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Case Study: From the Ground Up: Annie's Homegrown Builds a Vibrant Business in a Commodity Market

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Company: Annie's Homegrown
Location: Napa, California
Industry: Consumer packaged goods (B2C)
Annual revenue: Confidential
Number of employees: 65

Quick Read:

This case study outlines how Annie's Homegrown used grassroots marketing to propel itself from a home-based startup selling a commodity food item—packaged macaroni-and-cheese—in small mom-and-pop natural food stores to a business with products that are sold by supermarkets in all 50 states.

The keys to the success of Annie's Homegrown?

  • Grassroots marketing to build consumer demand
  • Great Web site marketing
  • A commitment to natural and organic foods and green packaging;
  • Promotion of social causes valued by its target demographic.

Challenge:


To stand out in a commodity business and achieve market penetration without compromising social values—and without the benefit of a fat marketing budget.

Campaign:

It's difficult to build a business on a commodity product, but savvy marketing that taps into consumers' deeply held values can make it happen. Annie's Homegrown is a case in point.

The company was founded by a woman with a vision: Annie Withey wanted to offer parents concerned about the environment and committed to feeding their children natural foods a convenient, child-friendly food in "green" packaging. The first product brought out by Annie's Homegrown was Annie's Shells & White Cheddar, in 1989.

The company started as most entrepreneurial companies do, on a shoestring budget, and so could not hope to compete with Kraft Foods and other mainstream consumer-product giants. Annie's didn't have—and still doesn't have—much of a budget for TV, radio, and print advertising, or fancy marketing initiatives. What the company does have is a unique story, an environmental "cause," great packaging, and all-natural cheese and organic durum semolina pasta.

Starting slowly, Annie's added a few more core products to its line, seeking maximum distribution in natural food stores, before seeking penetration in mainstream supermarkets. In recent years, Annie's has made significant progress in securing distribution in the nation's leading supermarket chains. How? Customer demand and the realization among mainstream food marketers that the little line was garnering respectable sales figures and profits.

Annie's marketing efforts, particularly online, included the following:

  • Annie's used its broker network to educate natural retail grocery personnel about the ingredients used in the products—how they are sourced, whether natural or certified organic.

  • Annie's understood that the consumer as much as retail personnel needed to have the kind of information about the product ingredients and how they are sourced. Accordingly, the company's Web site was updated to offer more detailed information about its products. Consumers could also email questions via the site and get online coupons that encouraged them to try Annie's products.

  • Tastings and demonstrations at many natural-product stores early on allowed consumers to see for themselves that healthy "fast food" could also be delicious. In the past, many consumers had tried natural easy-to-prepare foods but found them long on nutrition, short on flavor.

  • Annie's blog, dubbed "Bernie's Blog & Guest Book," enables consumers to post their observations about Annie's products. The sign-in page also gives consumers a toll-free customer service number.

  • Consumers can use the store locator guide on the Web site to find retailers in there area that stock Annie's products; consumers can also order products directly from Annie's.

  • Annie's Web site profiles the company's seven principal executives, making them human and approachable to the consumer.

  • Annie's Web site profiles the organic farm families the company works closely with to source its grains for its products.

  • Annie's Web site outlines the many programs the company supports—for example, organic and green causes, environmental studies and recycling. Annie's strives for environmental sustainability, and promotes this way of life to its business associates and consumers.

Bottom Line Results:

That shelf-stable natural and organic grocery products are enjoying industry sales growth of 20% per annum, while traditional grocery product sales are flat, hasn't hurt the little company "that could," either.

Annie's revenues have risen by 25% over the past year, prompting Wal-Mart to add Annie's to its grocery mix! Annie's is now No. 2 in the mac-and-cheese category, right behind Kraft Foods: not a bad place to be.

Annie's was able to capitalize on the trend of growing interest in natural and organic foods over the last couple of decades. However, the company's founders did not do so merely for business reasons or potential growth opportunities; rather, it was their way of life. As part of their overall corporate mission, they considered their products as an opportunity to educate the public about the important issues of sustainability.

Lessons Learned:

The company has never lost sight of its unique brand positioning; in fact, periodic new line extensions have continued to strengthen the core brand as its presence grows on the retail shelf. Products like "Bunny Shape with Yummy Cheese" for kids, and "Gluten Free Rice Pasta and Cheddar" are unique product offerings.

Consumers respond to Annie's and have a real emotional attachment to the brand; they enjoy the product and support the core brand message as well as the brand's causes. The motto "Eat Responsibly. Act Responsibly" resonates with them. Two very important demographic groups, moms with kids and college, endorse Annie's Homegrown and should keep the company in the chips.

Annie's developed a Web site that supports and markets the brand in a unique way (see Campaign section).

The Annie's Web site affords company executives and marketers a direct link with the consumer. The site has always been friendly, relaxed, and inviting, making interaction between the company and its customers a key marketing component.

When customers have asked for specific kinds of product, for example, Annie's has paid attention and added them to the line if they could source the proper ingredients and get the right flavor profile. Some consumers asked Annie's for a product with "orange" cheddar rather than the company's customary white cheddar. Annie's complied when it found a way to take real aged Wisconsin cheddar and color it with annatto, a natural dye from a plant.

The Web site enables the consumer to understand Annie's philosophy of doing business, and its unique products are fully explained on the site. The site also invites consumers to partner with Annie's—and earn a commission for themselves by referring friends. These "partners" even get a free Annie's banner guide to post on their own Web sites. Very smart marketing on a shoestring.

The goal: to sell more Annie's products, spread the word about Annie's in a grassroots marketing push, and support organic farming in meaningful way. As a small company, Annie's has relied on grassroots marketing rather than advertising to sell its products. Doing so has worked well for the company, in the process forming a meaningful community among its customer base.

A visit to garner marketing ideas at www.annies.com is worthwhile. Besides offering consumers consistently flavorful, high-quality foods, Annie's supports organic farming, environmental causes, and kids' special programs.

And finally, Annie's packaging: The company still uses white, clay-coated, 100% recycled paperboard and water-based inks, making the packaging easily biodegradable. It is then finished off with an aqueous coating rather than varnish, purposefully avoiding a slick, glossy look. Every aspect of the packaging proclaims the brand's values.

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Ted Mininni is president of Design Force, Inc. (www.designforceinc.com), a leading brand-design consultancy to consumer product companies (phone: 856-810-2277). Ted is also a regular contributor to the MarketingProfs blog, the Daily Fix.

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