When CEO John Foraker describes his 14-year stewardship of Annie's BNNY +4.81%, he sounds like he's losing his mind. "I live in a state of paranoia," he says of competitors that nibble like piranhas at his "healthy" food products. "I'm as obsessed with the big CPG companies as I am with the up-and-coming brands"--Kraft Foods on one side, smaller consumer packaged goods like Back to Nature Foods on the other. As they say in Catch-22 , "Just because you're paranoid doesn't mean they aren't after you."
A little maladjustment goes a long way in this business. Over the last five years sales have steadily grown at a 17% average annual clip. In the latest 12 months Annie's earned $11 million on $175 million selling nearly 150 healthier alternatives to junk food. (While its meals, snacks and dressings claim zero artificial flavors, preservatives or GMO products, its signature mac-and-cheese mix loses to Kraft on calorie count and fats, saturated and otherwise.)
As more Americans grab organic foods, Annie's continued success seems probable. So does Foraker's recurring nightmare: that the better he executes and the faster he expands, the more competition he creates. "To stay ahead, we've got to constantly move forward and put as many points of differentiation between us and them as possible," he says.
Annie's wasn't originally conceived as an us-versus-them proposition. Back in 1989 Annie Withey and then husband, Andrew Martin, had just sold Smartfood, a white cheddar popcorn, to Frito-Lay for $15 million or so. An experiment using Kraft macaroni and Smartfood's powdered cheddar yielded a tasty dinner for the couple--and a new business, as Withey and Martin peddled their wares at festivals and food co-ops along the East Coast.
In 1995 Annie's Homegrown completed a direct public offering, a little-used means of raising money from customers. Advertised with flyers in boxes of mac and cheese, the DPO raised $1.3 million. Three years later, with sales approaching $6 million, the company came to the attention of Foraker, a recent University of California, Berkeley M.B.A. grad who, with friends, had built Homegrown Natural Foods, a $10 million (sales) company offering flavored olive oils and mustards. Foraker was looking for a new brand. Read the full article...