Plant-based dairy alternatives beyond beverage are fertile “growth plot,” WhiteWave CEO says

By Elizabeth Crawford

- Last updated on GMT

Source: WhiteWave Foods
Source: WhiteWave Foods

Related tags Convenience store

WhiteWave Foods’ efforts to expand the plant-based dairy alternative category beyond beverage and outside of the natural channel already is paying off for the company, and it holds significant promise for the larger category’s and retailers’ future, executives suggested during the firm’s third-quarter earnings call Nov. 9.

Strong organic sales of WhiteWave’s existing plant-based food and beverage brands, as well as positive returns from recent acquisitions in the category, helped the Denver-based company increase net sales 20% to $1 billion in the quarter – a first for the firm.

Specifically, the firm’s Americas plant-based foods and beverage platform increased 41% in the third quarter. Most of this growth came from the firm’s core portfolio, which includes iconic Silk soy milk, but sales also came from recent acquisitions, including So Delicious, which closed a year ago, and Vega, which the firm bought two months ago.

Growth drivers

“We’re very, very pleased with how plant-based is performing overall. This is a category that is growing mid-single digits, up against very strong comps from last year,”​ said CEO Gregg Engles.

He attributed the growth in part to a shift in conventional milk prices, which he says are volatile and, therefore, can’t be relied on as a consistent growth driver.

The category’s overall growth also has benefited from increased private label sales, which currently hover around 13%, but which Engles predicts will reach the mid-teens. This expansion cuts both ways for the brand. On the one hand it increases competition, but it also is leading to higher merchandising levels of branded products to help balance private label on store shelves, and it is raising general category awareness and visibility, he said.

WhiteWave has benefited from lower levels of competitive advertising while it has maintained its marketing efforts. Again, Engles notes that this shift cuts both ways – giving WhiteWave unhindered reach to consumers, but also reducing the overall category’s visibility, which benefited from competitors’ advertisements in the past.

“It’s a new category; you have to remind consumers that when they go to the grocery store, they should put a plant-based beverage in their cart. And as an industry, as a category, we’re spending less money doing that, even though Silk as  a brand is spending more,”​ he said.

Finally, innovative product launches also helped drive growth in the plant-based segment, including the recent launch of Silk Cashewmilk, including ice creams, coffee creamers and whipped toppings, Engles said.

He added that WhiteWave is committed to continue to innovate in the category beyond just the beverage space and that in 2016 it will explore more opportunities for plant-based yogurt, frozen ice cream, novelties and “any others that we may uncover along the way.”

Driving overall category growth

WhiteWave’s success in the plant-based dairy alternative segment and dedication to expanding offerings beyond beverages is helping to drive growth in the category at large.

The firm noted that as a whole nut-based beverages grew 11% to $1.3 billion, frozen desserts and novelties grew 23% and yogurts increased 34% to undisclosed amounts.

“What you’re seeing is a natural evolution of these businesses as these categories get large and as household penetration builds towards maybe it’s more natural level,”​ Engles said. But in order to do this, “you have to innovate and you have to reframe the categories in order to sustain growth and we feel very good about our plot in that regard,” ​he added.

Expanding retail access

WhiteWave also is exploring ways to expand access to plant-based dairy alternatives beyond the natural channel – so increased penetration in conventional grocery and convenience stores.

The company already plays mostly in the conventional space with its large, well-known brands, but it is seeing conventional retailers building their business in natural, organic and better-for-you products, which creates more opportunities for manufacturers and retailers alike.

However, Engles cautioned that “when a lot of these products move to the traditional channel … they’re small, and in the traditional channel they have a hard time getting traction,”​ but they can improve their chances and the overall category’s success if they “tell consumers that they’re there. Particularly on the branded side of the equation, and that requires marketing and promotion and lots of other things.”

With that in mind, he said, “I think the transition from the natural channel to the conventional will not be as seamless as you might think it would be on first blush,​” because “now you’re a small part of what’s a very different portfolio for shoppers.”

WhiteWave also sees potential for growth in convenience stores, but Engles acknowledges there are several challenges the brand must overcome to fully capitalize and partner with these retailers.

He explained that the majority of WhiteWave’s offerings for convenience stores currently are not for resale, but rather about providing a “better coffee bar solution for a convenience store operator,”​ with its bulk creamers and portion control creamers under the International Delight brand, which can help drive foot traffic in stores.

But he says there are other ways for the brand and retailers in this channel to develop sales potential. For example, he said, WhiteWave is currently testing in several regions providing Silk in more convenient on-the-go formats.

Before WhiteWave can fully capitalize on the potential of the immediately consumable beverage in the away-from-home market though, CFO Kelly Haecker said the company needs slightly different manufacturing capabilities than it currently has.

“Those products really want to be aseptic so they can be distributed in a non-refrigerated way. You can make it work – refrigerated, but it is somewhat more challenging. So we’re sorting through a lot of those things behind the scenes in terms of how we get the right product format and formulation available to go to those marketplaces,”​ Haecker said.

With that in mind Engles emphasized the firm is currently just testing the channel and keeping an open mind.

Overall though, Engles said plant-based dairy alternatives are “a good growth plot going forward.”

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