In taking a closer look at WhiteWave’s recent acquisition of So Delicious, one key question comes to mind: doesn’t WhiteWave already sell almond milk?
It’s true that, even before the deal, WhiteWave has established its foothold in the alternative dairy category with Silk and, to a lesser extent, Alpro. Still, Sara Loveday, senior marketing communications manager for the company, spoke about the deal like an NFL general manager stockpiling assets. It’s a strong brand, she said, that offers growth potential and entry to new categories — namely, cultured products and plant-based frozen desserts.
Pat Finn, co-founder and managing partner at Finn Capital Partners, said there’s no question that the deal will lead to portfolio cannibalization. However, he likes the move because, to Loveday’s point, it gives WhiteWave a brand that has found rare cross-category success with both beverages and frozen desserts, which, he said, are high-growth areas.
So long as WhiteWave establishes unique positioning for Silk and So Delicious almond milks, both brands can coexist in the same beverage category, he said.
“There’s plenty of evidence that seemingly cannibalizing brands can live under an umbrella,” Finn said, “but it takes some hard work to make sure that they stay differentiated.”
There are plenty of avenues that WhiteWave could explore to clearly differentiate the pair of brands, he said, such as the shifting of price points to separate the premium brand from the staple brand.
Keeping a close eye on WhiteWave is Greg Steltenpohl, founder and CEO of Califia Farms, which markets its own line of almond milks. He thinks the deal helps the plant-based milk category, especially if WhiteWave can rationalize SKUs between the two brands. Another potential route to differentiation, Steltenpohl said, could be to focus one of the brands on coconut milk and the other on almond milk.
“When you’ve got a category that’s growing 40 percent a year, having the largest player put more resources behind it is a good thing,” he said, “because our biggest task is to increase household penetration.”
Finn also commends the deal for its margin-boosting potential. By combining the businesses, they’re amortizing production costs, increasing volume and possibly combining sales and marketing efforts. These changes, he said, could give WhiteWave more pricing power in the marketplace. He added that the acquisition could be seen as a defensive play for market share as well.
“They’re buying it because they don’t want somebody else to buy it,” Finn said.
Before the ink dries, WhiteWave is unable to comment on upcoming plans for the So Delicious portfolio, Loveday said.
“Once the deal closes, we’ll certainly want to get to know the people, business and brands there before we make any assumptions or plans for the future,” she added.
However, even at this early juncture, Loveday said that consumers have individual preferences, enabling WhiteWave-owned Horizon Organics, a dairy milk brand, to coexist with Silk, Alpro and So Delicious plant-based milks. The category’s growth trajectory is strong, she said, and is aided by its lesser environmental impact and product attributes (zero cholesterol, 50 percent more calcium than dairy milk).
“[Consumers] seek out the benefits and the product attributes that they want, and we’re pleased to deliver both of those,” Loveday said.
Finn and Steltenpohl both said that this deal indicates the strength and strategic appeal of the category. Steltenpohl, an industry veteran who founded Odwalla, said that it used to take 12-15 years to make the leap from the natural channel to the mainstream channel. But that isn’t the case these days. He said that it’s taken fewer than four years for almond milk to make a conventional-channel push. And he’s pleased to know that WhiteWave is helping the category reach a further state of maturation with a robust three-tier structure: premium, standard and house brands/private label.
The WhiteWave deal could also be viewed as a barometer for the torrid period of merger and acquisition activity in the healthy food and beverage industry, Finn said. He believes that So Delicious’ cross-category success could leave the door open for future cross-category innovation. Pushed forward by WhiteWave’s development, alternative dairy ingredients will have the permission of consumers to enter different categories over the next five to 10 years, he said.
“I suspect with all the cash sitting on the balance sheet of strategics right now,” Finn said, “that we’re going to see kind of a long swing of these types of deals.”