WhiteWave, maker of Silk soymilk, is purchasing the nation’s largest producer of organic produce, Earthbound Farm. Organic industry observers are wondering about the fallout of this consolidation, which was announced Dec. 9. For WhiteWave CEO Gregg Engles, the road ahead is clear.
“With Horizon Organic and Earthbound Farm, WhiteWave will now provide the two most popular gateways for consumers to enter into the organic category—produce and dairy,” he said in a press release.
The purchase comes barely a year since the initial public offering of WhiteWave stock, after it was spun off from its parent company, Dean Foods. Perhaps “foster parent company” would be more accurate, as Dean Foods had purchased WhiteWave 10 years earlier. Dean Foods then reorganized its holdings, transferring the feel-good products, like Silk and Horizon organic dairy, in the Silk division, before spinning off WhiteWave. Today on the WhiteWave website you can see a picture of people doing yoga.
Earthbound Farm, which started in 1984 with a rented raspberry patch and a farm stand, went on to transform the way America eats salad; today the company controls 60 percent of the bagged organic salad market, which it helped pioneer. Along the way, Myra Goodman, who started Earthbound Farm with her husband, Drew, has used her stature to further the cause of clean, fresh food. The Goodmans’ success, from such humble roots and with such good intentions, sounds like a foodie fairy tale.
But some are forecasting dark clouds over the WhiteWave buyout, as it invokes the specter of Dean Foods, the nation’s largest dairy company. Soon after purchasing WhiteWave in 2002, American organic soybean growers, who had been supplying Silk’s primary raw material, were told they had to meet the price of Chinese organic soy, which was lower. Organic soy is labor-intensive and American farmers couldn’t go that low, so Silk began sourcing from China. After the company amassed a commanding share of the organic soy milk market, Silk switched its supply back to the U.S., but used conventional soybeans. Silk products got a downgrade from certified organic to the meaningless designation “natural.”
By this time, WhiteWave was a division of Dean Foods, and another Dean Food holding, Horizon, was transferred to WhiteWave. Horizon is the largest organic dairy in the nation, and the largest organic brand, period.
Dean Foods built Horizon using roughly the same principles and practices it used to make Dean Foods the nation’s largest dairy—mainly, it gobbled up smaller dairies. In the case of Horizon, many small organic dairies saw core principles get tossed.
“The spin-off will provide WhiteWave with greater flexibility to build its portfolio of great-tasting, nutritious and responsibly-produced products,” said Engles, who, in addition to serving as WhiteWave’s CEO, is the former CEO of Dean Foods and still sat on the board of Dean Foods as of last May. “We look forward to our future as an independent company with a clear strategy, a leading portfolio of trusted brands and a culture of continuous innovation.”
Cornucopia Institute Co-director and farm policy analyst Mark Kastel fears that with the purchase of Earthbound Farm, WhiteWave is gaining undue influence in the industry. “This new acquisition even gives corporate lobbyists at the former Dean Foods/WhiteWave a direct conduit to the important National Organic Standards Board via John Foster, an employee of Earthbound and an NOSB member,” he wrote in a press release.
Samantha Cabaluna, vice president of communication with Earthbound Farm, dismissed the suggestion that WhiteWave would somehow control John Foster as “speculative.”
Cornucopia raises interesting concerns about the new WhiteWave, but got it backwards in claiming that, “After [Dean Foods] were done pillaging they then jettisoned the WhiteWave division earlier this year.”
If anyone was jettisoned it was Dean Foods, which was left with its conventional dairy business, while WhiteWave got the hottest, most profitable brands, including Horizon.
Now, WhiteWave has a lock on some of the most profitable industries in the country, including the largest dairy and vegetable producers in the fast-growing organic segment. Wall Street approved the merger, as the stock price soared 9 percent in the two days following the announcement.
WhiteWave says it plans to run Earthbound as a separate business unit, with no significant operational changes planned, and has expressed interest in keeping Myra and Drew Goodman on board as advisors and brand ambassadors. Similar promises were made to Whitewave/Silk founder Steve Demos. He told Bullfrog Films: “Dean Foods said, ‘We agree you have a culture, and we agree with the principles.’ That’s how I agreed to stay with Dean Foods and run Silk after its acquisition. I was told one week that I was doing a brilliant job and everything was working great, and the next week it was, ‘You’re not the right person for this job.’”
I asked Cabaluna at Earthbound Farm if the sale will mean big changes for her company.
“Absolutely not,” she told me by phone. “WhiteWave was interested in the purchase because they like what we do and want to expand on that.”