Danone’s Purchase of WhiteWave May be “Defensive” But Allows it to Potentially Launch New Products Beyond Dairy

The French giant, whose brands include Activia yogurt and Evian water, did not exactly surprise the market with its purchase of Denver-based WhiteWave for $12.5billon last week, as WhiteWave-whose product portfolio includes fast-growing brands such as  premium milk label Horizon Organic, soymilk brand Silk and Earthbound Farm organic produce-had long been seen as a possible acquisition target.

 

The deal, Danone's biggest in 10 years, underscores the long-running industry trend of food giants hoovering up natural and organic food companies as consumers eschew packaged and processed foods.

 

The deal gives Danone a presence, which markets itself as a 'health and wellness' company, in the plant-based and organic produce categories,  which consumers perceive as healthy options, as well as coffee creamers, a growing category in the key market of the US.

 

According to Danone chief executive Emmanuel Faber, the tie-up will create a "refrigerated powerhouse" in the "stable geographies" of the US and Europe.

 

It comes as Danone looks to tap into double digit growth in the plant based dairy alternative market and offset flat liquid milk sales in the US and also offset a potential slowdown in sales in the Europe following the EU referendum vote.

 

Speaking to FoodIngredientsFirst, Christopher Shanahan, global product manager at consultancy Frost and Sullivan, pointed to Danone's dependency on dairy based products such as infant formula and yogurt which could be problematic in the long-term.

 

While yogurt is a strong growth category for Danone and infant formula sales are growing in Asia, it faces stiff competition and growth could taper off over time, experts warn.

 

Shanahan said: "There is some dependency there that in the long-run could be a potential disadvantage if there is not a lot of product portfolio diversification in terms of dairy alternatives.”

 

"Here in the US for example the consumption of liquid milk is decreasing and also the consumption of dairy in general, except for specific categories such as Greek categories, is diminishing.”

 

Shanahan said one upside from the deal is that it could allow Danone to expand into new categories.

 

"WhiteWave has a relatively protected market share, very broad product portfolio that includes multiple diffident types of vegetable based dairies,” he said.

 

"I think this is an opportunity for them [Danone] to expand into even new categories even outside of dairy, it gives them a connection to plant based raw material sources in the long run, so they could go into possible plant based ingredients and products, make soy based cheeses or tofus and the like."

 

While WhiteWave- which was spun out of Dean Foods in 2013- has been an undoubted success story, boasting annual sales of around $4bn with like-for-like growth of 10 percent in recent years.

 

One potential concern for Danone could be that its growth is projected to slow in the coming years to "high single digits".