Analysts say the decision to buy the Denver-based company for 11.3 billion euros was based on Danone’s ambitions to expand in the American market that has seen a steady increase in the consumption of organic or healthier foods.
WhiteWave Foods also produces organic dairy products and plant-based dairy alternatives. Since its stock market flotation in 2012, WhiteWave has generated an annual increase in operating profit of 20 percent.
Their sales last year were close to 3.6 billion euros with a net profit of 152 million euros.
According to analysts, the deal will help Danone’s sales increase by 18 percent.
Danone’s shares got a boost following this announcement going up by 6.8 per cent to stand at more than 67 euros.
Stephane Bellon, an agronomist at the French National Institute of Agricultural Research based in Avignon, told RFI that such acquisitions in the organic dairy products sector have the potential of helping farmers.
“As far as milk production is concerned, there’s a crisis in France and elsewhere in Europe related to the price farmers are paid. Therefore organic farming appears as an option.”
“However, there’s a challenge to meet demand and supply not just for milk but for products derived for milk. After such there is potentially an increase in demand for organic dairy products. This could suit farmers who find it difficult to survive with conventional milk production or want to change their practices, e.g. with higher self-sufficiency,” he said.
He added that though it’s an opportunity, it’s a challenge as well.
“It’s important to ensure that the production potential and the way they implement organic practices can ensure a guaranteed supply in terms of quality production and ensure the farmers get fair price in the future.”