Danone may dump Horizon Organic – announcement follows Northeast contract terminations, big investments in fake-milk

By Sherry Bunting, previously published in Farmshine, February 3, 2023

PARIS, France — Danone put Horizon Organic on the proverbial chopping block last week, positioning itself to take another step away from real milk after spending the past several years building an operational runway to catapult the French-based global food and beverage giant even further into the world of fake-milk.

On January 26th, Danone announced it is exploring the “strategic option” of selling its U.S. organic dairy line — namely the Horizon Organic and Wallaby businesses. 

“Both are strong, much-loved brands with compelling growth opportunities,” said Danone CEO Antoine de Saint-Affrique in a brief press release. “That said, seen through the lens of our Renew Strategy, which requires us to stay disciplined in how we allocate our resources, they fall outside of our priority growth areas of focus.”

Previously, Danone executives noted Horizon and Wallaby represent 3% of global revenues and have a “dilution impact on operational margins.”

On the chopping block 

Wallaby is an Australian-style organic yogurt found mostly in natural food stores as well as the Whole Foods chain throughout the U.S.

Horizon Organic is ubiquitous and foundational. It became the first public organic food company in 1994 and was purchased by Dean Foods in 2004, where it became part of WhiteWave holdings alongside International Delight, Silk and other fake-milk brands. A 2012 spin-off separated WhiteWave from Dean, taking former Dean CEO Gregg Engles with it, until April of 2017, when Danone purchased WhiteWave, and Engles continued as a current Danone S.A. board member.

The announcement that Danone may dump Horizon comes just before Danone’s fiscal 2022 earnings call, just before the final extensions expire on previously announced contract terminations for 89 Northeast Horizon Organic dairy farms, and just after Danone closed the book in its final negotiations under pressure from organic and consumer groups by presenting its 2023 Northeast Region Investment Package.

Ed Maltby, executive director of Northeast Organic Dairy Alliance (NODPA), recounted the final communication. 

Pegged at $18 million, Danone’s package “is designed to drive meaningful impact in the region and the organic farming community in both the immediate and longer term,” Chris Adamo, Danone vice president of public affairs and regenerative agriculture policy, told the Northeast organic community in his December 2022 presentation.

Three Northeast projects were promised:

First, a partnership with dairy farming co-ops and processors to invest more than $14 million to “establish new relationships with more than 50 dairy producers in western New York.” 

“A year earlier, in December 2021, Danone maintained they were going to take on 50 new organic dairy farm suppliers to replace those farms they had dumped as part of improving their trucking logistics,” Maltby reflected. “Is this investment geared to making these farms more efficient to improve the supply of milk to Danone, or perhaps to improve their co-op’s infrastructure? How can producers access this money or is it just for processors?”

Second, a ‘market-premium price payment’ is included, whereby Danone commits to providing “direct financial support to farmers in the Northeast, along with additional pay price increases totaling approximately $3.6 million.” 

Maltby wonders: “Is this the transition payment that Danone already said it had paid to producers that they dumped? Or is it an increase in pay price for those farms they took on when they dumped their existing producers?” 

Third, Danone pledges $500,000 in new grants, administered by The Organic Center in 2023, to “support projects connected to the future of organic dairy and Northeast farming.” Recipients can be individual farms, groups representing farmers, non-profit organizations, academic institutions and universities, groups that provide agricultural technical assistance or groups that train and educate farmers on emerging agricultural topics.

“(Adamo) left many of us, and a few State Agriculture Commissioners, confused about exactly who would get what, when, and how. The phrase ‘smoke and mirrors’ accurately describes the way they have attempted to make consumers believe that something is being done to assist Northeast organic dairy farm families when it is not,” writes Maltby. 

“Danone’s lack of transparency at every step, and their green-washing, does not surprise anyone. Their actions have highlighted the problems faced by the Northeast organic dairy community that we continue to work on with support from consumers and other organic advocates,” he adds.

The potential offload of Horizon is not surprising, considering Danone’s pattern of ending contracts with smaller organic dairy farms, consolidating its conventional non-GMO pledge milk via larger farms, while at the same time making a big push into plant-based fakes. These pathways integrate operational control with green-washed growth.

Meanwhile, the promises made by Danone appear to skate all the way around the core impacts and could be up in the air if Horizon Organic comes under new ownership.

The entire organic dairy farming complex has long operated as a premium-priced real milk option alongside what are now ramped-up and continually reinvented plant-based fake-milks. Now they brace for what a Horizon sell-off could mean, and hope to see a real dairy renewal strategy of their own. 

Danone’s timeline has shaped up like this:

In July 2016, Danone launched the Dannon Pledge for non-GMO verified, positioning its conventional milk supply around a concept of ‘almost-organic.’

In April of 2017, Danone purchased the Dean WhiteWave spinoff, which included Horizon Organic and the Silk, So Delicious, and Alpro plant-based brands. The DOJ Antitrust Division required Danone to simultaneously divest its Stonyfield Farms subsidiary.

In 2018, Danone quietly notified smaller Horizon Organic dairy farms in the western states that their future contracts would not be renewed amid a glut of organic milk and differences in how USDA’s organic livestock origin rules were being applied. Some of these producers were offered conventional non-GMO milk contracts using Danone’s proprietary Cost Performance Model (CPM). Some found other markets, and many exited the business. According to Danone’s 2021 Regenerative Agriculture Report, more than half of all U.S. milk collected by Danone now comes from farms with CPM contracts. 

In February 2019Danone completed construction of the world’s largest plant-based yogurt factory in Dubois, Pennsylvania, where other non-dairy lookalike products are also made.

In February 2020, Danone told investors the rising global temperature is a business opportunity, and the company would accelerate food transformation with climate at the core of its growth strategy.

In October 2020, Danone announced its partnership with a bioscience startup to use artificial intelligence to explore new formulations to improve taste and texture of plant-based dairy alternatives.

In January 2021, Danone’s So Delicious brand launched its first plant-based cheese, and Danone S.A. was acknowledged as the largest plant-based company in the world. The company told investors it would grow revenue in plant-based with further acquisitions and a “plant-based acceleration unit.”

In April 2021, Danone and the EAT Lancet Commission announced a strategic partnership to promote a so-called “healthier and more sustainable food system by driving a change to planetary diets.” Danone pledged to use its ‘One Planet. One Health’ framework to “accelerate this food revolution.”

In July 2021, Danone announced three new plant-based fake-milk launches for 2022, along with a list of other lookalikes. During the July 2021 earnings call, Danone executives identified the U.S. as a “key plant-based market,” but noted 60% of U.S. consumers are not in the category because of product taste and texture. They announced a plan to win them over “with new dairy-like technology under Silk NextMilk, under So Delicious Wondermilk and under Alpro Not Milk.”

In August 2021, Danone sent letters notifying all 89 of its organic dairy farms in New England and eastern New York that their milk contracts would be terminated in 12 months’ time. Later, under pressure from organic groups, officials and consumers, Danone agreed to a Feb. 2023 extension.

In January 2022, Danone launched the three new fake-milks: NextMilk and Wondermilk hit U.S. dairy cases, and Not Milk hit shelves in Europe. 

(Interestingly, the Silk NextMilk Whole Fat has 6 grams of saturated fat from processed coconut and seed oils. That’s more saturated fat per serving than Real Whole Dairy Milk naturally from cows. Danone’s Silk NextMilk is packaged in red and white cartons with the words ‘Whole Fat’ appearing directly under the brand name to mimic the Whole Milk appearance. Interestingly, the FDA’s proposed healthy labeling rule sets a tougher threshold for saturated fat in dairy products compared to saturated fats from plant-sources.)

In March 2022, Danone described its Horizon Organic and “traditional dairy” holdings as “troubled offerings,” telling investors: “There are no sacred cows,” as they “keep pruning” the portfolio to “boost growth” and “distance” the company from “underperformance”… by investing more in “winning products” and selling existing brands or buying new ones.

In May 2022, Danone launched its “Dairy & Plants Blend” baby formula (60% plant-based, 40% dairy) “to expose children to food tastes early in life that can help shape their future food preferences… while shifting toward plant-rich diets and embracing alternative sources of protein to help reduce carbon emissions.”

In October 2022, Danone announced it would use artificial intelligence through its bioscience partner BrightSeed, to reformulate over 70% of its plant-based fake-milk alternatives to reduce added sugars and increase nutrient density. At the same time, it allocated $15 million to “partner with retailers on healthy eating education” and $7 million to partner with community-based programs that provide nutritious foods.

(Timing is everything: Danone is among the financial supporters of the infamous Tufts University Food Compass, launched recently into the federal nutrition policy arena through the Biden-Harris Hunger, Health and Nutrition Strategy and the FDA proposed rule on  “healthy labeling.” The Food Compass nutrition profiling algorithm rates nonfat dairy yogurt high as an encouraged food, along with plant-based fake-milks; but real milk and cheese are rated lower as foods to moderate or discourage. More artificial intelligence, to be sure.)

This brings us to January 2023, when Danone announced it is eyeing sale of Horizon Organic, saying it falls outside of their key areas of focus.

(Previously, Danone set its sights on being among the first multinational corporations to achieve global B-Corp certification by 2025, already certified in the U.S. Part of this certification involves accountability for social elements such as fair trade and treatment of suppliers. This posed a problem throughout 2022 as Danone was called upon to rethink the Northeast farm contract terminations or to provide financial assistance for the farms and the region.)

Heading into February 2023, the contract extensions end for the terminated Horizon Organic dairy farms in the Northeast. Some have gone out of business. Others have gone to Stonyfield or Organic Valley, which eventually agreed to take on the remaining Northeast farms facing Horizon termination, along with 40 organic dairies cut last year by Maple Hill in New York.


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