Small Organic to Mass Market: Growth Potential or Selling Out?

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Small Organic to Mass Market: Growth Potential or Selling Out?

By Alarice Rajagopal - 04/02/2015
Many small, organic food companies start with a homegrown story that appeals to its consumer base, however, major consumer goods powerhouses have been recently vacuuming up these niche players. Giants like Coke, General Mills and Kellogg have recently expanded their organic portfolios through acquisition with rumors of more to come. With the risk of being called a sell out, is teaming up with bigger companies better for growth, or is it a death sentence for these smaller players? 
 
Let's break down a few of the acquisitions that have been all over the news. The first example is Plum Organics which was acquired in June 2013 by Campbell Soup. According to an article by The Wall Street Journal, Plum used Campbell research to learn children’s favorites are chicken noodle and tomato and then reworked recipes “in a Plum way,” adding more vegetables, says Neil Grimmer, co-founder and chief executive of Plum. 
 
The 8-year-old company’s research and development team in California built on classic Campbell’s formulas developed with insights from more than 100 years of selling soup. For tomato meatball soup, Plum chopped kale and spinach finely so children aren’t scared away by the “huge leafy greens,” Grimmer says.
 
The Plum shopper and others like her are becoming the darlings of the food industry. Food giants such as Coca-Cola, General Mills and Kellogg are looking to the smaller food brands they’ve purchased such as Honest Tea, Annie’s Inc. and Kashi, which sell food perceived as healthy or labeled organic. Their goal: to drive up sales to this desirable, loyal consumer willing to pay more in the name of organic or natural, as sales of soup, soda and cereal stagnate.
 
According to this same WSJ article, Honest Tea has experienced nothing but growth before and after being acquired by Coca-Cola in 2011, along with the launch of many successful product introductions like Honest Fizz. 
 
And, although Kashi consumers have taken to social media to complain about GMO ingredients, Kellogg has let the cereal company lead with its response. Kashi's CEO said in an email statement that all its products will be Non-GMO Project Verified by early 2016.
 
Unilever took this same approach when it acquired ice cream company Ben & Jerry's. The company is against GMO label laws, which conflicts with Unilever’s documented stance. BloombergBusiness, writes, “Ben & Jerry’s has never shied away from speaking out on social issues, and Unilever, since acquiring the company in 2000, has not interfered." 
 
Then, there are the talks about Hormel Foods, best known for its Spam brand, to acquire natural and organic meat company, Applegate. Let's just say that even though it is only rumored at this point, consumers have already taken to social media, and while the company says it embraces transparency, only time will tell if this story has a happy ending. 
 
As consumers continue to eat healthier and more conveniently, this merger trend will most likely remain top-of-mind for major brands. Whether or not these smaller companies can make it with their larger parents remains to be seen as the industry continues to scoop up organic household staples.