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Dean Foods Co (DF), The WhiteWave Foods Co (WWAV): Feast on This Food Company or the Leftovers?

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Dean Foods Co (NYSE:DF) finished the official spin-off of The WhiteWave Foods Co (NYSE:WWAV) earlier this year. Now the question is, is either stock worth investing in? Both stocks should perform nicely on the back of a growing population; as the global population grows at an increasingly rapid pace, this means there are more mouths to feed, which is a positive for food companies. As you can see, there are no signs of a slowdown in population growth; if anything, the population-growth explosion is still in full force.


Source:  Duke University

What happened?

Dean Foods Co (NYSE:DF)At the end of 2012, Dean Foods Co (NYSE:DF) decided to IPO its wholly owned subsidiary, The WhiteWave Foods Co (NYSE:WWAV), but Dean still holds an 80% ownership interest in the new company. This newly formed company is the combined operations of WhiteWave and Alpro, selling branded soy, dairy and dairy-related products, as well as organic dairy products.

Earlier this month, Dean Foods announced plans to assign a portion of its remaining stake in WhiteWave to its shareholders, leaving the company with a minority stake of 19.9% in WhiteWave.

Product shakedown

In the Dean Foods Co (NYSE:DF) versus WhiteWave battle, I think Dean Foods’ more diversified products portfolio should reward investors better over the long term. The WhiteWave Foods Co (NYSE:WWAV)’s brands include Silk, The Organic Cow, Horizon Organic, International Delight, Land O Lakes and Alpro. WhiteWave operates throughout North America and Europe.


Source:  WhiteWave website

Meanwhile, Dean Foods Co (NYSE:DF) is a leading processor and distributor of milk and other dairy products in the U.S., with a diverse product portfolio that caters to regional tastes.

Source:  Dean Foods website

One of the big headwinds going forward for The WhiteWave Foods Co (NYSE:WWAV) will be the continued economic weakness in Europe. While growth in the U.S. appears to be picking up, economic growth expectations for Europe remain well below North American levels. WhiteWave gets nearly 17% of sales from Europe, while Dean Foods operates primarily in the U.S.

Some of Dean Foods Co (NYSE:DF)’s key initiatives include divesting non-core assets to help promote longer-term earnings growth. Dean Foods divested its Morningstar business to Saputo for $887 million in early 2013, and now the company is looking to cost reduction. In 2012, the company saved more than $300 million under its ongoing cost-reduction program started in 2009.

Dean Foods Co (NYSE:DF) also had Adage Capital as its top hedge fund shareholder, owning some 4 million shares, going into 2013 (check out Adage’s high yielders). Also, the company saw hedge funds with serious conviction, including Sheffield Asset Management with 8.7% of its portfolio invested and Harbert Management with 5.3% of its portfolio. Meanwhile, The WhiteWave Foods Co (NYSE:WWAV) has seen little to no hedge fund interest when it comes to being heavily invested in the stock; but one of the most notable investors was Pine River Capital (see Pine River’s high yielding stocks).
Other notables

A couple of the other major nutrition and health-based food companies include Mead Johnson Nutrition CO (NYSE:MJN) and General Mills, Inc. (NYSE:GIS). Mead Johnson is a a global leader in pediatric nutrition, with more than 70 products distributed across 50 worldwide markets. In essence, Mead has managed to carve out a niche part of the market, namely with its leading infant-formula products.

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