Foundations of New Venture Finance 253As Good As It Gets
In 1989 Annie Withey used what she calls
guerilla marketing to get boxes of her new
natural macaroni and cheese product on
supermarket shelves. She and her husband
traveled to folk concerts, ski lodges, store
parking lots, and “wherever there were
crowds, handing it out, and saying, ‘If you like
this product, tell your stores,’” Withey relates.
The strategy worked. Today Annie’s
Homegrown, Inc., has nationwide distribution
of more than 80 natural and organic products,
including boxed and canned pasta meals,
boxed pasta, graham cookies, cheese crack-
ers, and boxed vegetarian Indian entrees.
The company is the second largest brand of
macaroni and cheese in the United States.
But Annie’s Homegrown
(www.annies.com) sees itself as much more
than a mac ‘n’ cheese distributor. These
entrepreneurs describe their venture as “a
good company with good people that makes
good food and does good stuff.” That good
stuff includes scholarships for college stu-
dents majoring in environmental studies,
donations of their crackers and grahams to
organizations that benefit education and the
environment, and involvement in other pro-
grams promoting organic agriculture, recy-
cling and earth-friendly programs. This com-
pany has a social mission in addition to its
profit motive.
Today, with over $34 million in annual
sales, Annie’s Homegrown is long past the
point where handing out samples in parking
lots is effective. But in 1998 when the com-
pany needed money to develop new products
and extend its market penetration, particularly
into mainstream supermarkets, it got invest-
ments from two small natural food compa-
nies, Consorzio and Fantastic Foods. Then in
2002 Annie’s made a deal for a cash infusion
of $20 million from Solera Capital LLC, a
$250-million private equity firm run by
women. “We had to look at the financial ram-
ifications, but for a company like Annie’s, a
cultural connection was critical,” Annie’s
Homegrown CEO John Foraker says about
the partnership.
Molly Ashby, CEO of Solera Capital explains,
“Solera’s investment in Annie’s is consistent
with our strategy of investing in category-
leading brands in markets poised for signifi-
cant growth. Natural and organic food is one
of these markets.”
Natural and organic goods are big busi-
ness today. According to the Organic Trade
Association (OTA), organic food sales topped
$13.8 billion in 2005, a more than 16 percent
increase over the previous year. Many con-
sumers are concerned about the harmful
effects of food additives, pesticides, and
genetically engineered ingredients in foods,
and are willing to pay more for high quality,
healthy foods. “We appeal to a consumer
who is less price-sensitive and willing to pay
more to feel good about what they eat,” says
CEO Foraker. While organic foods currently
represent only 2.5 percent of total food sales,
experts predict sales will continue to grow at
20 percent per year, with natural food sales
growing at 8–10 percent. Conventional food
sales are expected to languish at 1–2 per-
cent.
In 2004 Solera purchased Annie’s other
investors, Consorzio and Fantastic Foods,
and combined them with Annie’s Homegrown
to create Homegrown Naturals, Inc. Annie
Withey now serves as “inspirational presi-
dent” of that company.
SOURCE:Adapted from Tara Siegel Bernard, “Willing a
Place on Grocery Store Shelves,” The Wall Street Journal,
March 29, 2005: B3; “Solera Capital Acquires Majority
Interest in Annie’s Homegrown, Inc.,” from Homegrown
Natural Foods, Inc., August 13, 2002. Retrieved from the
Web July 21, 2006.
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