Buyer’s Remorse: Why Bigger Natural Companies Often Aren’t Better

Lest anyone get us wrong, big companies buying small ones isn’t necessarily a problem for NBN.  Usually yes, but if Organic Valley for some reason were to buy up, say, Mozzarella Fresca, well, we wouldn’t really care about that one. But the difference is simple.  Most buyouts are efforts to maximize profits and have about as much to do with any sense of good beyond the bottom line as say, what Donald Rumsfeld has to say at a Quaker Meeting.

In addition to the no logic but profit mentality, there is another problem, one that even Wall Street insiders pay attention too.  This is what you might call the bureaucratic  two-pronged fork up the butt response to those intent on continuing innovation and entrepreneurship.  What usually happens when companies like Hain buy Spectrum or Zia or Hershey buys Scharffenberger and Joseph Schmidt is that paperwork and too many meetings take over, replacing enthusiasm with frustration.

A recent conversation regarding Powerbar suggests that the Nestle influence has had just this effect.  When I suggested that it must be more fun having the Nestle money to play with, I was quickly corrected. The Swiss Food giant has made the once innovative and quick to the marketplace company into a slow paced thoroughbred ready for the efficiency equivalent of the glue factory.

Conversation with numerous folks at other companies bought up by Hain are rife with stories about commission disputes, the inanity of who arbitrates them (meaning strangely enough the people at the top), and sales meetings where long timers are treated like interns, all suggest that Hain, which reported a 2004 net income of $27 million on 544.1 million in sales built mostly through acquisitions, will remain a neutral investment for bankers and for us, a company that has a lot to learn before it can add smarts and creativity to its growing list of assets.


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