Faced with higher costs and a disappointing quarter, Dean Foods has turned to White Wave founder Steve Demos to lead its combined branded businesses: White Wave, Horizon Organic and the Dean National Brand Group.
The new division accounts for $1.1 billion in annual sales, will be headquartered in Boulder County, Colo., and will employ as many as 1,200 people, Demos said. White Wave is forecast to account for $370 million in sales this fiscal year, while Horizon is expected to post $250 million.
"We will use our profitability as a resource to lead in sustainability and the environment," Dean said.
Dallas-based Dean Foods announced the reorganization Wednesday during its quarterly earnings call. While earnings declined 15.3 percent in the second quarter to 47 cents a share, sales rose 26.3 percent from the year-ago quarter and the acquisition of Horizon accounted for a good chunk of that sales increase, said Leonard Teitelbaum, first vice president at Merrill Lynch.
The Dean National Brand Group includes such disparate offerings as Marie's salad dressings, Hershey's chocolate milk and Land O'Lakes products. "They're very powerful brands with great equities," Demos said, adding that even conventional products produced in a "green" plant contributes to the environmental goals that White Wave and Horizon have espoused since they were founded.
Demos said sales, marketing and distribution will be combined to present "a single face of the selling organization" to retailers. The resulting cost-cutting "will be applied directly to increasing market awareness of organic and natural foods."
One of the differentiating factors of this consolidation is its focus, Demos noted. White Wave, Horizon and other Dean brands live in the same "20 to 30 linear feet" of store real estate, whereas "most of the other business consolidations in our industry are fairly disparate."
Analyst Carole Buyers of RBC Capital Markets in Denver noted that Demos has "grown up from the grass roots" and evolved from an entrepreneur to a corporate leader. "He's delivered whatever he's promised," she said.
Demos will report to Gregg Engles, chairman and chief executive officer of Dean. Chuck Marcy, president of Horizon, "will assist in the integration of the three businesses" through January 2005, according to Dean Foods.
When White Wave merged with Dean Foods in 2002, Demos recalled, "We said were going to introduce our 'green' to Dean Foods, and Dean Foods was going to introduce their 'green' to White Wave."
The consolidation re-emphasizes that point, he said. "The fact of it is, it's coming to Boulder, Colorado—it's not coming to Dallas. ? If your goal is to change the way Americans eat, this is the best thing that could have happened."