WhiteWave Foods Company (WWAV, Financial) is a consumer packaged food and Beverage Company, which manufactures, markets distributes and sells branded plant-based foods and beverages, coffee creamers and dairy products in North America and Europe. The company has a diversified cost base with an efficient and modern supply chain network.
WhiteWave Foods provide plant based foods and beverages products including soy, almond, coconut, hazel and oat based products like Silk soymilk, Silk almond milk etc. With increasing health consciousness amongst the people, plant based products has gradually become a favourable option.
Also, since the company aims at changing the way the world eats for better, plant based product will gradually gain market share. WhiteWave Foods spin-off from Dean Foods Company (DF) can be considered as one of the several new spin-offs with a promising future.
In this article I will discuss the performance of the company and also reasons why WhiteWave Foods can be a potential acquisition target.
Impressive Financials
WhiteWave has a very impressive growth history with net sales increase by 34% to $857 million year-over-year. Strong growth has been continued in both the segments with North America growth at more than 36% and Europe’s growth at more than 24%.
Though both North America and Europe provide huge opportunity of further growth, I also believe the company’s investment in expansion of its business in China would further accelerate the growth. I will discuss about the opportunities WhiteWave Foods have not only in China but also in other developing nations like India in my next segment.
In terms of the growth trajectory, the company’s diluted Earnings per share have also increased by 42% to $0.27, excluding investments from China as compared to third quarter 2013. Margins have also been expanding over the quarters and we could see an operating margin growth of 87%, EBIT margin growth of 92% and Net margin growth of 63% over the last year. A consistent margin expansion over a period indicates that the company has been managing its costs effectively with a greater operational efficiency.
China Could Boost Growth
WhiteWave Foods has its operation in China and I believe the country provides huge scope of growth. With more than 1.3 billion consumers and their increasing disposable income, China provides huge growth opportunity.
Also, with a shift towards a higher quality and more premium foods and beverages, the country provides a market of more than $2 billion comprising of plant based beverage products. Moreover, WhiteWave’s position as a global market leader in plant based beverages further provides platform for growth and profitability.
To tap the increasing demand for its product the company has recently announced a joint venture with Mengnui dairy Company Limited, one of the leading dairy milk brands of China. The aim of the venture is primarily to provide premium plant based products with a greater reach in association with a leading brand of the country.
Marketing And Penetration Strategy Could Become Better with Acquisition
There is significant upside potential for WhiteWave Foods through household penetration. The data below shows that there are large unused market in the organic milk, organic packaged salad, plant based beverages and coffee creamers segment.
In order to gain access to more households the company plans to strategically invest in expanding the distribution network, introducing innovative products and making products with broader household usage.
Historically, these strategic steps have helped WhiteWave Foods to increase its net sales by a CAGR of 17% in a span of three years. I also believe that brands like Silk and alpro serve as the prime catalyst of growth for the company.
Historically, silk’s market has increased tremendously in North America and based on its success the company aims at targeting more penetration in both new households and new people within the existing household.
Considering a large untapped market and the company’s aim at expanding its operation in other international occasions I believe WhiteWave could be a good acquisition target. In my perspective Coca-Cola (KO, Financial) could be a good prospective buyer. This is primarily because association with WhiteWave Foods will give Coca-Cola access to a faster growing dairy and plant based beverage market and would in turn help WhiteWave Foods to a large global distribution network to expand its operations internationally.
Conclusion
WhiteWave Foods has a history of great performance. The sales have been increasing with improvement in margins and introduction of some of the successful brands like Dunkin Donut creamers.
Even the balance sheet looks strong with a leverage ratio of approximately 3.2x and an available credit facility of $688 million. Thus, strong financials, the company’s aim at expanding its operations in the international market and its possible acquisition by Coca- Cola makes me believe that the company has huge upside potential.
