Thread by @CoyoteEquity

When Mr. Market admires #Oatly ($OTLY.US) and has a lapse in memory of past sector deals, a healthy refresher is needed.
Plant-based cream on #Danone’s ($BN.FP) morning coffee, a lengthy thread (x/11):

In the summer of 2016 #Danone acquired #WhiteWave for $12.5b or c. 14x EV/EBITDA 2016F aft syn. Danone became the leader in plant-based food with an estimated market share of >40%. The acquisition added many plant-based brands, but more importantly the #Alpro and #Silk products.

#Danone plant-based portfolio includes (est,ori):
-Silk (1977, WW)
-Alpro (1980, WW)
-Promavel (1983, WW)
-So Delicious (1987, WW)
-Activia’s PB product (2019, R&D)
-Danette’s PB product (2020, R&D)
-Actimel’s PB product (2020, R&D)
- Follow your heart (1988, 2020,Earth Island)

In '18 #Danone pledged to increase plant-based sales from €1.9b to €5.0b in 2025. Last FY #Danone’s plant-based revenues amounted to €2.2b or c 10% of revenues. #Oatly IPO doc mentioned Danone 2x, 1x as a traditional dairy company. As one can see, reality is more nuanced.

The category grew +15% LFL last year. The company continued its penetration gains since 2016 in the US and EU: resp. +5pts and +8pts. Couldn’t find #Danone EBITm of its plant-based segment, but the EDP overall segment reported 10,2% margins in FY20.

Let’s focus on #Alpro with €750m in FY20 sales, it’s a cornerstone plant-based product of Danone (35% sales of the category). Its heritage is immense (40 years) and is well recognized by US and EU consumers. It’s the first brand of choice for 18 to 24 yo (2x next competitor).

#Alpro offers a wide range of products (almond, oat and coconut milk) through B2B (read hip ‘baristas’) and B2C channels. Since its acquisition (basis 2015), it grew 60% or a 9,9% CAGR. The number of countries addressed has doubled since then.

IMO, the main differences between #Oatly and #Danone’s plant-based portfolio are: focus, growth, image and obv profitability. Oatly is a hip pure player (Oat: 90%) with stellar growth, while Danone offers a blend of plant-based products with lower grwth and more old school image.

During an intervention of #AtlanticEquities on #CNBC, the analyst mentioned a peer group (#Fevertree, #Monster and #BeyondMeat) to value #Oatly. Didn’t read the analysis, but I would be cautious to use the 2 first as the customer’s base (and dynamics) could be different.

I wonder where #Danone ($BN.FP) stock would be if we would transpose an albeit lowered (to account for lower growth) #Oatly EV/Sales multiple to the former’s plant-based segment? Moreover, at current prices, #Oatly market cap represents one third of Danone’s cap... Interesting.

On a more traditional peer analysis versus #Nestle ($NESN.SW), #Danone ($BN.FP) trades on significant lower EV/EBITDA, EV/EBIT, P/E, P/B multiples for FY21F and FY22F (BB data). Sales growth is comparable, but margins and ROE of the latter could improve. We are long Danone.