Drew Field
Direct Public Offerings
Case StudiesAnnie's Homegrown, Inc.

Annie's Homegrown, Inc.

First of the nine items in the "Screen Test for a Direct Public Offering," described in Chapter 5, is that "the company's business would excite prospective investors, making them want to share in its future." Annie's Homegrown, Inc. is in the business of marketing macaroni and cheese dinners, the kind that come in a box and are cooked in hot water. Not very exciting?

Excitement is that Annie's macaroni and cheese is "totally natural," compared with the Kraft product which so dominates the market. Bernie the Rabbit is portrayed on the box. Environmental messages are on the back. "Be Green" bumper stickers are available for customers who write in for them. Shares in the company's profits are donated in product and cash to charitable organizations in its "Community Enrichment Program." A company magazine, Be Green, features articles about helping the environment and society. Founder and "Inspirational President" of the company is Ann Withey, who lives on an organic farm and personally answers customer letters.

Money was certainly an important motivation for the offering. Expanding sales of grocery products these days means buying shelf space in supermarkets. Nearly all the proceeds were earmarked for paying "slotting fees" that have become necessary for the introduction of new products. Another critical objective of the Direct Public Offering for Annie's Homegrown was to bring its customers into share ownership. They would certainly be good future customers and they could be expected to bring in their relatives, friends and neighbors. As it turned out, the average investment, excluding one or two larger ones, was under $600. This fits with the customer demographics, of people in their 20s and young parents.

Annie's placed a "tombstone" announcement like a "cents-off" coupon in the box. (It tended to go into the boiling water with the macaroni.) A few other media were used for announcing the offering, as well. The major innovation in the Annie's offering began once a customer or other prospect responded by requesting a prospectus. Response could be either by telephone to an 800 number, mail to a post office address, e-mail or by viewing Annie's website.

Only the SEC's February 1995 "no-action" letter was available to guide us in designing the website. (As described in Chapter 7, "Selling Shares on the Internet," the SEC gave much more extensive guidance in an October 1995 release on electronic delivery of offering materials.) Most of us were surprised to find that about 30% of the initial responses came electronically. There were four different ways that requests needed to be handled, depending upon the prospect's residence, and the programming mechanics worked smoothly throughout the offering.