September 8, 2015

As the group works to focus on fresher, less processed food items that are in higher consumer demand, General Mills has agreed to sell Green Giant and its Le Sueur canned vegetable brand for $765 million to B&G Foods Inc. Under the terms of the deal, after the sale, which is expected to close in the fourth quarter, General Mills will continue to operate Green Giant in Europe and other markets under a license from B&G.

Begun 90 years ago as a healthy food option, Green Giant became a household name, fronted by its ‘Green Giant’ mascot in its commercials. But in recent years, U.S. consumers have turned away from frozen and canned foods, opting instead for choices they perceive as less processed and more natural.

In response, large U.S. food companies are working to re-brand themselves to tap into these changing eating and shopping habits. Last year General Mills bought the organic snack company, Annies, Inc. for $820 million, and in June of this year, Campbell Soup Co. announced it was acquiring the refrigerated hummus and salsa brand, Garden Fresh Gourmet Inc. for $231 million.  

The sale is widely believed to be an indicator of a broader divestiture by General Mills of its slower-growing brands, such as Hamburger Helper, to raise capital to fund the company’s future acquisitions in the natural food space. Reinforcing this view, the Wall Street Journal reports that the company said that the sale “reinforces General Mills’ strategic priority to shape its portfolio for growth,” and that the proceeds would be dedicated to debt reduction and share repurchases.

B&G Foods, owner of more than 40 brands including Pirate’s Booty and Molly McButter, has had a history of buying prominent, but struggling brands and returning them to a position of growth, as it did when it bought the Cream of Wheat brand from Kraft Foods Inc. eight years ago, turning sales around and increasing profitability. B&G, which posted revenue of $848 million last fiscal year, said it will double the marketing budget that General Mills had dedicated to Green Giant, especially for the frozen foods unit.

“Although Green Giant has struggled recently, it’s a truly iconic brand,” B&G Chief Executive Bob Cantwell said in an interview. “There is a lot of opportunity to move the needle up on this brand by being more innovative and reinvigorating the brand, as we’ve done with dozens of other acquired brands over the years.”

General Mills is not the only iconic brand to struggle as consumer tastes change. Campbell Soup Co. announced that revenue for the quarter ending August 2 fell by 8.6% compared to a year earlier to $1.69 billion on sales volumes that declined by 1% and a stronger dollar, while its U.S. soup business reported a decline in sales of 2%. The company hopes that its strategy of accelerating its entry into grocery store delis and the creation of its fresh-foods division will create a turn-around and drive long-term growth.