Cornucopia’s Take: Now that Group Danone has been forced to sell the Stonyfield brand, China- and Mexico-based companies have made bids to acquire the almost $400 million brand. Founder Gary Hirshberg is optimistic about the sale, and onlookers are hopeful that the new owner will continue to buy milk from family-scale dairy farms. Cornucopia will watch for developments.
Does a culture change await yogurt maker Stonyfield?
The Boston Globe
by Janelle Nanos
Source: TEDx Manhattan
At the end of March, Gary Hirshberg experienced a bit of a culture shock.
The cofounder of Stonyfield Farm Yogurt was preparing for the company’s 34th anniversary when its corporate parent, the dairy giant Danone Group, dropped a bombshell. It was putting Stonyfield up for sale.
The reason: In its quest to acquire more of the natural foods that Stonyfield had popularized, Danone had spent $10 billion to purchase WhiteWave Foods, the maker of Horizon Organic milk and Silk soy milk. But in doing so, it had raised red flags for the Department of Justice, which worried about a monopoly in the organic milk market. Danone will be forced to sell Stonyfield in the coming days, or face antitrust action.
Hirshberg was crestfallen. The Londonderry, N.H., company had played a key role in fueling Americans’ appetite for yogurt, and after three decades, it had become the top-selling organic yogurt in the country, its reputation as a mission-driven company on par with Ben & Jerry’s.
That success came in part because Stonyfield had ridden the wave of several significant trends that shifted how America eats. Consumers were paying attention to — and were willing to pay more for — organics. And yogurt had become an international obsession. In the 15 years that Danone owned Stonyfield, its sales had surged to nearly $400 million from $75 million.
But even that was no match compared with the seismic growth of another upstart company that reshaped the yogurt market. Since Chobani helped introduce Greek yogurt to the United States a decade ago, the thick, creamy cups have now grown to account for 46 percent of market share.
Now, as Stonyfield seeks a new owner, some have asked: Can the company that helped introduce Americans to the health benefits of yogurt continue to thrive in a crowded dairy aisle?
“Stonyfield has been an important part of the movement for a long time,” said Brad Edmondson, a journalist and author who has written extensively about corporate social responsibility efforts in the United States. “I hope they come through this sale with their identity intact.”
Both Stonyfield and Danone executives have declined to comment as they await the sale. But Hirshberg, Stonyfield’s cofounder who still serves as chairman, says he’s bullish about the future.
“I think that this is a great moment for Stonyfield,” Hirshberg said. “How often do you get a chance to do a do-over?”
Since stepping down as Stonyfield’s chief executive in 2012, Hirshberg has largely split his time between his nonprofit efforts and Danone’s international endeavors. He remains on the company’s advisory board and recently returned to New Hampshire full time to refocus his energy on the sale. He says Danone was a benevolent owner, one that helped it extend into global markets. But he still sees room for growth, and believes Stonyfield could, and should, become a billion-dollar brand.
A lot has changed since Hirshberg and cofounder Samuel Kaymen began selling Stonyfield Farm Yogurt in 1983 to help lift their farming education center in Wilton, N.H., out of debt. For the first nine years, the duo raised their families on the site where they produced yogurt, using milk from regional family farms. In 1988, they acquired their Londonderry production facility, which boosted annual sales to $78 million over the next decade.
Kaymen retired in 2000, and the following year Danone Group bought a 40 percent stake in the company, working out a unique agreement where Hirshberg would continue to lead Stonyfield and maintain 60 percent of its voting shares. In 2013, Danone acquired the company outright.
It was heady times for yogurt, as Americans began eating it by the bucketful. Between 2009 and 2014 yogurt saw a 50 percent growth in US sales, to the point where analysts at NPD Group dubbed it the “category of the decade.”
A good deal of that growth derived from Chobani’s rapid rise. The Norwich, N.Y., company now controls 19 percent of the $7.6 billion US yogurt market. The success of Chobani’s Greek yogurt took the two largest players in the country, Dannon, the US subsidiary of Danone, and General Mills, which produces Yoplait, by surprise. And since then, they’ve been scrambling to play catch-up. Meanwhile, Chobani overtook Yoplait as the country’s largest yogurt brand last year and saw $1.5 billion in revenue.
Greek yogurt has been a particular challenge for Stonyfield, which can’t easily produce the faddish treat.
Stonyfield Yogurt products on display at the company’s facility in Londonderry, N.H.
In short: Organic milk is expensive, and when you create a denser, thicker yogurt, you end up using more milk. The company does produce Greek yogurt, but Hirshberg said the high supply costs make it impossible to offer the same kind of grocery store discounts as for other non-organic brands.
He acknowledges that it’s been difficult for Stonyfield to compete. “Greek went from being the new kid on the block to being everywhere,” he said. “Fifty percent of the yogurt market is now one in which we’re not the leader or a serious player.”
Where analysts do think Stonyfield has an edge is in its mission-driven, healthy identity. For consumers, “it’s not just engaging a product or a service, it’s supporting a cause that’s in line with their values,” said Darren Seifer, an analyst at NPD Group.
Those values are also increasingly important to food industry giants as they look to make acquisitions and stay competitive in a shifting food landscape. For the past several weeks, analysts had speculated that General Mills and Dean Foods might be weighing a possible purchase of Stonyfield to bolster their yogurt divisions. Then two international dairy giants stepped forward: China’s largest dairy company, Inner Mongolia Yili Industrial Group, has submitted an $850 million bid for Stonyfield. And Mexico-based Grupo Lala has now emerged as the lead bidder, though no price was revealed.
In both cases, the international dairies most likely see Stonyfield as a way to make inroads into organics and gain expertise in the US market. The company’s safety standards are also a major draw.
“Hopefully, these suitors are sophisticated enough to know that part of the romance that the Stonyfield brand holds with organic consumers is their dedication to family-scale dairy farms, mostly in New England,” said Mark Kastel, cofounder of the Cornucopia Institute, an advocacy group that tracks the organic industry.
He worries that the brand’s potency may be diluted, particularly if a new owner attempts to lower the cost of production by shifting the purchase of organic milk from family farms to large industrial dairies, some of which have recently come under scrutiny for mislabeling their products.
“That would pretty much deep-six the value of the Stonyfield brand,” he said.
The sale is also a very public reminder that Stonyfield is owned by a larger corporation, something that might put off younger consumers, who tend to flock to independent companies with compelling stories, Seifert said.
“Consumers like to support those little guys,” he said. “If you project the image that you’re part of this bigger conglomerate you risk alienating people.”
While they can’t speak to the specifics of the sale, Stonyfield representatives said their mission will remain intact, and pointed to the fact the company was recently recognized as a certified B-corporation as proof of that commitment.
“One of the things that Gary says is that we’re not a brand, we’re a company, we bring value,” said Nichole Cirillo, the company’s mission director. “People who buy that product buy that mission.”