Organic Pasta Maker's Shares Soar in Debut

Daily Herald (Arlington Heights, IL), March 29, 2012 | Go to article overview

Organic Pasta Maker's Shares Soar in Debut


Byline: Associated Press Associated Press

NEW YORK -- Investors ate up shares of pasta maker Annie's Inc. Wednesday, which had the biggest opening day gain for an IPO this year. It's the latest sign of the pull of natural and organic foods for consumers.

Shares soared 89 percent to close at $35.92. Shares of Proto Labs Inc., a Maple Plain, Minn.-based provider of custom parts, soared 81 percent in their first day of trading in late February.

Best known for its signature macaroni and cheese with pasta shaped like rabbits, Annie's now makes about 125 organic and natural food products and is sold in more than 25,000 store locations, almost all in the U.S. Its focus is catering to what it calls "gatekeeper moms," who are willing to spend 25 to 30 percent more for a healthier alternative to staples such as crackers.

"This isn't a surprise. It is a brand name that everyone knows, and the natural organic food sector is pretty hot right now," said Tiffany Ng, a research analyst at IPO investment advisory firm Renaissance Capital.

The U.S. is the world's largest market for foods labeled organic and natural, with sales exceeding $40 billion in 2010, Annie's said in a filing with the Securities and Exchange Commission. The company said that it expects demand for such products to grow faster than demand for food overall.

A tough economy has kept shoppers' appetite for some pricier organic foods in check. In 2004, 13 percent of 5,000 shoppers polled consumed an organic beverage or food at least once every two weeks, according to market researcher NPD Group. That figure went up to 25 percent in early 2008, but growth has stalled, according to Darren Seifer, NPD's food and beverage industry analyst. He noted that the market for organic products has skewed more toward wealthier households that have combined income of at least $100,000.

But Annie's momentum hasn't slowed, partly because the company markets products as affordable, according to CEO John M. Foraker. He said that Annie's products have an average cost of $2.50.

The Berkeley, Calif., company, which started out in 1989 selling products to regional supermarkets and small natural food stores in New England, now derives 30 percent of its overall sales from big discount chains including Walmart Stores Inc. …

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