WhiteWave strategically expanding in key categories

by Monica Watrous
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With such brands as Silk, Horizon Organic and So Delicious Dairy Free, The WhiteWave Foods Co. leads in on-trend categories.

DENVER — With such brands as Silk, Horizon Organic and So Delicious Dairy Free, The WhiteWave Foods Co. leads in on-trend categories. The Denver company maintains a 57% share in the $1.2 billion category of refrigerated plant-based beverages, and its Earthbound Farm brand has a leading share position in organic packaged salads, said Gregg Engles, chairman and chief executive officer. With recent acquisitions, the company seeks to expand its presence in fast-growing categories, including plant-based nutrition and yogurt.

Strategic investments contributed to growth during the second quarter ended June 30. WhiteWave had net income of $37,444,000, equal to 21c per share on the common stock, up 9% from $34,407,000, or 20c per share, for the prior-year quarter. Net sales increased 10% to $923,632,000 over year-ago sales of $837,926,000. Excluding foreign currency translation, net sales were 14% higher over the previous year.

During the quarter, WhiteWave completed the acquisition of Vega, a Vancouver, B.C.-based leader in plant-based nutritional products, for $55 million, helping the company expand its global leadership position in plant-based foods and beverages. More recently, WhiteWave announced plans to acquire Wallaby Yogurt Co., an American Canyon, Calif.-based maker of Australian- and Greek-style yogurts, for $125 million. Executives said the transaction brings significant expansion and growth opportunities through combining Wallaby’s manufacturing expertise with WhiteWave’s sales, marketing and innovation capabilities. Wallaby is a leading yogurt brand in the natural channel with little distribution in traditional and retail grocery channels, according to WhiteWave.

WhiteWave recently acquired Vega and Wallaby Yogurt Co.

“There is a fistfight (in the yogurt category) because it is a several billion-dollar category that is still growing in the upper half of the single digits, and it is a category that when you comp it against other Western marketplaces around the world is still significantly underdeveloped from a U.S. perspective,” Mr. Engles said during an Aug. 7 earnings call with financial analysts. “So I think there is a fistfight because people perceive there is a big prize here, and we are not in the middle of that slugging it out in the more commoditized parts of the category where the vast majority of the volume is, but we're trying to pick places in this category that frankly are the highest growth portions of the category and the highest value-added portions of the category that frankly leverage some of our unique capabilities in places where we have differential competitive advantages.”

WhiteWave offers several dairy-free yogurt alternatives under its Silk and So Delicious Dairy Free brands, including cultured coconut milk and almond milk, as well as Horizon Organic yogurt in fat-free and whole-milk varieties.

“So, clearly in the nondairy space, we feel very strongly there that we have the opportunity to be the clear leader, and then Wallaby just so clearly leverages off of our organic milk supply and our ability to grow the business on a supply basis, which is extremely difficult if you are not already in that space, and our growing presence otherwise in the category through Silk and otherwise with the retailer,” Mr. Engles said. “So, it really plays to our strengths in and around the yogurt category, and we think leverages off the higher growing parts of the category.”

During the quarter, WhiteWave’s Americas Foods and Beverages segment, which includes plant-based foods and beverages, coffee creamers and beverages, and premium dairy, posted net sales of $640 million, an increase of 15% over the prior year, driven by volume growth and aided by pricing benefits from the premium dairy platform. Operating income for the segment increased 24% to $74 million.

Net sales for the Americas Fresh Foods segment, which includes the Earthbound Farm brand, declined 1% to $151 million, due to lower availability of fresh fruit and the company’s decision to exit agreements with certain low-margin fruit suppliers, which offset growth in organic packaged salads. Operating income increased 6% to $15 million, benefitting from continued supply chain and efficiency improvements.

Net sales for the Americas Fresh Foods segment, which includes the Earthbound Farm brand, declined 1% to $151 million.

“While the organic packaged salad subcategory was still rebounding, its 9% growth rate outpaced the total salad category in the second quarter,” Mr. Engles said.

For the Europe Foods and Beverages segment, which includes plant-based foods and beverages sold primarily under the Alpro brand, net sales increased 3% on a reported basis to $133 million and 23% on a constant-currency basis to $158, driven by volume growth across the entire European product portfolio. Operating income for the segment advanced 19% to $17 million.

Net income for the six months was $70,791,000, or 40c per share, marking an increase over net income of $66,767,000, or 38c per share, for the same period of fiscal 2014. Year-to-date net sales advanced to $1,834,773,000 from $1,668,149,000.

Based on strong first-half results, the company has increased its full-year outlook for net sales, adjusted operating income and adjusted diluted earnings per share. WhiteWave now expects to achieve net sales growth of 12% to 13% on a reported basis, or 15% to 16% on a constant currency basis. Management is forecasting adjusted diluted earnings per share to be $1.14 to $1.17, excluding investments in its China joint venture.
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