The Parent-Child Relationship: Why Annie’s and General Mills Will Work

When I read the news Monday of the purchase of Annie’s Homegrown (NYSE: BNNY) to General Mills (NYSE: GIS) for $820 million I was stunned. Quickly, however, my surprise shifted to disbelief with myself that I didn’t see it coming given the path of Annie’s over recent years. Of course selling to a larger company was part of the grand plan, and thus, another parent-child relationship begins.

Working on the Kashi brand (acquired by Kellogg in 2000) for many years, I learned a few things about navigating these kinds of relationships. Today, as a consultant to the food and beverage industry, I’ve identified a pattern in the parent-child relationship and have come to understand that despite best intentions by all, the pitfalls and missteps are less about the specific attributes of the companies in question and more about the larger influencing factors of today’s marketplace that are all too often given priority. Unfortunately, Annie’s now faces the challenge of avoiding a stereotypic experience in the arc of acquisition, expanded distribution and profit, brand dilution (largely due to operational streamlining and decreased risk tolerance) and ultimate failure.

Act like a Bull Not an Ostrich in Today’s Food Climate

Individually, both Annie’s and General Mills are at the top of my list of companies who are doing it right in today’s food climate. Figuring out how to maintain relevance and leadership in the midst of the food awakening that is our country’s current Food Movement, Annie’s and General Mills have taken a bullish approach in their own size-appropriate way, maintaining a strong voice in the debate (Annie’s mostly) and making strategic changes in business practices that have been rewarded by shareholders in today’s tough climate (General Mills). Given this behavior and spirit, both companies bring compelling factors to their new relationship:

  • With other natural and organic brand acquisitions (Cascadian Farm, Muir Glen, LARABAR, Food Should Taste Good), General Mills demonstrates an awareness and acceptance of where packaged food is heading. Spending well over a million dollars to block GMO labeling initiatives may seem at odds (even hypocritical) to this behavior, but that’s where those “larger influencing factors of today’s marketplace” come into play and the saying, “the best defense is a good offense” rings true. To their credit, they are evolving their business in the right direction even if they are hedging their bet through financial contributions along the way.
  • Annie’s has a strong foundation of 25 years from which to solidify its reason for being in the world. Its philosophy in the areas of nutrition and people/planet health is established and, maybe more importantly, are clear keys to their success in market.
  • Annie’s is positioned for massive growth. From a successful VC incubation period that ultimately led to going public and the steady increases in product distribution and consumer awareness, short of a major mistake (and I don’t believe this is it), they really can’t fail right now.
  • From a timing perspective, we are years in at this point to the modern Food Movement debate and, as a result, both companies have had a good amount of time to demonstrate their positions on the big issues. If nothing else, this should provide all of the skeptics with some comfort in that both companies are less apt to do an about face on their stance and behavior.

Mom/Dad, You Don’t Always Know What’s Best

Purely from a business perspective, the parent-child relationship is all about diversifying the portfolio and mitigating risk. If you’ve ever worked with a financial advisor, you know that it’s just not smart to have all your money in bonds or in aggressive growth stocks. Spreading your money around is the safe bet, and so it is with large food companies. To a large degree, Annie’s represents an aggressive growth stock opportunity for General Mills, and from this perspective, it’s just business…no people and planet health aspirations required.

Taking the financial planning analogy a step further; being a successful financial advisor requires understanding where the market is heading. Identifying what’s big today is easy, real success happens when you are able to predict what will be big tomorrow. And that, General Mills (and all you other really big companies gobbling up the little guys), is what you need to keep in mind when you get your hands on Annie’s and start looking for opportunities to streamline processes and optimize systems.

Annie’s was born out of the beliefs that are leading the evolution of food and health in our culture today. Their philosophy was not adopted based on market trends and consumer insights data, it is part of their DNA, and when something is part of your DNA, you intuitively use it to guide every decision. It cannot be wrong because it exists from a consciousness that has evolved and survived through generations and across cultures.

On paper the Annie’s business looks a bit risky because they have chosen to do things that are not yet proven out in the market. They are attractive because their bets to date may payout big, but their aggressive behavior may also lead them to fail.

General Mills, I Challenge You to Parent Differently

So, Parent Company, this is where you have an opportunity to parent differently. Instead of guiding your child to be more conservative, more like her peers, more like you, stop. Expand your perspective to not only prioritize financial strategy but moral ethics as well. Honor the unique beliefs and attributes of your child and consider if their perspective isn’t just sweet innocence but inherent intelligence.

Taking this approach with Annie’s will be hard for General Mills. I’m sure there will be pushback internally within the business, it will mean living with complication, taking more risks and getting comfortable with a greater degree of uncertainty. It will mean going against tradition, instead of molding the child to fit the parent, it will mean changing the parent to emulate the child.

I think General Mills has what it takes. We’ll all just have to wait and see.

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