Natural Foods Merchandiser

Demos To Lead Combined Brands

Retailers will see a single sales force and unified promotional and distribution efforts as Horizon Organic Dairy combines operations with White Wave over the next year.

Dallas-based Dean Foods turned to White Wave founder Steve Demos Aug. 4 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 500 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,? Demos said.

When White Wave merged with Dean Foods in 2002, Demos recalled, ?We said we?re 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, Colo.—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.?

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.

The Dean National Brand Group includes such 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.?

Sales reps for the new company will be ?much more of a complete partner, working within the dairy category, providing more category management,? Marcy said. ?That?s something [retailers] are asking for all the time. They would much rather deal with one vendor than three.?

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.?

In a conference call, Engles told investors that Dean would spend more money promoting the Horizon brand. Among other initiatives this fall, Horizon will debut print advertising featuring Happy the Horizon spokescow. Single-serve 100 percent juices and kids? smoothies are being introduced, and organic infant formula is ?doing very well? in test markets in California, Oregon and Washington, Marcy said.

Higher conventional milk prices ?created a better opportunity for consumers to look at organic as a good value,? Marcy said. While organic milk has posted consistent growth rates in the mid-teens, sales in June spiked 29 percent year-over-year, according to Information Resources Inc.

White Wave has launched its TofuTown line of prepared ?tofu tenders? and its Silk Live fruit smoothies, which combine soymilk and yogurt cultures. The promotional campaign for Silk Live includes sampling in more than 180 Whole Foods and other natural supermarkets. White Wave?s ad budget increased by more than half to $12 million by the end of July.

?The drinkable yogurt and probiotic market is a very large market,? Demos said.

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.

Marcy said he?s excited about the restructuring and harbors no ill will toward Demos or Dean.

?My No. 1 priority is to set a personal record for ski days this winter, and then find another company to run,? Marcy said. He joined Horizon in 1999.

?People?s jobs will change,? but headcount will probably increase at both Horizon and White Wave, Marcy predicted. ?We?ve grown so fast, 20 to 25 percent a year, that every year things change. This is just another step in this process.?

Natural Foods Merchandiser volume XXV/number 9/p. 1, 9

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