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Last week, the Wall Street Journal wrote a cautionary tale of Kellogg’s acquisition of Kashi 15 years ago. While the story speaks to Kashi’s huge success in the immediate years after the acquisition, it delves more deeply into Kellogg’s “missteps” that have plagued the brand in recent years. Missteps that included courting more mainstream consumers — and in doing so, being outed for using GMO ingredients and generally losing its better-for-you differentiation. Oh, and nearly $200 million in annual sales.

With Kashi being another BFY Food acquisition (don’t feel too badly for Kellogg — Kashi has grown from $33 million in annual sales in 2000 when it was acquired to $398 million at YE 2014) by Big Food, should we expect some of the other well-known BFY acquisitions (e.g., Plum Organics by Campbell Soup, Annie’s by General Mills, Krave Jerky by Hershey) to hit the same wall? Is the lesson of Kashi that Big Food will screw up a natural/organic brand by imposing Big Food principles and process? Or is it an external issue, where BFY foodies decide a once-beloved natural brand has jumped the shark because of a Big Food takeover and begin abandoning the brand?

Perhaps Big Beer acquiring craft beer can be illuminating. A-B InBev has been on a craft beer buying spree for much the same reason that Big Food companies have been acquiring natural and organic food brands — to replace some of the falling volume in their mass brands with small but accelerated growth from the acquired brands. And not surprisingly, there’s a vocal group of craft beer aficionados who cry foul and pledge not to buy the now-acquired craft beer brands. But for the bulk of us, A-B InBev’s purchase of a craft beer like Elysian only means that we’ll have access to Elysian at our favorite store for the first time.

3G and Warren Buffett might be feared and loathed for their ruthless cost-cutting at Anheuser Busch and at Big Food brands like Heinz and Kraft, but at least in the short run, they seem to have a clear strategy when it comes to craft beer acquisitions — they’ve steered clear of the culture and the product, and provided operating capital and distribution to scale the business. It appears that, for now, 3G knows when to hold ’em (by staying out of the way of growing craft beer acquisitions) and when to fold ’em (by deep cuts at shrinking mass beer and food acquisitions).

Kellogg appeared to be doing everything right on the Kashi acquisition from 2000 to 2008. As the Wall Street Journal reported, sales grew 42% annually on a compound basis during that period, as Kashi’s core products gained mass distribution at Wal-Mart and Kroger. So what went wrong? It appears that the days of “staying out of the way” came to an end. Staff was moved from San Diego to Battle Creek. Increased volume led to the introduction of GMO grains. Consumers learned Kellogg was a heavy contributor to a campaign against a California ballot initiative to make food companies to label GMO foods. In short, Kellogg ultimately behaved the way every BFY consumer feared.

Will A-B InBev ultimately lose its way with its craft beer acquisitions? Will Campbell Soup, General Mills, Hershey and other Big Food companies do that with their BFY brand acquisitions? Time will tell. But the cautionary tale of Kashi/Kellogg demonstrates that there’s a huge price to pay if autonomy and authenticity are sacrificed, even if that’s many years post acquisition.

Article Link (http://www.mediapost.com/publications/article/257962/will-big-food-force-healthy-food-to-jump-the-shark.html)

Michael Bollinger
Michael Bollinger
President

With over 25 years in the advertising agency business, Michael is focused on building the consumer package goods agency of the future - today. One centered on the breakthrough brand storytelling skills of Smith Brothers' creative heritage, but delivered with the speed, efficiency and real-time optimization demanded by today's digital environment.

Michael joined Smith Brothers in 2005 as Director of Client Services, after spending the previous 20 years with DDB Worldwide where he was Senior Vice President, Group Account Director of the global agency's flagship, Chicago office.

Excited by Smith Brothers' creative firepower and entrepreneurial spirit, Michael joined the Smith Brothers’ team with a vision for delivering big agency resources on a dramatically more nimble and effective platform.

Under Michael's leadership the agency acquired digital agency, Hot Hand Interactive, in 2007. It added its Social Media practice in 2008. Developed an Analytics practice in 2009 and a Shopper Marketing practice in 2010.

Layered onto its existing strategic planning, creative and media capabilities, Smith Brothers is now a force in the CPG marketing world – working with brands like Nestle, Del Monte, Heinz, Ghirardelli, Red Bull, and more.

Michael holds a B.A. in English from Union College.