General Mills buys Annie's in bet on organic

General Mills (GIS) is buying Annie’s (BNNY) – the organic food company best known for its mac and cheese – for $820 million dollars in cash.

It’s the latest sign that corporate America is betting on organic. Earlier this year Wal-Mart (WMT) announced it would begin carrying products from Wild Oats Marketplace in an attempt to drive down organic food prices.

Not everyone is a fan of Corporate America’s new organic thinking, however. Many of the customers of organic brands oppose the corporations who are now supporting them.

"Organic is getting corporatized," said Yahoo Finance Senior Editor Michael Santoli. "Which brings up the question, does that in itself kind of dilute whatever value there was in the organic label."

The outcry on Annie’s Facebook (FB) page reflected the contradiction. Buckminster Phuller posted, “I will miss you Annie’s. Enjoy your money. I will never allow my family to eat your products now that they will be tainted by GM.”

Another user, Robyn Quinn, commented, “You say that things won’t change but selling out to a huge corporation knowing what they stand for which seems to be the exact opposite of what you stood for…. Very sad.”

A central controversy in the Annie’s, General Mills’ deal is the labeling of genetically modified (GMO) products. Annie’s has pushed for stricter regulations of the products, while General Mill’s has lobbied against measures.

GMO labeling is an ongoing consternation for the food industry. For example, restaurant chain Chipotle (CMG), which was one of the first advocates for better labeling, says, “In the United states at this time… there is currently not a viable supply of responsibly raised meets and dairy from animals raised without GMO feed.”

As of 2013, 90% of the corn grown in the United States is genetically modified. To complicate things further, GMO products can still be labeled as “natural” under current rules, though that may be subject to change.

According to Santoli, “It’s subjective. It’s a little bit of a bureaucratic game.”

Not only that, but insistence on organic food is not currently sustainable for the masses.

“There’s simply not enough certifiably organic or non-GMO foods to feed the world right now,” added Santoli. "It can't all be [organic]."

Which is to say, a large portion of the organic and natural food movement may be about perception and peace of mind.

“What Annie’s actually sells, in addition to mac and cheese and little snacks, is parental guilt mitigation product,” Santoli said. "I am somewhat experienced [in this]," he added. Parents often feel guilt feeding their children packaged products in post the slow-food movement, so organic packaged food might ease their pain.

“Annie’s is probably the most resonant brand in terms of kid-focused, organic stuff,” he said.

Despite the backlash against the company’s move into General Mill’s mainstream fold, Annie’s will be just a small portion of GM’s business.

“The big food companies are facing a very kind of difficult road, not just because they don’t really have the very popular kind of organic and non genetically modified type foods that seem to be the growth areas, but because their core businesses, like cereal, like crackers, are not actually doing that well,” sad Santoli.

Cereal, dough and vegetable sales are falling and just last month, General Mills slashed the salary of CEO Ken Powell by 6%. The company’s stock, though, is up about 9% in the past year.

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