General Mills splurged $820m earlier this month to buy Annie’s – a kids’ organic snack and convenient meals specialist. The move was coined disastrous by plenty of consumers and clever by much of industry.
Julian Mellentin, healthy foods consultant and director of New Nutrition Business, said the acquisition was promising, specifically because Annie’s was a kids’ brand within the organic sector.
“While some people have said General Mills will do well because Annie’s is organic – that’s not the whole picture. Yes, organic is growing, but it’s not growing that excitingly,” he told BakeryandSnacks.com.
Organics suffered when the economy slowed in 2008, he said, but kids’ organics didn’t, for example.
“At the end of the day, organic for an awful lot of people doesn’t deliver the clear, easy-to-understand, tangible benefits. The organic proposition beyond kids is too fudgy and it’s too risky an area. If it sorts out its proposition, it might be a different story,” he said.
Kids’ organics strong
However Annie’s, even in a flat US economy between 2009 and 2014, grew its sales by 118% and profit margins from 3.3% to 12.8%, Mellentin said.
“The kids’ organic market is one of the markets that has shown itself to be recession-proof in recent years. And the reason for this is that while parents of young children, particularly mothers, feel they’re able to compromise when they economize, one thing that became very clear in the economic downturn is they’re not going to compromise on the health of their children.”
Brands like Happy Baby, Plum Organics and Ella’s Kitchen were proof of that, he said.
“Opportunities in organic seems to sit most strongly in the kids’ sector. I think it’s riskier to do things outside the kids’ sector because you have proof of market in the kids’ sector.”
Mellentin said while kids’ organics was a promising sector, a lot of opportunity depended on the country and culture.
“Be careful – this is not everyone. Consumer markets are massively segmented,” he said.
Kids’ organics was rising in Scandinavian countries, for example, but not so prominent in Australia, he said.
“On the other hand, if you’re General Mills and you use the obvious know-how of Annie’s and its people, along with your own marketing muscle, then perhaps you can communicate the benefit of organics for kids in markets where that hasn’t been done very well."