Health Drive by the Big Food Companies Continues: Danone Acquires WhiteWave Foods
Danone’s acquisition of WhiteWave Foods is the latest example of big food companies going on a health drive as demand for healthy food continues to transform the food industry. Nestlé’s recently appointed CEO with a background in the medical industry is a testimony to Nestlé’s goal to redefine itself as a nutrition and health company. Also, Mars’ recommendation for consumers to use its pasta sauces only once a week, is an example of the drastic measures food companies are taking to appeal to a new generation of consumer who want simpler, less processed healthy foods.
Whilst WhiteWave is far from a start-up company, its focus on health-positioned products like almond and other nut-based beverages has helped it climb the dairy ladder in the US quickly – it is now the fourth largest dairy company. Indeed, this acquisition will boost Danone’s presence in North America in the short run, but also offer overseas potential in the long run. WhiteWave could use Danone’s existing distribution network in China to expand its Silk brand to a non-dairy milk alternative market ten times the size of the US, and turnaround Danone’s growth trajectory in the country.
Danone’s exposure to Western Europe where it derives over a quarter of global sales has resulted in weak performance as a deflationary pressure in the region continues. With the WhiteWave acquisition, North America will account for 23% of Danone’s global sales and reduce its reliance on Western Europe. The US is the second largest market for non-dairy milk alternatives which includes the likes of almond, coconut and peanut drinks and WhiteWave dominates the scene with a 40% share.
Overall, this acquisition makes sense for both companies, given the synergies in product offer as well as their geographical presence complimenting each other. With demand for milk alternatives (WhiteWave’s main cash generator), growing, Danone’s existing distribution network can provide the expansion platform WhiteWave needs to leave a truly global footprint in fast-growing dairy alternatives.