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General Mills Buys Out A Major Organic Food Company

Cereal giant buying small Skagit firm General Mills taps organic-foods source

Thursday, December 16, 1999

By BILL VIRGIN
SEATTLE POST-INTELLIGENCER REPORTER

A giant in the food industry is buying a small Sedro-Woolley company to tap
into the growing market for organic foods.

Minneapolis-based General Mills Inc., the parent of such cereal brands as
Cheerios and Wheaties, said yesterday it is buying Small Planet Foods for an
undisclosed sum.

Small Planet owns the Cascadian Farm brand of organic frozen fruits,
vegetables and juices, entrees and pickled foods. It also owns the Muir Glen
line of organic canned tomatoes, pasta sauces, salsa and condiments. Small
Planet has about 90 employees.

With just $60 million in annual sales, the Skagit County firm amounts to one
flake of cereal to General Mills, a company whose quarterly sales are about
$1.8 billion.

What interested General Mills in such a small company is the growth rate in
organic foods, estimated at more than 20 percent a year on a base of about
$4.7 billion in annual sales, according to one trade group.

Organic foods are generally defined as those grown without the use of
synthetic compounds for weed, insect or disease control, with certification
by a third party that organic methods have been used.

Cascadian was one of the first in that market.

The company was established by Gene Kahnin 1972 when, as an English graduate
student at the University of Washington, he "got romantically overwhelmed by
the notion of living in the North Cascades" and learning how to farm, Kahn
said in a P-I interview several years ago.

Kahn said yesterday he is "overjoyed" with the General Mills deal, not just
for what it brings his company ("we'll be able to choose from a menu of
resources, not just financial") but for the organic foods category as a
whole.

"Organics have a huge opportunity, provided we bring a more mainstream
consumer proposition forward," Kahn said. Becoming a part of mainstream
companies like General Mills will help lift organic foods beyond a niche
product and toward the industry's goal of accounting for 7 to 10 percent of
total food sales in 10 years, compared with about 1.5 percent now.

General Mills spokeswoman Pam Becker said Cascadian and Muir Glen were
attractive because the brands rank first or second in the categories in
which they compete.

"Small Planet is a highly respected company in the organic industry,"
General Mills Chief Executive Steve Sanger said in a statement. "They offer
great-tasting products and have well-developed sales and distribution
relationships with natural and organic food retailers."

General Mills hasn't done much to date in the organic category, although it
has introduced an organic cereal and is test-marketing an organic flour.
"We've had our eyes on the organic category," said Chris Shea, president of
new ventures at General Mills. "We've had limited success entering it on our
own."

General Mills wasn't specific about its plans for Small Planet beyond
expanding distribution of existing products and developing new ones. Kahn,
Small Planet's chief executive, will join General Mills as a vice president
and continue to lead Small Planet.

Small Planet has been owned by Trefoil Capital Investors II LLP, a
partnership owned by the investment company of the Roy Disney family, and GE
Investments, a part of the General Electric Pension Trust.

General Mills' other brands include Betty Crocker, Bisquick, Gold Medal
flour, Yoplait and Chex Mix.

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