This week, the organic milk industry will be churning the impact of Groupe Danone’s shedding of its Stonyfield division, the world’s largest organic yogurt manufacturer and a major Northeast organic milk buyer. It’s doing so to avoid an antitrust run-in with the U.S. Department of Justice.
The divesture would also clear the path for Danone to move forward with its proposed acquisition of WhiteWave Foods. Danone, the French dairy giant, already owns Horizon and Wallaby brands.
Stonyfield, based in Londonderry, N.H., churns $370 million in annual sales. That makes it a tasty deal with analysts estimating a purchase price of more than $700 million. Potential big-name buyers, analysts speculate, include Chobani, Coca-Cola, Dean Foods, General Mills and PepsiCo.
Dampening a monopolistic move
In 2016, the Cornucopia Institute, an organic industry watchdog, formally challenged the WhiteWave acquisition in DOJ filings, noting its negative economic impact on U.S. organic dairy farmers. “We openly questioned whether Danone was interested in WhiteWave because of its role in organic dairy,” noted Mark Kastel, institute co-director. The divesture suggests Danone is more interested in WhiteWave’s dominance in the growing, more profitable “plant-based” beverage category.
Danone CEO Emmanuel Faber confirmed it in a company news release: “As part of the agreement in principle with the DOJ, we made the strategic decision to divest Stonyfield as it allows us to take a major step toward completing the WhiteWave transition expeditiously.”
WhiteWave brands are top sellers in their categories. Horizon organic milk controls nearly 25% of the organic milk market, while their Silk brand is a leader in plant-based beverages.
Danone owns a 21% stake in the Lifeway organic kefir brand. Adding WhiteWave’s Wallaby and Horizon Organic brand yogurts to Danone’s existing market share would have allowed the dairy conglomerate to control a sizable slice of the U.S. organic market.
The organic churn
Organic Valley, the No. 2 organic milk brand, is a member-owned farmer cooperative that has been the longtime raw milk supplier to the Stonyfield yogurt brand. If, after its acquisition, Danone had decided to dump Organic Valley, a Horizon competitor, as a supplier, it could have left only one major purchaser of farm milk in some U.S. regions, New England for one.
Organic Valley just launched a 50-50 joint venture with Dean Foods, the largest U.S. milk bottler, to process and market organic milk. Dean, WhiteWave’s former owner, has been without an organic offering since the spin-off of its former branded products division. The Stonyfield sell-off may put Dean Foods in a front-row seat at the auction.
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