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Cornucopia Asks Regulators to Block Merger

Monday, October 17, 2016 15:02
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(Before It's News)

Groupe Danone/WhiteWave Would Dominate the Organic Dairy Market

[This article was previously published in the fall issue of The Cultivator, Cornucopia’s quarterly newsletter.]

by Marie Burcham, JD
Farm and Food Policy Analyst at The Cornucopia Institute

Certified Organic Factory Farms
(Above) Hilltop LLC, Boehning Dairy
in Earth, TX (May 17, 2014).
(Below) No evidence of cows on pasture at
Horizon Dairy in Kennedyville, MD
(Sept. 27, 2014)

The French dairy giant Groupe Danone (Dannon in the U.S.) has announced the proposed acquisition of WhiteWave Foods for approximately $10 billion.

The deal would combine the world’s largest organic yogurt brand, Stonyfield, with Wallaby, a rapidly growing yogurt label, and Horizon, the nation’s largest brand of organic milk.

Cornucopia has formally challenged the acquisition based on the serious erosion of competition it would create in the consumer marketplace and the negative economic impact it would have on U.S. organic dairy farmers.

WhiteWave brands are the top sellers in their categories. Horizon organic milk controls nearly 25% of the organic milk market, while their Silk brand is a leader in plant-based beverages. Danone will be taking control of a bigger piece of the organic dairy market than has ever been controlled by a single company.

With this acquisition Danone will easily be able to beat out competition by lowering prices beyond what farmstead and more moderately sized dairies can withstand.

Dairy has long been the first food consumers associate with the organic label. In many households organic milk is among the first foods introduced to children. As such a key part of the organic market, it is vital that competition remains open.

Cornucopia made this argument in letters calling on the Department of Justice and the Federal Trade Commission to treat this merger as suspect. In addition, a petition drive was launched at Cornucopia.org/Danone2016 to push for a full investigation of the proposed merger by federal regulators.

The market for organic dairy already has less competition than other agricultural sectors and is more susceptible to monopolization.

The anti-competitive implications of this deal for organic dairy should be considered as distinct from Danone’s nonorganic market share.

These are important considerations for determining whether this acquisition violates the Sherman Act and the Clayton Act for anti-competitive and anti-trust reasons.

Danone is already a majority shareholder of Stonyfield, the largest organic yogurt brand in the U.S. Adding WhiteWave’s Wallaby and Horizon Organic brand yogurts to Danone’s existing market share will allow the dairy conglomerate to control a sizable slice of the U.S. organic market.

Mergers like this one could eventually reduce options and raise prices for consumers without any positive impact on the quality of the products they are buying.

With less competition, big companies commonly underpay independent farmers for their products, undermining the economic viability of small, family-scale farms.

We should be very wary of this particular acquisition, as it could seriously erode wholesale competition in other less obvious, but potentially ominous, ways.

The number-two brand of organic milk in the marketplace, Organic Valley, is produced by a member-owned farmer cooperative that has been the longtime raw milk supplier to the Stonyfield yogurt brand. If, after its acquisition, Danone decides to dump Organic Valley, a Horizon competitor, as a supplier, it could leave only one major purchaser of organic farm milk in some regions of the U.S., like New England.

Complicating the matter, one of the other leading brands of fluid milk, marketed under the Stonyfield label, is actually produced and distributed by Organic Valley.

Stonyfield built its reputation and brand on its imagery of supporting family-scale dairy farms, predominantly in the Northeast. Conversely, a substantial percentage of the milk used in Horizon products comes from “organic” factory-dairies in the West, many milking thousands of cows each.

Cornucopia is currently investigating reports of new giant organic dairies, each milking 2,000-5,000 cows, springing up in Oregon, Idaho, and Texas. Many of these operations milk three to four times per day, rather than twice, which is the standard on farms that move their cattle to pasture each day.

In addition, state regulatory documents indicate some of these dairy operations have as many as 10 cows per acre, whereas previous polling done by Cornucopia indicated the national average for organic producers was one cow per acre.

Which production model dominates in the new merged entity will have a great impact on the future financial viability of family dairy farms in this country. If the management and infrastructure at Horizon takes charge, many smaller dairy farms will become expendable in favor of cheaper milk, produced on industrial-scale dairies. This merger truly represents a clash of cultures.

Peter Hardin, perennial industry observer and publisher of The Milkweed, a dairy publication, sees this merger as a bad deal for dairy farmers. “Dairy farmers commercialized the organic industry, starting in the 1980s, because of the oppressive control of the conventional milk market by an increasingly concentrated group of companies allegedly manipulating the market.

Ironically, Dean Foods, the original parent company of WhiteWave, was long viewed as the consummate industry ‘bad actor’ and was under scrutiny by the Justice Department for market manipulation. The corporate kingpins that run the company are still making billions at the expense of hard-working dairy families,” says Hardin.

If this merger is allowed to go through, it may very well exacerbate the illegal and unfair competition being condoned by the corporate-friendly regulators overseeing the organic industry at the USDA.

The post Cornucopia Asks Regulators to Block Merger appeared first on Cornucopia Institute.

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