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Leveraging Wholesome Mac-and-Cheese Into Prosperity

Success in “better-for-you” foods for kids has led the company to a crossroads: how to build on it without sacrificing its ethical vision or its organic formula.

Mid-Market Company of the Week: Annie’s Homegrown

One of the biggest recent success stories coming out of Silicon Valley has nothing to do with chips or pixels: Annie’s Homegrown posted a second-fiscal-quarter sales increase of 24 percent by selling organic CPGs favored by kids, from bunny-shaped graham crackers to frozen lasagna.

And in fact, CEO John Foraker has led Annie’s on a growth boom that has seen sales grow at a 17-percent annual clip over the last five years, bringing the company to an annual sales rate of about $240 million. Its second IPO, in early 2012, was hailed by some deal-makers as the best offering of the last few years outside of digital-tech high-flyers.

“The fact that Annie’s was able to go public and was warmly received by Wall Street and Main Street is as big an affirmation as any that organic food is a mainstream idea,” Foraker told Chief Executive. “People call it a fad, but it keeps growing. And just now, big retailers in the U.S. are beginning to understand how important natural and organic foods are for consumers. We believe we’re closer to the beginning of this phenomenon than the end.”

The Annie’s Homegrown of today is a mashup of three startup companies from various aspects of the foodie phenomenon. But the key to growth has been how Foraker, CEO since 1999, has tacked more aggressively in the direction of organic and “all-natural” sourcing of ingredients.

That approach has allowed Annie’s to help define, fuel and grow with the boom in more healthful fare sold to discerning American parents for their children, first in the aisles of Whole Foods Markets and now, increasingly, in mainstream supermarkets everywhere.

Annie’s Natural Mac & Cheese actually has more or less identical amounts of calories, saturated fat, sodium and cholesterol as Kraft’s classic product – and Annie’s sells for significantly more. But the patina of natural goodness that Annie’s has built up around all of its products – fed by branded-content videos devoted to family farms and flavor names such as “Organic Peace Pasta & Parmesan” — has kept the company on a growth arc that makers of competing traditional CPGs can only admire.

Among the steps Foraker is taking to keep the growth engine going is Annie’s purchase of Safeway’s cookie and cracker manufacturing plant in Joplin, Missouri. It “will provide us with valuable long-term scale benefits,” Foraker said, and “enable us to accelerate our pace of innovation and distribution growth in snacks.”

Annie’s also is “aging up” its product line as competition proliferates in kids’ better-for-you foods, with square-shaped frozen pizzas and family-size frozen meals that began appearing last fall at 1,700 Target stores.

“Mainstream retailers are increasingly looking to put organic products in the mainstream aisle from the strongest brand,” Foraker told Chief Executive. “That’s us.”


Annie’s Homegrown

CEO: John Foraker

Size: About 100 employees, $170 million in sales for fiscal 2013

Location: Berkeley, Calif.

Goal: The company’s stated mission is “to cultivate a healthier and happier world by spreading goodness through nourishing foods, honest words and conduct that is considerate and forever kind to the planet.”

Fact: There are two founding “Annies:” Annie Withey, who founded the original company in 1989 after she’d sold her white-cheddar popcorn business, Smartfood, to Frito-Lay for about $15 million, and Annie Christopher, a Vermont salad-dressing entrepreneur.

Unique: Annie’s moved to Berkeley from California’s Napa Valley in 2011 in part because it needed more good people to fuel growth, and Foraker knew he could find talent – and recruits who believe in the Annie’s ethos – in Silicon Valley. “We really do compete for the same kind of people” as Apple, he told Chief Executive. “Highly talented, driven to make a difference and wanting to connect.”

http://www.forbes.com/sites/meghancasserly/2013/10/09/homegrown-success-mild-indigestion-annies-natural-foods/

http://www.slate.com/articles/business/when_big_businesses_were_small/2013/10/annie_s_homegrown_profits_how_the_company_recast_selling_out_as_buying_in.html

http://www.brandchannel.com/home/post/2013/11/12/Annies-Growth-111213.aspx

http://www.investors.annies.com/phoenix.zhtml?c=251112&p=irol-newsArticle&ID=1874037&highlight=

About Dale Buss

Dale Buss
Dale Buss is a long-time contributor to Chief Executive, Forbes, The Wall Street Journal and other top-flight business publications. He lives in Michigan.