO, organic brands are killing it at specialty-foods stores, these innovative companies often lack the financing, marketing muscle and global distribution to go head to head with traditional brands in supermarkets.
Increasingly, the solution is to sell out. Smaller brands are finding the support they need by forming what used to be considered unholy marriages with food conglomerates. In September, Niman Ranch, a natural pork, beef and lamb producer, became a division of poultry giant Perdue Farms. That followed the $775 million sale of Applegate Farms, a producer of "natural" deli meats, to Hormel Foods. A year ago, Berkeley, Calif.- based organic packaged-foods high-flyer Annie's Inc. sold for $820 million to General Mills.
Such deals are a rational response to revolutionary change. Twinkies and Doritos cannot be reengineered to be healthy. And consumers aren't fooled when big food companies cobble together "healthier" choices that contain a laundry list of unpronounceable ingredients. The conglomerates' remaining option is to acquire smaller brands.