The economics of supplying plant-based foods and beverages over dairy will become increasingly compelling “because the cow is a relatively inefficient converter of grain into protein”, says the chief executive of WhiteWave Foods.
Meanwhile, consumers’ thirst for almond and coconut-based products in particular has shown no signs of abating, observed Gregg Engles on the firm’s Q3 earnings call.
He added: “While overall US grocery grew at an average of just over 1% between 2009 and 2011, our categories grew between 8% and 9% annually, and this momentum has continued in 2012.”
Dairy just gets more expensive
WhiteWave, which has just completed an IPO on the New York Stock Exchange, the first step in its separation from Dean Foods, is best-known for its soy, almond and coconut-based beverages under the Silk brand in the US and the Alpro brand in Europe, plus its Horizon Organic dairy operation.
Asked about the cost base at Horizon, which posted a decline in volume during 2012 following price rises, Engles said: “At the end of the day, the plant-based model is a lower cost model, because the cow is a relatively inefficient converter of grain into protein.
“So in what we believe will be a long-term inflationary environment, the cost advantage of plant-based over dairy, we believe, will continue to grow.”
He added: “Dairy just gets more expensive as it has to continually bear an increasing share of the externalities that have up until now been really not charged to dairy.”
Net sales growth of over 20% in the plant-based foods and beverages in North America
While soy-based beverages have lost momentum in recent years, “Silk Soy has continued to stabilize on the strength of one of our latest product innovations called Silk Fruit and Protein”, claimed Engles.
However, almond-based products continue to go from strength to strength, he said: “Silk Pure Almond was once again the strongest performer in the platform.”
Household penetration of plant-based beverages in the US has grown by 200 basis points
Over the past year, household penetration of plant-based beverages in the US has grown by 200 basis points to the highest reported level since the introduction of the category, he revealed.
“The most recent 12-week data show category growth continues to be over 20%.
“The strong growth in Silk Pure Almond, Pure Coconut, and Fruit and Protein resulted in third quarter net sales growth of over 20% in our plant-based foods and beverages in North America.”
People choose plant-based beverages for different reasons as opposed to cost
As for the impact of fluctuations in retail price on plant-based beverages on consumers, he said: “There is, I think, less cross-elasticity with plant-based beverages [versus dairy]. I think people choose those for primarily different reasons as opposed to cost.
“And those range across the spectrum from perceived health benefits, to perceived health conditions that people might have, like lactose intolerance or dairy allergy conditions, to a more social perspective on how they’re going to behave in the marketplace, because of sustainability or animal rights issues."
Innovation for 2013: Almond and soy yogurts have ‘outstanding potential’ in the US market
Asked about what is in the innovation pipeline in dairy-free at the $2bn+ turnover firm, WhiteWave president Blaine McPeak said there is “a pretty robust calendar here between now and January”.
First to hit shelves is Silk Fruity and Creamy Yogurt, which will begin shipping in the US toward the end of December, he said.
“We currently have plant-based yogurts under the Silk brand today. But in partnership with Alpro… who have a fantastic tasting yogurt [in Europe], we have been able to fundamentally improve the overall product performance of the launch that we have coming up here [in the US].
“They’re very very nascent, but we think we are doing it fundamentally better with both a soy and an almond offering coming into January of next year.”
…But the market will take time to develop
He said: “If you take a look at our overall Alpro business, they have a substantive part of their portfolio is in non-fluid areas such as yogurts and cooking creams and desserts. And we believe we can create a similar type portfolio in the US.”
Engles added: “There’s outstanding potential in this arena, and this is a powerful area where we’re going to leverage the knowhow across our business in growing the plant-based alternative to dairy yogurt business in the US.”
But he cautioned: “This is going to be a slow build, because I think there’s a bit more education that’s going to have to take place here among our consumers.”
WhiteWave as a standalone business
WhiteWave, which posted a 13% rise in adjusted net sales to $581m in Q3, has greater potential as a standalone company, said Engles.
Meanwhile, managers will be solely focused on WhiteWave, which as a public company will have an “enhanced ability to pursue strategic acquisitions”, he said.
WhiteWave recently agreed to sell certain assets to Morningstar Foods for $60m in connection with the latter's sale to Saputo.
Following the deal, Morningstar will continue to manufacture certain products for WhiteWave, and WhiteWave will continue its business relationship with Saputo, pursuant to which Saputo manufactures and sells WhiteWave products in Canada.
WhiteWave's US brands include Silk (plant-based foods), International Delight and LAND O LAKES (coffee creamers and beverages), and Horizon Organic (dairy products). Its European brands include Alpro and Provamel (plant-based foods).