In complaints filed with both agencies (click HERE and HERE), the Cornucopia Institute – which describes itself as a non-profit representing farmers and consumers with an interest in the organic dairy market – argues that combining two such significant US players in organic dairy would have “a chilling impact on both competition in the consumer marketplace and the wholesale market for organic milk.”
With the majority of the branded organic dairy market being controlled by one player, claimed Marie Burcham, a livestock policy analyst with the Institute, “the livelihoods of organic family dairy farmers would be threatened as well as the survival of small ethical independent yogurt brands who already face tight financial conditions.”
Deal would lessen competition in organic milk
Danone owns the Stonyfield organic dairy brand (and a 21% stake in organic kefir manufacturer Lifeway Foods), and is a major player in the organic fluid milk market, while WhiteWave produces Horizon Organic dairy products, and acquired Wallaby Yogurt in 2015, notes Burcham.
“The Danone acquisition of WhiteWave is likely to severely lessen competition in the organic milk market and would therefore be illegal under the Clayton Act… With this acquisition Danone would control a significant majority of the organic dairy market, allowing them to easily push out smaller companies or farmstead dairies who would have difficulty competing with Danone’s superior economy of scale.
“Another impact on competition in the marketplace is whether producers can obtain a fair price for their milk,” added the Cornucopia Institute, which is also urging consumers to sign a petition urging the DOJ and FTC to “take immediate action to scrutinize the acquisition.”
How would the deal impact Organic Valley?
Finally, were Danone to “transition to acquiring milk only from the Horizon suppliers for Stonyfield branded products” rather than continuing a deal with Organic Valley (which currently supplies Stonyfield with raw milk and has a licensing agreement to market packaged, fluid milk under the Stonyfield label), claimed the Cornucopia Institute, this could “materially weaken” a key player in the market.
“This acquisition would substantially lessen competition in the organic yogurt market, raising concerns that the acquisition is in violation of Section 1 of the Sherman Act. It is vital that the organic dairy sector is kept free of monopolies.”
Deal will almost double the size of Danone's US business
A spokesman for Dannon Company (Danone's US subsidiary) said it was not commenting on the Cornucopia Institute’s objections to the $12.5bn deal, which will almost double the size of Danone’s US business from 12% to 22% and is expected to close by the end of the year (subject to regulatory approvals and customary conditions).
Net sales in WhiteWave’s premium dairy business rose 11% in Q2, primarily driven by the inclusion of Wallaby, which was acquired on August 31, 2015. Excluding the acquisition, sales grew in the low-single digits.
Read more about the deal HERE.