Living in central Vermont, with its population of less than 100,000 people spread among many small towns, has its pluses and minuses. On the plus side, until this weekend, I had never heard of Imagination Farms, the company selected by The Walt Disney Company to market the Disney Garden brand of fresh produce (hat tip to Ethicurean).
It got me thinking about why a massive worldwide entertainment company like Disney would get into a line of business like produce. After all, it’s really difficult to mark up produce, especially as you add companies between farms and consumers, and even harder when one of those companies is one of the world’s premium brands. I decided to dig a little deeper.
I found very little. Disney makes no mention of Disney Garden or Imagination Farms in its 2008 SEC 10-K filing, and Imagination Farms hasn’t had a press release since mid 2008. So, I pieced together what I was able to find in hopes of drawing an intelligent conclusion regarding Disney’s strategy. Here are some highlights of what I was able to uncover:
- Disney is the #1 family lifestyle brand, #1 brand in entertainment, #1 brand for families with children under 12, and #7 overall brand in terms of its value, which is calculated to be worth over $26 billion dollars.
- Consumer Products has been Disney’s fastest growing business segment for the last two years: 26% growth in ’08 (v. 7% overall) and 9% in ’09 (v. 5% overall). Revenue in 2008 was $2,875 million, led by Hannah Montana and High School Musical brands, and accounted for less than 8% of total revenues.
- Consumer Products gross margins were approximately 25%, second to Disney’s Media Networks (30%), and substantially higher than Parks & Resorts (16%) and Studio Entertainment (15%).
- Imagination Farms (I-Farms) buys and packages organic and conventional grown fruits and vegetables from farms and co-packers in North and South America. A co-packer is a company that manufactures and packages foods for other companies to market and distribute. Co-packers work under contract with the hiring company to manufacture food as though the products were manufactured directly by the hiring company.
- Disney Garden packaging encourages kids to visit the I-Farms web site, where they are asked to provide demographic and eating information, download collections pages for collecting stickers on fruits and vegetables, and engage in Disney-branded activities, among other things.
- According to I-Farms, “Children age 4 to 12 are definitely consumers and influence over $30 billion dollars in consumer spending…of which food and beverage is the number one category.”
- Packaged Facts reports that U.S. sales of licensed food and beverage products aimed at kids in the 3 to 11 age range rose by 10% in 2006, to $746 million (source).
- Disney had a 10-year exclusive pact with McDonald’s — valued at $2 to $3 billion in promotional value and royalties — that expired in 2006. At the time, executives at both companies indicated they will continue working together on a project-by-project basis.
From a purely business perspective, Disney may be trying to back fill its Happy Meal revenue stream. But what seems more plausible is that Disney Garden is mostly about its public relations value in promoting Disney entertainment properties, while countering years of being associated with fast food. After all, Disney is not branding highly-processed foods, which would provide them with better margins than produce. What that leaves is a product line that will be hard pressed to match Disney’s Consumer Products gross margins (25%).
It also gives Disney thousands of mini billboards in 18 of the top 20 mass and grocery retailers across America where it can effectively promote Disney’s more valuable business segments, especially its characters, films and TV shows.
Is this a smart business strategy? Sure. Is it good for specialty crop farmers? Not in my opinion, since it will likely take shelf space away from sustainable, organic and local produce in conventional food retailers, which means less sales and profits for small to medium sized farms. It also keeps farmers in the background, as I-Farms and Disney Garden dominate packaging, displays, and associated web properties. Which brings up an interesting point. There is no Disney Garden. Like many of Disney’s characters, it only lives in our imagination.
What we need to see more of is brand credit going to the real heroes (not Disney characters) that work hard day in and day out to sustainably grow fruits and vegetables for our enjoyment. Of course, I’m talking about farmers. One way we might accomplish this is by having a handful of the leading agents representing chefs, who have seen their stock rise substantially over the last decade, take on farmers as clients. Who knows, maybe Disney will end up creating a family-friendly version of Jerry Maquire (1997 Best Picture award nominee) that replaces professional athletes with world-class organic farmers.
Perhaps I’m dreaming, but if there is one thing Disney has taught me over the years, it’s that dreams can come true.
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Very fair post Rob. Great work on ferreting out the info form the 10k SEC filings! I used to do that back when i was a derivatives trader! hehe I’ll link manana
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Very happy to have found this intelligent blog about food.