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In a Wave of Acquisitions, Natural Foods Companies Are Being Gobbled Up

As corporations realize the valuable market niche and consumer loyalty of many natural brands, they have begun, quite literally, to gobble them up. In the last six months alone, General Mills acquired Small Planet Foods, which holds the organic Cascadian Farms and Muir Glenn labels; Heinz took a solid stake in Hain Food Group, home to Arrowhead Mills, Health Valley and Westbrae; Kellogg's bought Worthington Foods, which markets Morningstar Farms, Loma Linda and Natural Touch; and Nestle got a boost from Power Bar, the leading U.S. manufacturer of energy and nutrition bars.

Even Philip Morris is jumping into the health food field. In February, its Kraft Foods, the nation's largest packaged foods company, acquired Balance Bar and Boca Burger, Inc., a privately held early pioneer in developing non-meat burgers. The popular soy-based Boca Burgers and Boca Breakfast Patties will now be distributed by the company that made the Oscar Meyer Weiner a familiar part of childhood. Why the change of heart? “The alternative meat category is one of the fastest growing in the food business,” says Kraft spokesperson Claire Regan. “We keep our ear to the ground for trends, and Boca is strongly aligned with consumer desires.”

“Consumers are demanding these products and are willing to pay the premium associated with them,” affirms Paddy Spense, CEO of Spense Information Services (SPINS). “Large consumer packaging goods companies have realized this.” The phenomenon isn't necessarily a trend of aggressive buy-outs, however. Frequently, the added capital brought to the relationship is welcomed by the acquired business as an opportunity to take growth and distribution to the next level. “When you have the world's largest food company backing the distribution of natural items, it doesn't do anything but good for the availability of products,” says Spense.

That's certainly the hope of Ben & Jerry's, which was acquired by Unilever in April. The ice cream company famous for its hometown start and socially responsible message, delivered via unbleached paperboard packaging, bovine growth hormone-free dairy and, until recently, publicly owned stock, changed hands for $326 million. But concerns that many of the company's values-led practices may not align with the prerogatives of potential new shareholders were manifested in an underground movement to “Save the Cow Now.” There were even demonstrations at Scoop Shops across the country prior to the sale.

“Ben and Jerry's is not an ordinary company. It's a company that has been a leader in the whole concept of being values-led, and it's very important that the company remains in a position to expand its social mission,” says Judy Wicks, owner of the White Dog Café in Philadelphia, PA, and organizing force behind the now-defunct Save Ben & Jerry's Coalition. “The growing concentration of power is of great concern,” says Wicks. “It's never been the case that when power and wealth are concentrated, the rights of others and the environment are better protected.”

Unilever, the world's largest ice cream company with brands including Breyers and Good-Humor, begs to differ. Ben & Jerry's, the company says, will continue to make its ice cream unhampered, with 7.5 percent of pre-tax profits donated to community social and environmental organizations through the Ben & Jerry's Foundation. In addition, Unilever will contribute another $5 million to the foundation and create a $5 million fund to help minority-owned businesses.

Gene Kahn, CEO of Small Planet Foods, is equally optimistic about its recent acquisition. “General Mills has no interest in watering down our standards. In fact, that would be contrary to the principal motivation that caused them to buy the company in the first place,” he says. “We differentiate ourselves in the marketplace and to consumers because of our standards. As a company that is now well-funded, we have much better tools to enhance our environmental commitment.”

As natural products escalate to an $8 billion industry, it hardly seems possible to contain the explosive growth within the original mom-and-pop framework of many companies. Even within the industry, many are shoring up their resources through new partnerships to stimulate growth. A merger between Odwalla and Fresh Samantha, the two leading all-natural, super-premium juice companies on either coast, was approved this past April, and specialty tea guru Celestial Seasonings recently merged with Hain Food Group to create the largest natural foods company in the United States. The new Hain Celestial Group Inc. expects sales of $1 billion by 2002.

Likewise, one reason for the rapid expansion of natural food chains is the common practice of buying up smaller, independent retailers. Whole Foods, the nation's leading natural foods retailer, now boasts more than 106 stores, many of which once operated under such names as Wellspring Grocery, Bread & Circus, Fresh Field's and Mrs. Gooch's. Wild Oats, which comes in a close second in sales (though with more stores, 112), has acquired over time Henry's, Nature's Northwest and Sun Harvest. According to Communications Director Harry Day, such acquisitions account for half of Wild Oats' 30 percent a year growth.

Still, there are those who doubt the new relationships are really in everyone's best interests, or that growth of capital and growth of ideals necessarily go hand-in-hand. “It's the height of naivete to think that a big company can buy a smaller one, and the smaller one can still hold onto its values,” says David Korten, author of When Corporations Rule the World. “In the very nature of socially responsible businesses, there is an element of being local and independent and not captive to financial markets,” says Korten. “It's central to their ability to maintain their values. We need to nurture smaller companies and find way to help them remain independent. Otherwise, we lose those values, and control over our economic lives.”