Grocery Store Guru

All about the grocery industry, from a store level perspective.

General Mills buys Food Should Taste Good, leaves bad taste in my mouth

The last 15 years has seen many small successful food companies bought by larger ones… heck, even large food companies bought by even larger ones. Now that the Health Foods/Natural Foods category is gaining market share in leaps and bounds, many organic and specialty food companies are becoming buyout targets for the big guys.

The grocery industry trade publications are looking at the General Mills purchase of Food Should Taste Good (www.foodshouldtastegood.com, maker of all natural chips) in a couple of different ways. Some say it’s an attempt by GM to compete against it’s largest rival Kellogg’s in the Healthier snack category – Kellogg’s owns Kashi and has a significant portion of the category already. Others are saying it’s GM trying to chip away (sorry for the pun) at Pepsico, who owns snack giant Frito Lay (as well as Gatorade, Minute Maid, Quaker….).

From the consumer’s point of view, is this a good thing?

First off, I have to admit I’m almost always against it. I don’t see consolidation as a positive force – it takes away the diversity and creativity of the people that make our food. Rather than taking pride in crafting an excellent product, the focus of the large corporations is always profit first. Smaller companies are often able to keep their focus on creating that superior product, knowing that a happy customer is a repeat customer – and profits will be the result.

The key will be how GM chooses to handle it’s new aquisition. Will it keep the current operational management, and run it at arms length? In this case, Food Should Taste Good may be able to keep is core values intact. They could experience increased profitability through GM’s superior buying power for base ingredients, and increased volume using GM’s wider distribution and larger retailer base. As long as the Food Should Taste Good unit produced healthy profit numbers, maybe GM would be happy to keep out of the day to day operations. Ah, to dream.

Or, as I would suspect, will they try to bring “efficiencies” to Food Should Taste Good? In this case, GM would be looking at how to squeeze more profit out of the current operation. It may not happen right away, but down the road someone is going to look at the relative cost of high quality base ingredients and figure that they could make more money using the cheaper stuff. It’s in the nature of the large corporations to do so – numbers are all that really matters. I can’t pretend that I know how Food Should Taste Good makes their chips, but “streamlining” the production process is another way that companies can squeeze for more profit. In both of these cases, the final product is likely to be effected.

I don’t yet have faith that conventional consumer packaged goods companies understand the very customers they’re looking to gain by buying these companies. While price is always a factor in any buying decision, the quality of the final product tends to be the primary factor for people that are buying health/natural/specialty foods. We know that even the cheapest product in these categories will likely cost more than it’s conventional counterpart, so the customer needs to feel that the quality of the final product justifies the premium price. Just ask Metro about the dangers of low cost options – having a Gluten Free product recalled for containing Gluten can not have had a positive impact on their store brand specialty products.

In the short term, this will look good for the consumer – increased availability, and likely some new product innovation. I, however, will keep a curious eye on the final product.

Two quick case studies, so you don’t think I’m coming out of left field:

In the 90’s, Humpty Dumpty came out with a line of potato chips called “Extreme”. They were slightly bigger bags than they’re competitors, and they had a ton of flavouring on them. For 6 months, they were the most popular thing in the chip aisle in the store I was working at. Then, the tinkering began…. the bag became smaller, and there was less flavouring in each bag. The product line disappeared as quick as  it arrived. The people making the decisions didn’t understand what it was that was making their product so popular, and they made their product just like everyone else’s. I still dream about Extreme Buffalo Wing chips….

Kraft Foods bought Christie in the early 2000’s, if memory serves. The reason I can’t nail it down in my head is because Kraft didn’t really change anything when they took over… Christie ran like it always did. That went on for a few years, and then the efficiencies began. When I went back to working in a discount grocery store in 2009, Christie no longer had their own sales reps – the Kraft guy was taking care of everything. One person doing more work NEVER leads to better quality work, and since the Christie’s (and now Kraft) reps actually wrote the orders for their stores, their work was kind of important. Then, Christie eliminated their warehouses and started using a third party logistics company to both warehouse and deliver their products. Deliveries started arriving late or not at all. Sure, I imagine that the Christie’s operation is costing Kraft less money, but I also will tell you that they went from being one of the best suppliers I worked with at the store to average at best. Eventually, that catches up with the bottom line.

Brent

April 17, 2012 Posted by | Industry | 1 Comment