'Organic' growth from Danone

Danone yesterday confirmed that it had increased its shareholding in US-based organic yoghurt maker Stonyfield Farm from 40 per cent to 80 per cent, reflecting the positive development of the organic food market in the US since the French group first invested there in October 2001. Danone did not say how much it had paid for the stake. With sales around $140 million in 2003, Stonyfield Farm is the largest organic yoghurt producer in the US and has seen its sales grow by an average of 20 per cent a year over the last decade, according to Danone. It is also one of the top four brands in the US yoghurt market as a whole, the company added. Food scares across the world have helped drive sales of organic food in recent years, aided by the 'natural' image of such products. The discovery of the first confirmed case of BSE in cattle in the US last month underlines the fact that these food scares are still very much a challenge for the food industry - and suggests that organic and natural product sales are likely to continue to benefit. Danone clearly believes so, and not just in the US either, with chairman Franck Riboud commenting that the company hoped to expand the marketing of Stonyfield Farm's products outside its home market. Not that Stonyfield has suffered too much from a mostly US-centric strategy in the past - it is already the world's biggest producer of organic yoghurt. But expanding into a competitive global market was always going to be hard to do alone, and Danone was the obvious partner following the acquisition of its initial stake nearly two-and-a-half years ago. Danone's investment in fact stemmed from a failed takeover bid for the company by Unilever, the Anglo-Dutch consumer goods group, which was not seen as a good fit by Stonyfield's chairman and founder Gary Hirshberg. Stonyfield has built a reputation as a natural producer through a range of activities, including the creation of a 'healthy' vending machine designed to offer an alternative to those selling confectionery and soft drinks. It also donates 10 per cent of its profits to environmental causes, a policy which Danone will continue. Danone is one of the biggest fresh dairy product producers in the US market with a 30 per cent share, but should see this rise to 34.6 per cent with the acquisition of Stonyfield Farm. Another French brand, Yoplait, is the market leader with 35 per cent, although its brands are in fact marketed in the US by General Mills. Danone has concentrated its efforts on expanding its bottled water business in recent years - it owns the Evian and Volvic brands, and, along with rival Nestlé, is one of the world's biggest water cooler suppliers - but it now appears keen to expand its dairy business. Last month, it acquired a number of Turkish brands from Nestlé, doubling its revenues in that market, but its attempts to negotiate the acquisition of Russian group Wimm-Bill-Dann ended in failure after the two companies could not agree on a price. Whether any part of the Parmalat empire will eventually tempt Riboud to change his mind remains to be seen, but with its three-stream strategy now firmly in place and most non-core units sold off, future dairy acquisitions from Danone are a distinct possibility.

'Organic' growth from Danone

Danone, the French dairy product, bottled water and biscuits group, may have said that it is not interested in acquiring any assets of bankrupt Italian group Parmalat, but this does not mean that it is not on the acquisition trail.

Related Topics