Almond Joy: 2 Companies Pushing Milk and Butter off Shoppers' Grocery Lists

Within the fast-growing organic and healthy foods category, there are several superstars -- and the almond is one of them. Consumers are increasingly ditching their cow and soy milks for almond milk, and turning their backs on peanut butter in favor of almond butter. Naturally, this changing of the food guard is pouring profits into some food companies' coffers, while leaving other businesses a bit shell-shocked.

We're going to look at two companies benefiting from consumers' growing love affair with all things almond, Hain Celestial (NASDAQ: HAIN  ) and WhiteWave Foods (NYSE: WWAV  ) , and one company, Dean Foods (NYSE: DF  ) , that's on the losing side of these trends.

First, a few statistics showing how nuts consumers are going over almonds:

  • Demand for California's almonds (which comprise 80% of the world's supply) has increased 51% in five years.
  • U.S. per capita consumption of almonds has increased more than threefold since 1997.
  • U.S. per capita consumption of almonds surpassed that of peanuts in 2011.

Hain Celestial serves up both almond butter and milk
Hain Celestial produces a wide range of natural and organic foods, beverages, and personal care products. Its diverse 30-plus-brand portfolio includes Celestial Seasonings (herbal and other teas), Greek Gods (Greek yogurt), MaraNatha (almond and other nut and seed butters), and Jason Natural (personal care products).

Sales of Hain's MaraNatha brand increased more than 20% in its most recent quarter, which is tremendous for a grocery product. Even more telling, John Carroll, executive VP and CEO of Hain's U.S. business, stated during the conference call: "Our growth could have been 30-plus percent if we were able to fill our out of stock."

Consumers' voracious demand for MaraNatha butters, specifically almond and chia seed varieties, is greater than the company can keep up with. The plant that produces the butters is running "24/7," noted founder and CEO Irwin Simon, so there are production constraints. Additionally, the company is finding it challenging to get its hands on enough almonds and chia seeds.

Carroll mentioned the possibility of adding additional production capacity in the company's fiscal fourth quarter. As for the tight supplies, Hain's size should help, as this gives Hain bargaining power that smaller companies don't have.

Neither J.M. Smucker, which sells peanut butter under the world's No. 1 brand, Jif, and its Smucker brand, nor Hormel Foods, which bought the world's No. 2 brand, Skippy, from Unilever earlier this year, sell almond butters. Both companies would be wise to produce at least one almond butter offering, in my opinion. Granted, they'd cannibalize their peanut butter sales, to some degree. However, as Steve Jobs famously said: "If you don't cannibalize yourself someone else will."

MOO-ving on to Hain's almond milk... Hain's "Dream" brand produces various non-dairy (mostly plant-based) beverages, desserts, and yogurts. Its beverages are heavily in the aseptic -- or shelf-stable -- category. Only its soy and rice milks come in refrigerated options, according to its website. However, Simon commented on the call that the company is considering offering refrigerated varieties of almond and coconut milks to the U.K. and European markets.

Hain ramped up its production capacity in May when it opened a new plant outside of Cologne, Germany. Simon stated that the company plans to produce as much of the plant-based "milks" it can and roll the products out in the U.K. and throughout Europe.

As one might expect of a company that does a good job pleasing consumers' taste buds, Hain's been delivering tasty earnings reports and stock price performance to its shareholders. The company beat both revenue and earnings estimates when it reported quarterly earnings, for the period ending Sept. 30, last week. Revenue rose 33% to $477.5 million, while adjusted earnings per share increased 27%.

Its stock has risen 345% over the five-year period, trouncing the S&P's total return of 120%. It's also slightly outperforming the market over the one-year period, as the chart below shows. 

WhiteWave Foods is riding the almond milk popularity wave
WhiteWave Foods -- which spun off from dairy giant Dean Foods in Oct. 2012 -- produces plant-based foods and beverages, coffee creamers, and nonorganic and organic dairy products. It's probably best known as the maker of the Silk brand line of plant-based beverages, including soy and almond milks. Some of its other well-known brands include International Delight, Land O'Lakes, and Horizon Organic.

The company's experiencing soaring demand for almond milk, as its almond milk sales surpassed its soy milk sales for the first time in the company's previous quarter, and increased 60% in the U.S. in its most recent quarter.  

WhiteWave's results leave no doubt that the company's almond milk sales are "eating away" at its soy milk sales. However, the net effect is a positive, as the company's revenue in the plant-based food and beverage category rose 14% in the U.S. and 19% in Europe in the third quarter, propelling the company to strong quarterly results, with revenue up 10% and adjusted earnings per share up 21%. 

The company is in the right business, as U.S. retail sales of plant-based nondairy beverages are expected to top $1.7 billion by 2016, up from  $1.33 billion in 2011, according to a report from Packaged Facts.  

Dean Foods could be crying over spilled (almond) milk
Dairy producer Dean Foods' brands include Dean's, Alta Dean's, and TruMoo. The biggest U.S. milk processor's stock price has been flowing in the same direction as the milk industry's sales -- down. 

Milk sales in the U.S. have been on a slow long-term decline, as consumers replace milk with plant-based non-dairy beverages -- such as almond "milk" -- and other beverages. Dean Foods released disappointing quarterly results on Tuesday, Nov. 12, noting that its share of milk sales fell to 34.9% from 36.4%, while industry volumes dropped 1.7%. 

Our two "almond players" stocks have outperformed the market over the one-year period, while Dean Foods' stock has taken a wild ride to end up back where it started. Food giant Kraft Foods is included to provide some context, as it can be considered a decent proxy for the industry.  

HAIN Chart

The Foolish takeaway
Investors would be well served to home in on companies that are on the right side of consumers' changing tastes.

Hain Celestial has been doing a great job staying ahead of the curve with food and beverage trends, and its management continues to execute well. WhiteWave is certainly in the right business, though it has many more of its almonds in one basket than the more diversified Hain, which presents WhiteWave with additional risk.  

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