GENERAL MILLS TO BUY SMALL PLANET FOODS

BARBARA MURRAY

MINNEAPOLIS, Minn. -- General Mills here has signed an agreement to purchase the privately held Small Planet Foods, Sedro-Woolley, Wash., a leading producer of organic food products. Small Planet's Cascadian Farm and Muir Glen brands are part of the acquisition, although Fantastic Foods, formerly part of the group, will stay with its former owner, Trefoil Capital Investors II, L.P., of Petaluma, Calif.

Although terms of the deal were not disclosed, the companies said Cascadian Farm organic frozen fruits, vegetables, juices and entrees and the Muir Glen line of organic canned tomatoes, pasta sauces, salsa and condiments, have combined annual sales of $60 million.

General Mills introduced its first cereal made with certified organic ingredients, Sunrise, earlier this year.

"It's a validation message to the industry," said Angela Sterns, executive director of the Organic Alliance, St. Paul, Minn. "It validates the integration of organics into the mainstream. A company the size of General Mills would never make such a purchase if they didn't see it as a growth opportunity."

Indeed, General Mills' Chairman and CEO Steve Sanger said the acquisition represents a strategic growth opportunity for the company and complements Sunrise. "Sales of organic and natural foods have been growing by more than 20% a year over the last five years, and this strong market growth is expected to continue," he said in a statement.

"Small Planet is a highly respected company in the organic industry. We're very excited about the opportunities we see for expanding Small Planet's existing product lines and developing new organic foods."

Gene Kahn, founder of Cascadian Farm in 1972 and current CEO of Small Planet Foods, will join General Mills as a vice president and will continue to lead the business, which will operate as a free-standing subsidiary.

"Our plans are to continue growing our brands and building our consumer franchise, and accelerating our growth. We see with General Mills an opportunity to expand our distribution and our product lines and to grow through acquisition. We are really excited about being part of General Mills," Kahn said.

However, Kurt Krahn, director of natural foods for the Copps Corp., Stevens Point, Wis., said "the trend in general of larger companies trying to gobble up the smaller ones is disconcerting to me. I think it has the potential to dilute the uniqueness of the natural foods industry. I hope we don't lose the diversity of product that has been made available by these smaller, privately held and often family owned companies."

But, Kahn told SN all distribution will remain unchanged. "We are communicating with our customers through our brokers. If people have questions, they can talk to their existing salespeople or call or e-mail Cascadian Farm. We are committed to continuing our typical promotional activities. We have no plans to change the frequency of our promotions," Kahn said.