Dean Foods Sees Soy Milk as Good Source of Income
Sep. 25Anyone who thinks soy won't amount to a hill of beans hasn't looked at Dean Foods Co.'s Silk business.
Wholesale revenue of Silk soy milk is expected to grow by 36 percent this year, executives at Dallas-based Dean have told analysts, making it one of the fastest-growing food products of any stripe.
Supermarket and mass merchandise sales of Silk, which accounts for more than 70 percent of the refrigerated soy milk category, grew almost 20 percent last year, according to Information Resources Inc., a Chicago market research firm.
That's more than double the growth rate for all soy milk products.
Looking to capitalize on that kind of momentum, Dean is expected on Monday to combine the sales staffs for the company's branded products ”“ including Silk, Horizon Organic milk and Hershey's chocolate milk ”“ continuing a reorganization announced last month.
The company is combining its three groups that sell most of its branded products ”“ White Wave, Horizon Organic and the Dean National Brand Group ”“ under one, as yet unnamed unit.
The combined business will be headed by Steve Demos, who in 1977 founded White Wave, the Boulder, Colo., company that created Silk. In 2002, Dean acquired White Wave.
"White Wave is a key component of Dean Foods' growth strategy," said Cory M. Olson, treasurer of Dean Foods, the nation's largest dairy processor.
"Branding is extremely important to the company going forward," Mr. Demos said. "It differentiates Dean from being a commodity-driven company."
At Dean, as in the milk market, the main commodity is still cow's milk.
Dean's dairy group represented 80 percent of the company's overall business in the second quarter. That unit, which is not part of the reorganization, produces a variety of milk labels sold regionally, such as Oak Farms and Schepps in the Southwest.
But dairy milk sales industrywide are flat, and its market share is slipping, edged out not only by sodas, but by drinks perceived by consumers to be healthier, including soy milk.
"I think the industry does see soy milk as a competitor," said Jeff Manning, executive director of the California Milk Processor Board, which created and manages the "Got Milk?" advertising campaign. "As those sales grow, it has to have some negative impact on the milk business."
Soy milk's share of the market is small. Information Resources puts it at about 3 percent of refrigerated milk sold at supermarkets and mass merchandisers other than Wal-Mart.
"If kids grow up on soy milk," he said, "that becomes a much bigger issue."
Today, it's the grownups who are consuming more soy as part of a nationwide push to eat healthier.
A dramatic change from its days as the sole province of hippies and health nuts, soy today is a nearly $4 billion industry in the United States, said Peter Golbitz, president of Soyatech, a firm in Bar Harbor, Maine, that conducts research on the soy industry.
In the mid-1990s, White Wave successfully began its head-to-head competition with dairy in the refrigerated section. Before that, soy milk was sold largely in square, shelf-stable boxes in the health food aisles.
Other soy milk companies had tried to take on dairy but failed.
Reformulated from traditional soy milk using white organic cane sugar, Silk was sweeter and textured more like cow's milk. Plus it had less of the beany, dense taste associated with previous soy milk incarnations.
The reformulation and entry into the dairy case "opened up soy milk to the 95 percent of the market that had not had soy milk yet," Mr. Golbitz said.
"What Silk was tapping into was the consumers who had been reluctant to try soy milk before," he said.
Soy products grew in popularity in the 1990s, thanks largely to medical reports touting the health benefits of soy. However, some have raised concerns about whether soy has adverse effects, including brain atrophy and estrogen-like effects.
Mr. Golbitz dismissed most of the concerns, saying they're based on misinformation.
Silk accounts for about 90 percent of sales at White Wave, which also makes tofu.
White Wave plan White Wave hopes to capitalize on Dean's distribution network to broaden its reach into food-service operations, convenience stores and other untapped outlets.
White Wave is also benefiting simply from getting the word out. The company launched a $35 million marketing effort in April, including a $22 million national television prime-time ad campaign ”“ a first for soy milk.
Because a disproportionate number of blacks and Hispanics are believed to be lactose intolerant ”“ unable to easily digest dairy products ”“ the company launched bilingual billboards in key markets including Texas, Mr. Demos said.
Mr. Demos and others in the industry say it's only a matter of time before a major soft drink player like PepsiCo or Coca-Cola joins the fray.
"It was not so hard for Pepsi to join up with Tropicana," noted Tom Pirko, president of Bevmark LLC, a beverage consulting firm in Santa Barbara, Calif. "It's not a big stretch to see them dive in here."
"We're always looking at new beverage options, but there's nothing specific planned at this point," said Pepsi spokesman David DeCecco.
Said Mr. Demos: "Bring it on... Our trajectory is clear. We have never lost more than 15 percent of market share to any competitor...We are the authentic brand."
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