Danone to sell Horizon Organic and Wallaby brands to PE firm

Dive Brief:

• Danone has reached an agreement to sell its Horizon Organic and Wallaby brands to investment firm Platinum Equity for an undisclosed amount. The sale of its premium organic dairy businesses in the U.S. is part of Danone’s portfolio review and asset rotation program announced in 2022.

• Danone will retain a minority stake in the business. The closing of the transaction is subject to customary conditions.

• The sale comes a year after Danone announced it would explore strategic options for its organic dairy business in the U.S., which includes Horizon Organic and Wallaby.

Dive Insight:

Just six months after taking over as CEO, Antoine De Saint-Affrique vowed in early 2022 to shake up the water and dairy giant. At the time, he said there were “no sacred cows” and that the company would “keep pruning” its portfolio to boost growth and distance itself from its recent underperformance.

While Danone has a dominant presence in dairy, Horizon Organic and Wallaby appear to be outliers and have weighed on the company’s business in recent years. De Saint-Affrique even singled out the need to improve performance in troubled offerings such as Horizon Organic two years ago.

Horizon Organic and Wallaby, which offer organic dairy products, including milk, creamers, yogurt, cheese and butter, represented about 3% of Danone’s global revenues in 2022, the company said.

Along with representing a small amount of Danone’s global revenues, they have had a dilutive impact on Danone’s like-for-like sales growth and recurring operating margin in 2022. For a company looking to increase growth and shift its resources to its most promising brands, Horizon Organic and Wallaby are logical targets for Danone to divest.

“This sale, once completed, will allow us to concentrate further on our current portfolio of strong, health-focused brands and reinvest in our growth priorities,” De Saint-Affrique said in a statement.

Horizon Organic is the largest USDA-certified organic dairy brand in the world, according to Platinum Equity. Adam Cooper, managing director at the investment firm, said premium offerings, including organic and value-added products, “are driving the growth” in the $17 billion dairy milk category in the U.S.

Platinum Equity is no stranger to food and beverages, with a portfolio that includes a biscuit maker as well as wine and seafood producers. It also has previously invested in distributors of food ingredients and packaged meat and bakery products.

Danone’s sale of Horizon Organic and Wallaby is representative of portfolio shifts taking place across the broader food and beverage space as companies look to divest non-core or slower-growth businesses while building their portfolio in more trendy, higher-margin items. 

Other recent deals include B&G Foods’ sale of its Green Giant U.S. canned vegetable business and J.M. Smucker’s divestiture of condiment brands to TreeHouse Foods. Smucker, meanwhile, has purchased Twinkie maker Hostess Brands for nearly $6 billion, while Campbell Soup is working to close its $2.7 billion acquisition of premium food manufacturer Sovos Brands.