French dairy giant Danone is expanding its infant formula empire after agreeing to buy a majority stake in US plant-based company Kate Farms.
Already the world’s second-largest formula maker, Danone is looking to expand its US footprint and dairy-free portfolio with a deal to acquire plant-based firm Kate Farms.
The French dairy giant has announced that it has agreed to take a majority stake in the Californian startup to strengthen its specialised nutrition offerings. The financial terms of the transaction have not been disclosed, and it is subject to regulatory approval.
Kate Farms will join Danone’s established baby formula portfolio, which includes Aptamil, Neocate and Pepticate. The deal will help the company broaden its reach in the US – despite its global production footprint, it only commands about a 5% market share for formula stateside.
“We are excited to be working alongside Danone, who share our mission. We are both focused on going above and beyond to help people with health needs and the medical professionals supporting those needs in the US,” said Kate Farms CEO Brett Matthews, who will now serve as chairman and CEO of Danone’s North American Medical Nutrition business.
It currently offers products for both everyday and nutritional needs of kids and adults alike. These include pea-protein-based nutrition shakes in several flavours and formulations, pediatric blended meals and peptide shakes, and shakes for glucose and renal support.
The company has raised $188M in funding over several rounds, including a $75M Series C round led by Novo Holdings, the parent company of Ozempic and NovoRapid manufacturer Novo Nordisk.
It is now part of Danone’s extensive plant-based portfolio, which includes brands like Silk, So Delicious, International Delight, and certain Actimel products in the US, and Alpro in the rest of the world.
“As a business founded on and guided by deeply held values, it was important for us to partner with an organisation that is aligned with our mission in this way, and we believe Danone is the perfect fit to continue to make nutrition the foundation of health,” said Matthews, who joined Kate Farms in 2015.
The acquisition will help bring Kate Farms’s products to a wider range of hospitals and consumers across the US, but elsewhere too. “Building on Danone’s expertise, we can also expand internationally,” Matthews said.
Danone looks to take hold of dairy-free infant formula category
Infant formula is a $56B market monopolised by dairy formulations and a handful of industry giants (such as Danone), which leads to supply problems like the infamous shortage in the US three years ago. That poses a problem for the many mothers who are unable to or don’t want to breastfeed.
About 5-10% of women are physiologically unable to breastfeed, and many more say they’re not producing enough or have nutritional deficiencies in their milk. In the US alone, less than half of women continue to exclusively breastfeed after three months, and only a quarter keep doing so at six months, the recommended period by the American Academy of Pediatrics.
Meanwhile, 90% of formula products on the market are dairy-based, and the rest usually contain soy or rice. But these are some of the most common allergens in the US, where 2% of infants suffer from milk allergies alone.
It outlines the need for companies like Kate Farms, which has sustained its business in what is a tough market to crack, as can be evidenced by brands like BéBé M and Earth’s Best, whose dairy-free offerings are no longer available.
But with the plant-based baby formula market set to expand by 7.8% annually until 2029, Danone is hoping to seize on the opportunity, adding to its plant-based offerings from Neocate. As a behemoth valued at $57B, its strength and market position will only help Kate Farms and the wider non-dairy formula category.
In 2023, Danone also signed a letter of intent to license Canadian firm Else Nutrition’s vegan formula under its own branding, though there has been no public update since.
Its impending acquisition of Kate Farms comes during a time of rampant M&A activity in the plant-based sectors, with companies like Wicked Kitchen, Deliciously Ella, Nuggs, Vertage, Blackbird Foods, and Allplants all being acquired in the last 12 months.
Aside from Kate Farms, Else Nutrition and Danone’s Neocate, other brands offering dairy-free toddler drinks include Enfamil’s ProSobee and Similac’s Soy Isomil in the US, Nestlé’s Good Start Alsoy in Canada, Sprout Organic in Australia, and Grow with Iris in the UK.
You can now read the most important #news on #eDairyNews #Whatsapp channels!!!
🇺🇸 eDairy News INGLÊS: https://whatsapp.com/channel/0029VaKsjzGDTkJyIN6hcP1K
