Soy food venture just the start of Dean Foods expansion programme
the biggest US dairy processor, has said he is confident that the
recent acquisition of soy food producer White Wave will prove an
excellent investment as the market for healthy foods continues to
grow.
Gregg Engles, chairman and chief executive officer of Dean Foods, the biggest US dairy processor, has said he is confident that the recent acquisition of soy food producer White Wave will prove an excellent investment as the market for healthy foods continues to grow.
In an interview with The Wall Street Tracker which also included White Wave chairman and founder Steve Demos, Engles said that the decision to branch out into the soy food market via the White Wave acquisition was part of Dean Foods' desire to move into higher added-value products.
"Our goal is to become a more branded company. We're going to invest more in the brands that we own, and we hope to acquire brands of quality and potential with our cash flow. Over time, that will make us not only a bigger and more profitable company, but also a more valuable company in the investment community's mind," he said.
The first criterion for any acquisition, White Wave included, was that it generate good value for shareholders, Engles said, and that would certainly be the case with the soyfood maker.
Demos told TWST that the decision to sell the business to Dean Foods had been a relatively easy one and that it was borne out of the company's own success.
"The infrastructure requirements that we have in to keep up our growth rate would require either the construction of facilities or the contracting of additional capacity. That capacity is relatively limited, given our current contracts. So if the soy market is going to continue exploding at the rate that it recently has, then it's in our best interest [to join forces with Dean Foods] if we truly want to brand the category and lead it the way other categories have been lead by household brands. We don't want to be focused on building factories, we want to be focused on stimulating consumers."
Demos said that while there were numerous synergies between the two businesses already - such as the similar packaging for Dean Foods milk and White Wave's soymilk products - the acquisition would also involve substantial investment on the part of Dean Foods to accommodate the new soy-based brands. This, he sad, would nonetheless enable White Wave to take its soy beverages into channels of distribution that a small company would not be able to do in the short term because of the high cost.
Demos added that the acquisition of White Wave by Dean Foods would not mean a watering down of the smaller company's own beliefs and ethics. "We are a culture that resonates with a very specific consumer segment. That's what branding is all about. When you mention the brand name, it represents a meaning, a benefit to the consumer. Dean Foods has really appreciated this fact, understood it, and in no way stands in front of us in any form, but rather stands behind us, encouraging us to continue to develop that culture," he said.
Engles said that the White Wave deal was just the first step in Dean Foods move into the added value brand segment, and that other acquisitions would be forthcoming, although he declined to comment further on any likely contenders.
