Dive Summary:
- Danone said in a statement that it is exploring strategic options, including a possible sale, for its US organic milk business. The segment consists of the Horizon Organic and Wallaby brands.
- Horizon Organic and Wallaby, which offer organic dairy products including milk, creams, yogurt, cheese and butter, represent about 3% of Danone’s global revenue.
- Antoine De Saint-Affrique, CEO of Danone, vowed last March to improve performance at troubled offerings including Horizon Organic and traditional dairies, invest more in winning products and create value by selling existing brands or buying new ones.
Dive Insight:
Before De Saint-Affrique’s arrival, Danone, whose brands include Activia yogurt, plant-based Silk and Evian water, struggled with a stagnant share price and pressure on many of its core businesses.
In the time since taking over, former boss Barry Callebaut has wasted little time making changes and driving growth at the France-based food and drink giant. Earlier this month, Danone appointed three deputy CEOs to improve its decision-making, execution and growth.
Danone has also driven innovation in many of its core brands. This includes two plant-based milk-like alternatives, Silk Nextmilk and So Delicious Wondermilk, that the company says are more like their animal-based counterparts. Danone also accelerated the rollout of Two Good smoothies, bringing the fast-growing yogurt brand into the portable space, building on its low-sugar, low-protein popularity.
But even with a strong portfolio built around plant-based milk and yogurt, traditional dairy, water and specialty food, De Saint-Affrique has publicly announced it will not be committed to any one brand.
In announcing a review of the company’s portfolio in 2022, he said there were no “sacred cows” and that the dairy giant would “continue to trim” its portfolio as it aims to boost growth and distance itself from underperformance. The last.
In a statement announcing the review of Horizon Organic and Wallaby, De Saint-Affrique said they are strong brands with “compelling growth opportunities”.
But Danone must “remain disciplined in how we allocate our resources, [with Horizon Organic and Wallaby falling] outside of our priority growth areas of focus,” he said. “Exploring strategic options for these brands will enable them to get the focus and resources they need and therefore allow them to maximize their potential and unlock further growth.”
It’s not hard to see why Danone could sell the brands. They represent a small amount of Danone’s global revenue and had a dampening impact on Danone’s like-for-like sales growth and recurring operating margin in 2022. For a company looking to increase growth and shift its resources in its most promising brands, Horizon Organic and Wallaby are logical targets to try to divest.
While it is uncertain what will happen to the brands, or whether Danone will sell them once the review is complete, it could find a handful of willing partners if it chooses to offload them. A private equity firm can invest more time and resources behind brands in a way that is more difficult for a large CPG.
Lactalis, which has rapidly grown its US business through a series of deals including adding the natural cheese business of Siggi’s and Kraft Heinz, could be another buyer. Owner Parmalat is no stranger to dealing with Danone after buying Stonyfield for $875 million in 2017, which gave it a strong foothold in organics – the same category in which Horizon Organic and Wallaby operate.
