Danone

Dive Brief:

• Horizon Organic and Wallaby, which offer organic dairy products, including milk, creamers, yogurt, cheese and butter, represent about 3% of Danone’s global revenues.
• Antoine De Saint-Affrique, Danone’s CEO, vowed last March he would improve performance in troubled offerings including Horizon Organic and traditional dairy, 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 key businesses.

In the time since he took the helm, the former Barry Callebaut chief has wasted little time making changes and pushing for growth at the France-based food and beverage giant. Earlier this month, Danone appointed three deputy CEOs to improve its decision-making, execution and growth.

Danone has also pushed innovation in many of its key brands. This includes two dairy-like plant-based alternatives, Silk Nextmilk and So Delicious Wondermilk, that the company says are more like their animal-based counterparts. Danone also expedited the rollout of Two Good smoothies, bringing the fast-growing yogurt brand into the portable space while building on its low-sugar, high-protein popularity.

But even with a strong portfolio built around plant-based milk and yogurt, traditional dairy, water and specialized nutrition, De Saint-Affrique has publicly announced he would not be beholden 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 will “keep pruning” its portfolio as it aims to boost growth and distance itself from its recent underperformance.

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 needs to “stay disciplined in how we allocate our resources, [with Horizon Organic and Wallaby falling] outside 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 may sell the brands. They represent a small amount of Danone’s global revenues and had a dilutive 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 to its most promising brands, Horizon Organic and Wallaby are logical targets to try to divest.

While it’s uncertain what will happen to the brands, or if Danone will even sell them once the review is completed, it could find a handful of willing partners if it does choose to unload them. A private equity firm could invest more time and resources behind the brands in a way that is harder for a big CPG.

Lactalis, which has rapidly grown its U.S. business through a series of deals including the addition of Siggi’s and Kraft Heinz’s natural cheese business, could be another buyer. The Parmalat owner is no stranger to dealing with Danone after purchasing Stonyfield for $875 million in 2017, which gave it a strong foothold in organic — the same category that Horizon Organic and Wallaby operate in.