Danone Buys Follow Your Heart to Strengthen Plant-Based Business

Yogurt giant Danone has acquired plant-based brand Earth Island, maker of the Follow Your Heart line of condiments, yogurts and breakfast items, the company announced last night. Terms of the deal were not disclosed, but CEO and co-founder Bob Goldberg along with the current Earth Island management team will continue to lead the business, which will be run as a subsidiary of Danone.

Earth Island launched the Follow Your Heart brand in 1988 out of its namesake market and cafe location in Canoga Park, CA, which was not included in the deal. Follow Your Heart was first known for its vegan mayo alternative Vegenaise, which is now sold in 13 varieties, but has expanded to offer vegan cheeses, yogurt, dips, spreads, dressings and egg replacement. Most recently the brand added Rocket Cakes, a ready to cook vegan, gluten-free pancake and waffle batter. Along with the deal, Follow Your Heart also debuted refreshed branding for its entire line.

Cascadia Capital represented Earth Island while Piper Sandler & Co. represented Danone. According to Erik Einwalter, managing director at Cascadia, there were multiple offers for the company.

“You can’t underestimate the interest from the strategic buyer community seeking acquisitions in the plant-based community as either an offensive or defensive play to add plant-based analogues to their current portfolio set.”

In a press release issued last night, Goldberg said partnering with Danone would allow the brand to scale its mission of “bring[ing] positive change in the world through the creation of sustainably and responsibly-made foods.” Danone added that the acquisition would give the company “a unique opportunity to strengthen its plant-based business,” citing the success of fellow plant-based portfolio brands Alpro, Silk and So Delicious Dairy Free. On its 2020 annual results call today, Danone reported that its plant-based business grew 15% in 2020, reaching € 2.2 billion of sales in 2020, up from €1.9 billion in 2019. The company’s goal is to increase its plant-based sales worldwide to €5 billion by 2025.

“It’s a typical case for us where the strength of the channels, the know-how, the knowledge of Danone will be put to [use] to develop this gem of a company,” Emmanuel Faber Chairman and CEO of Danone said this morning during a call with analysts.

Danone has steadily worked to increase its presence in the plant-based space via acquisitions, bringing aboard the Silk, Vega and So Delicious brands via its purchase of WhiteWave Foods in 2017 for $12.5 billion. Through its venture arm Danone Manifesto Ventures, the company has further invested in brands including Harmless Harvest, Halsa, Nature’s Fynd and Forager Project.

Still, Follow Your Heart marks one of Danone’s first acquisitions that largely departs from the fluid dairy or yogurt set. Through Follow Your Heart has produced yogurt since 2018, it represents a small section of the business. That said, Danone told investors and analysts today that it also seeks to enter the plant-based cheese category, which it says in the U.S. is larger than the dairy business, and the deal will give the company a leg up on that mission.

According to the presentation today, Follow Your Heart has the number one selling plant-based sliced cheese and the number two plant-based shredded cheese in the U.S. Danone also sees opportunity to target the foodservice channel with Follow Your Heart’s products, for items such as pizza, burger and mac and cheese. Though the deal was perhaps smaller then some of Danone’s previous acquisitions, Danone sees an opportunity to expand the brand’s reach.

“[It’s] frankly not a big acquisition,” Faber said. “It’s simply a pioneer, iconic brand that we [can] buy now and maybe in five or ten years time, it would be too late or much too expensive.”