The Wall Street Journal: Soy milk’s popularity a headache for dairy industry

By Jacob Bunge and David Kesmodel


Bloomberg

Berkeley Farms products, a brand of Dean Foods Co., at Fog Hill Market in San Francisco.

Shoppers’ zeal for healthier foods and beverages has turned the tables on a small soy-milk supplier and its former parent, America’s largest milk processor.

A little over a year ago, Dean Foods Co. /quotes/zigman/21139747/delayed/quotes/nls/df DF +0.63% , a nearly 90-year-old dairy giant, spun off its Silk plant-based milks and Horizon-brand organic milk into a separate company, the WhiteWave Foods Co. In the past 12 months, WhiteWave shares /quotes/zigman/12497873/delayed/quotes/nls/wwav WWAV +0.60% have jumped 62% while Dean’s are off 17%.

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WhiteWave’s profit and sales are climbing as U.S. consumers embrace plant-based milks. Dean has churned out losses on falling domestic demand and higher costs for raw milk. Today, WhiteWave’s revenues are just a third of Dean’s, but its market value is more than three times its former parent.

Getting drinkers back in the barn won’t be easy. “It is going to be tough to buck the trend of declining consumption of [cow] milk in the U.S.,” says Ryan Oksenhendler, an analyst with Arlon Group LLC, a New York–based fund manager that owns WhiteWave shares. He says shoppers quitting cow milk and embracing soy, almond and coconut milks are feeding WhiteWave’s gains.

Dean executives aim to reverse its profit decline by cutting costs and expanding sales of flavored milks and higher-protein drinks, two niche products that are outperforming conventional, white milk. Dean shut eight of its roughly 80 plants last year and plans to close three more this year in an effort to navigate what its executives call the toughest industry conditions in memory.

“It’s uncharted waters,” Dean Chief Executive Gregg Tanner told analysts in May.

An expanded version of this report appears at WSJ.com.

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/quotes/zigman/21139747/delayed/quotes/nls/df

US : U.S.: NYSE

$ 17.61

+0.11 +0.63%

Volume: 2.47M

July 18, 2014 4:02p

P/E Ratio

4.87

Dividend Yield

1.59%

Market Cap

$ 1.65 billion

Rev. per Employee

$ 502,491

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/quotes/zigman/12497873/delayed/quotes/nls/wwav

US : U.S.: NYSE

$ 30.06

+0.18 +0.60%

Volume: 1.34M

July 18, 2014 4:03p

P/E Ratio

48.48

Dividend Yield

N/A

Market Cap

$ 5.23 billion

Rev. per Employee

$ 708,728

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