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Republished from triplepundit.com
By Leon Kaye
Plant-based foods and beverages, as well as organic dairy products, are surging in popularity due to their perceived nutrition, environmental benefits or a combination of both.
Last summer, French multinational food company Danone acquired WhiteWave Foods, which owns brands such as Silk, Horizon Organics, Wallaby and Earthbound Farms, for $10 billion. The sale proved that foods once relegated to the local health food store are now mainstream, and can generate copious profits as they are sold in big-box chains such as Target and Costco.
The newly combined entity, which generates over $6 billion in revenues annually and now employs 6,000 people, says it has become the largest public benefit corporation within the U.S. This announcement comes less than two weeks after Danone completed its acquisition of WhiteWave at $56.25 per share – providing investors a 350 percent return if they held their stock in the company since WhiteWave first went public in 2013. The new company combines WhiteWave with Danone’s dairy business and operates as a subsidiary of Danone.
DanoneWave has accomplished a business model that at first glance seems impossible: creating a company that sells both dairy-based and nut-based milks. But as Fortune reported, the newly created company is riding the wave of enthusiasm for natural and organic foods. Overall sales of milk have been on the decline this decade, but organic milk saw a boost of well over 20 percent. So the business case is there; then what’s the social benefit?
DanoneWave says the point of becoming a public benefit corporation is to launch an “alimentation revolution,” which will strengthen individuals, their communities and, at a higher level, the world.
To keep that promise, this new entity is taking a long-term view that would have not been possible if WhiteWave were still publicly traded and subjected to Wall Street’s onerous quarterly forecasts. For the moment, the company is taking two approaches.
First, the company is articulating this mission within its articles of incorporation. DanoneWave will encourage dietary habits that toe the line with its parent company’s mission, which is to “bring health through food to as many people as possible.” In addition – and this is where DanoneWave is breaking new ground – the company has pledged to follow a model of sustainable development, which will generate “economic and social value” for employees, suppliers, customers and the environment.
Next, in order to charter through these new waters, DanoneWave CEO Lorna Davis announced an advisory committee that will be central to the newly created company’s corporate governance.
The chair of this committee is Rose Marcario, Patagonia’s CEO. Other committee members include doctors, the head of B Corporation’s European unit and a partner at Greenmount Capital Partners, which has long invested in companies that make socially responsible consumer products. That group will advise DanoneWave’s executive team on a wide range of issues, including diversity, animal welfare, water conservation and environmental stewardship.
It’s a bold new experiment for DanoneWave, which is now among the 15 largest food and beverage companies in the U.S. Its structure will allow the company’s executives to balance profit with the creation of social benefit, a concept that butts heads with over a century of conventional American business practices. For now, the company is eschewing any certification, although Fortune reported that DanoneWave aims to become a certified B Corporation by 2020.
If DanoneWave proves it can revolutionize the food industry while keeping its multinational parent happy with respect to financial performance, look for other companies to consider a similar shift. Younger consumers have made it clear they not only want more healthful products, but they also want to buy from companies with a clear social mission. Businesses could find that they will lose market share to DanoneWave and other upstarts if they cannot win the hearts — followed by the wallets — of this new generation of customers.