When the Big Guys Eat the Little Guys: A “Better for You” Screw Up?

General Mills has been very busy. 

Never shy to make major corporate moves, the multinational food conglomerate always has its eye on the prize, fearless in its constant drive to expand its portfolio, including in the “better for you” category. In fact, General Mills recently acquired GHOST, a sports nutrition brand that creates protein-rich cereal and considered a strong source of calcium.1 In the pet food realm, General Foods also recently acquired Fera Pets, a vet-founded pet supplement company as its first dip into the pet supplement category fleshing out the large company’s roster of brands.2

It’s only natural for large companies to be attracted to “better for you” brands that are making a splash, to bring them into the fold, increase consumer reach and, ultimately, revenue. But is there danger in making these kinds of acquisitions? What are the potential risks for large brands and small brands in these moves, and what could be the repercussions in terms of relationships with consumers? 

Why the Big Guys Buy

A standout reason why companies like General Mills seek out smaller brands to acquire is naturally driven by innovation. Despite their best efforts, multinational corporations in all industries are simply not designed to be nimble, simply due to the implications of their heavy size, and with this find challenges in moving past their dinosaur ways. They recognize that with innovation comes access to fresh minds and new ideas that have the capacity to transform a stodgy landscape. 

In addition to innovation, multinational companies stand to benefit from the edgier, more consumer-focused ideology that makes smaller brands more desirable to the average consumer. Sustainability is a huge factor – many consumers today are making purchasing decisions based on how aligned a brand is with sustainability, so with the right acquisition, the large company’s perception is naturally raised as eco-conscious. Rather having to implement a total overall in operations, multinational organizations can slide right in and reap the benefits of existing strategic sustainability efforts. 

Multinational brands also appreciate the nimble quality that smaller brands have had to adopt, necessary for the push and pull with competitors, demonstrative of a new level in efficiency. Smaller brands have identified alternative distribution methods (e.g., e-commerce), leverage social media effortlessly, etc. that has proven to be effective with modern consumers. This builds a unique strength, a muscle that larger brands simply cannot flex. 

At the end of the day, if a multinational brand is unable to properly align with these kinds of factors, a screw up is inevitable.

The Big Risk

Over time, consumers find comfort in engaging with brands they have established relationships with, especially in the “better for you” space as these brands support them in leading healthy, fruitful lives.

So, when a large conglomerate like General Mills steps in, big bucks in hand and ready to shake things up, it’s no surprise that consumers are skeptical – even fearful – as to how relationships will change. They’ve come to rely on how they engage with smaller brands – especially through social media – and if that changes, communication is cut off.

One of the biggest concerns from a consumer standpoint that, if not properly addressed, could cause serious issues: a change in transparency. In the “better for you” space, consumers must trust that a multinational conglomerate’s acquisition of a tried and tested smaller brand will not cause tampering with key ingredients and bring down the health value of products, especially without communicating crucial changes, all for the sake of the almighty dollar. 

It’s also important to remember what a shift in branding might look like for the smaller brand, specifically that they “sold out.” A change like this can significantly affect the power of the acquisition, leading to a drop in projected revenue growth, as well as incur long-term negative perceptions of the large brand and its entire portfolio.

Executives involved in the acquisition process need to develop and put in place plans that directly address the wants and needs of existing customers, not to mention in gathering new customers. And this must be done in a way that is truthful and transparent, as consumers can sniff deception a mile away, and could be the complete downfall of a completed transaction.

What to Watch

To some, brands like General Mills may seem safe and responsible simply due to their history and reach. However, today’s consumers must be watchful of the developments that proceed at the close of an acquisition. Even the best intentions of the new owners can become skewed in the process, ultimately translating into serious small brand shifts, leading to a decrease in true transparency, product integrity, and more. It’s up to us to keep an eye on changes within the industry so we can continue to engage with the brands we know and love, confident that they will continue to produce what we expect.

Consumers, stay vigilant.

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References

1. GHOST Collaborates with General Mills to Enter Functional Food Category. Nutraceuticals World website. https://www.nutraceuticalsworld.com/contents/view_breaking-news/2024-04-15/ghost-collaborates-with-general-mills-to-enter-functional-food-category/ April 15, 2024.
2. General Mills Acquires Fera Pets. Pets+ website. https://petsplusmag.com/general-mills-acquires-fera-pets/ November 9, 2023.