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WhiteWave Foods (NYSE:WWAV)

Q3 2013 Earnings Conference Call

November 7, 2013 10:00 AM ET

Executives

Dave Oldani - VP, Treasurer and IR

Gregg Engles - Chairman and CEO

Kelly Haecker - CFO

Analysts

Ryan Oksenhendler - Bank of America

Farha Aslam - Stephens Inc.

Judy Hong - Goldman Sachs

Chris Growe - Stifel Nicolaus & Company

Phil Terpolilli - Longbow Research

Bill Chappell - SunTrust

Operator

Good morning and welcome to The WhiteWave Foods Company's Third Quarter 2013 Earnings Conference Call. Please note that today’s call is being recorded and is also being broadcast live over the internet on The WhiteWave corporate website. This broadcast is the property of The WhiteWave Foods Company. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of the company is strictly prohibited.

I would now like to turn the call over to Dave Oldani, Vice President, Treasurer and Investor Relations for The WhiteWave Foods Company. Go ahead Mr. Oldani.

Dave Oldani

Good morning, everyone. And thanks for joining us on our third quarter 2013 earnings conference call. This morning, we issued our earnings press release which is available on our website at WhiteWave.com. The release is also furnished as an exhibit to our Form 8-K which is available on the Securities and Exchange Commission's website at SEC.gov. Also available during this call on the WhiteWave website is a slide presentation that accompanies today's prepared remarks. A replay of today's call will be available on our Web site beginning this afternoon.

We would also like to advise you that all forward-looking statements made on today's call are intended to fall within the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements will include, among others, disclosure of earnings targets, expectations regarding our branding initiatives, innovation and research and development plans, growth plans, and various other aspects of our business.

These statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today’s conference call. Information concerning those risks is contained in the Company’s 2012 Annual Report as updated b current report on Form 8-K filed with the SEC on June 14, 2013.

We also want to remind you that our presentation on today’s call and the accompanying slides is based on our adjusted financial results. The financial result and the related references to period before 2013 are presented on a pro forma adjusted basis as if the company had operated independently as a standalone entity which is the same basis that we used in our past earnings presentations and financial results and early references to 2013 period are presented on an adjusted basis.

The pro forma and other adjustments are outlined on slide 3 of today’s presentation. Our earnings release and the reconciliation posted on our website contains all the details of these adjustments along with the reconciliations between our GAAP results and the results we present on a non-GAAP basis.

Participating with me in the prepared section of today’s call are Gregg Engles, our Chairman and CEO; and Kelly Haecker, our Chief Financial Officer. Also available to participate in the Q&A portion of the call is Blaine McPeak, President of WhiteWave’s North America Segment.

Gregg will first provide a review of our results and overall business performance. Kelly will then offer additional perspective on our operating results and comment on our forward outlook before turning the call back to Gregg for his closing remarks. We will then open the call for your questions.

With that, I will turn the call over to Gregg. Gregg?

Gregg Engles

Thanks, Dave, good morning, everyone and thank you for joining us on the call this morning. I’m pleased to report today that Q3 was another quarter of strong organic growth for WhiteWave on both the top and the bottom line.

Consolidated sales were 10% in Q3, behind continued strong volume growth. Our consolidated operating income grew 19% in Q3 versus a year ago, even as we continued to experience higher operating cost. We remain focused on expanding our capacity to lower these costs this quarter with strong volume growth. We generated earnings per share of $0.19 in the quarter, an increase of 21% from the prior year. EPS also exceeded the high end of our range in Q3 by a penny. Overall Q3 was a solid quarter that exceeded our expectations.

As I mentioned we had strong top-line growth in Q3 with sales up over $57 million from last year to $639 million. Our top-line continues to be primarily volume driven behind our leading brands and innovative products. All of our categories performed well during the quarter supported by consumer interest in great tasting healthy and responsibly produced foods and beverages.

Sales in North America increased 8% in Q3 led by strong growth from plant based beverages and coffee creamers. Our premium Dairy sales grew low single digits in Q3 as our growth was impacted by our decision to exit certain private level business and by a national coffee chain’s decision to discontinue Horizon and offer only at some brands in its stores. The absence of these sales impacted the growth of our entire North America segment by roughly a four percentage point in Q3.

Our European segment reported robust top-line growth of 19% in the quarter driven by ongoing strong growth in Almond, Hazelnut and other non-soy beverages as well as Yoghurts.

Our growth came from across the grocery, drug and mass merchandiser channels with a meaningful portion also coming from other channels that include convenience and dollar stores, food service and other away from home outlets. Sales growth in Canada and Mexico along with the growth from our European operations were also contributors to our consolidated top-line performance in Q3.

Now I’ll cover the individual platform results for the quarter. Sales for North America plant based foods and beverages, again posted double digit growth which show a 14% in Q3, driven by volume. Our growth was on top of a strong category which was 13% in the quarter. Silk continues to be flat based market leader with an approximately 50% share of the overall plant based food and beverage category.

We continue to maintain number one share positions in all of our sub-categories with a 75% share in Soy, a 65% share of coconut and 53% share of almond. The almond sub-category continued to show strong growth in Q3 increasing 49%. The category was propelled by Silk almond, which posted 60% sales growth in the quarter. This is an acceleration from the 50% growth rate in Silk almond that we reported in Q2. Almond share of the plant based category continues to grow and now stands at 59% of the category, silicon prices 34%.

The recent rollout of our almond whites line is going well and we've also been pleased with the targeted roll out of our new yogurt offerings. We continue to believe that client based alternatives to dairy are in the early stages of their development and that the Silk and Alpro brands and the plant based category globally offer compelling opportunities for WhiteWave and its shareholders.

Alpro our European plant based food and beverage segment had another outstanding quarter of growth with sales increasing 19% as reported and 15% on a constant currency basis. This performance was driven by double digit volume growth on the back of excellent performance from our almond, hazelnut and rice beverages as well as our soy based yogurts.

Alpro's innovative plant based cream products were an additional growth contributor. Alpro's core geography of the UK, Belgium, Netherlands and Germany continued to be its strongest performing markets, but we are also starting to see positive signs coming out of the southern parts of the continent as well.

We’re pleased by the very strong growth of our Europe segment and we continue to focus on expanding our plant based portfolio throughout the continent behind Alpro's great tasting products.

Now turning to our premium dairy business. This platform delivered 3% sales growth as its top line was reduced by about half in Q3 due to the factors I previously mentioned. Risk related volume essentially generated little profit so its loss did not impact our operating results. Increased Horizon half gallon volume drove the growth in the premium dairy segment in the quarter. The organic milk category grew 3% in Q3 and our Horizon brand performance was in line with the category.

We continue to maintain a leading market share of 43% in organic milk. We expect our sales in this platform to be roughly flat on a year-over-year basis in Q4 due to the full impact of loss volume being realized in the coming quarters. We will also be comparing against a very strong Q4 of 2012 when sales were up 14%. We continued to be positive about the long term growth opportunities that we see for Horizon, as we continued to develop this brand and move it beyond just dairy in the years to come.

Our coffee creamers and beverages business continued its strong performance in Q3 with sales up 9% from the prior year period. Growth was volume driven behind the increases in our flavored creamer business as well as growth in half and half creamers. This platform also continued to see strong growth from food service, convenience stores and other away from home channels where we have a number one share. The refrigerated flavored creamer category grew 8% during Q3 driven by continuing trends of increased coffee consumption and coffee flavoring.

Our International Delight flavored creamers outperformed the category with low double digit growth. This momentum continued into early Q4 as our seasonal flavors are off to a strong start. We expected we would attract new -- enter the multi-serve ice-coffee category last year, after the successful launch of our International Delight ice-coffee line. This has occurred in 2013 and while the ice-coffee category has shown good growth the new market participants have captured this incremental volume and reduced our overall market share.

However we continued to remain the leading player in the space with a 50% share and continued to experience solid repeat usage and good velocities. Ice-coffee is still a developing and evolving category and we continued to see long term growth opportunities for our brands in this category.

We also maintain a bullish outlook for our coffee creamers and beverages business based on our belief that we can continue to bring innovative and delightful products and brands to coffee consumers. We’re very pleased with the overall strong results that we generated on an organic basis in Q3 behind continued volume growth across all of our brands.

I will now turn it over to Kelly who will review our third quarter operating performance and our outlook for the fourth quarter. Kelly.

Kelly Haecker

Q3 was another solid quarter performance posted by operating segments; driven by double digit volume growth our top line advanced 10% to 639 million. This top line performance drove consolidated segment operating income growth of 13% in Q3 to a record high $66 million. Operating income in our North America segment grew 12% in the quarter to 59 million behind continued strong sales growth of 8%.

Our Europe segment also delivered a very strong Q3 with sales growth of 19% that drove operating income growth of 23% in the quarter to approximately 8 million. We are very pleased with results of both of our segments produced on the top line and our strong operating income generation this quarter.

Now looking at our consolidated P&L. as you can see the ability leverage our P&L continued in the third quarter. As we converted our 10% top line growth into 19% total operating income growth, with our operating margin expanding 60 basis points in the quarter. This resulted in another strong quarter of earnings per share growth of 21% and an EPS of $0.19 that we delivered in Q3 exceeded the top end of our expectation range for the quarter.

Our gross margin compressed somewhat on a year-over-year basis as we experience some incremental operational cost driven by our ongoing growth including new line startup cost. We also chose to invest behind productive promotional activities and we experienced higher year-over-year raw material cost in the quarter.

Going forward we remain very focused on improving our overall supply chain cost and we continue to make progress on all of the production capacity expansion projects we previously outlined. We started up one new filling line in Q3 and are scheduled to have two others begin production in Q4. The additional capacity will aid in lowering our cost over time as other projects come on line over the next 18 months. Although we may incur incremental start-up cost as lines are being commissioned and until they become fully operational and begin running at optimal levels of production.

We also foresee some continued inflationary pressure in select raw material inputs notably [indiscernible] as was the case in Q3. In response we had announced that we will initiate price increases on our silk product line beginning in mid-November in order to maintain our historical margin structure.

Lastly I want to mention that we are pursuing the potential sale of our Idaho organic daily farm to allow our Horizon business to focus on its core processing, marketing and distribution capabilities.

As a result we have reclassified the related assets as held for sale and recorded a 7 million non-cash write-down to reflect the estimated fair value. We have excluded this non-cash write-down from our adjusted results. Historically approximately 5% of our milk supplies come from this farm. After sale we will look to continue to utilize organic milk in this farm along with our more than 600 other family farmers. Horizon will continue to be strongly committed to our organic dairy and focused on growing the category while continuing to provide consumers with high quality great testing organic products.

I’ll now spend a few moments growing overall expectations for the fourth quarter. When looking at our top line guidance we continue to see solid ongoing growth in our plant based foods and beverages and coffee creamers and beverages platforms in Q4. As Gregg mentioned we expect the top line in our premium dairy business to be roughly flat on a year-over-year basis and our European business will be also cycled against the strong Q4 of 2012 due to the lapping of the launch of almond and hazelnut beverages on the continent in the prior year.

Based upon these factors we expect our sales growth rate in Q4 to run below our year-to-date level but still be in the high single digit range. This will also result in a high single digit sales growth rate for the full year which is in line with our previous full year guidance. We expect to generate total operating income growth in Q4 in the mid to high-teens on a percentage basis resulting in the same growth rates the full year also in the mid to high-teens.

We continue to forecast operating margin improvement through the cost leverage we are able to generate down our P&L and maintain our full year 2013 outlook for operating margin expansion of at least 50 basis points over 2012. We continue to estimate roughly $55 million in corporate expense for 2013 and maintain our $150 million to $160 million full year capital expenditure forecast. We expect our tax rate to range between 33% to 34% in Q4 so, generally in line with our year-to-date rate. Based upon the expectations I outlined we anticipate generating adjusted diluted earnings per share of between $0.19 and $0.20 for Q4.

For the full year we are once again taking up the bottom end of our guidance range to reflect our strong results to-date and performance in Q3. So for the full year 2013 we now expect to achieve between $0.71 and $0.72 in adjusted diluted earnings per share. This would equate the EPS growth of 18% to 20% for the year on a completely organic basis.

In wrapping up, let me say that we are very pleased with our strong Q3 results as we were able to once again deliver EPS growth at times our top line growth rate we remain focused on continuing to drive our top line growth while improving our operating performance over time and we look forward to closing out the year with a strong Q4.

I will now turn the call back to Gregg for some closing comments before we open the call for your questions. Gregg?

Gregg Engles

Thank you, Kelly. Before turning the call over to you for your questions we recently launched a one year anniversary as a public company and I wanted to take a few moments to reflect upon some of our accomplishments over the past 12 months. We delivered four consecutive quarters of consistent strong sales and earnings growth behind our large market leading and on trend plans that operate in some of the fastest growing segments of the food and beverage industry.

We believe the long term favorable consumer trends force healthy favorable and sustainably produce foods and beverages will continue to generate consumer interest in the products we offer. We completed the final piece of our separation of Dean Foods with Dean selling its remaining interest in us to a successful secondary offering in July. Our separation came as a multistep process that took place as planned. In fact we completed this process somewhat ahead of the time frame that we had originally anticipated.

We maintain our innovation track record with the launch of several new and exciting products this past year. We continue to be the innovation leader across our categories and believe we are one of the main contributors to our categories growth. We remain committed to continuing to develop great pacing products that change the way the world eats for the better. We did our best while remaining crude oil emission and the core principles that guide our business which include being mindful of our impact on the planet.

For example in North America, we achieved our greenhouse gas reduction goal of 25% and exceeded our waste-to-landfill reduction goal of 30% by midyear. In Europe we succeeded in cutting our waste in half and further reducing our plant's carbon emission to by 14% since 2008 despite a 17% increase in production volumes.

We also took our sustainability commitment to the next level in the third quarter and we became one of the first U.S. companies to source only sustainable palm oil. We have made great strides to date. And all of us at WhiteWave are especially proud of what we have achieved in our first year as an independent company; we have great brands and businesses and believes that we are well positioned for continued growth and further value creation in the years ahead.

I want to thank the entire WhiteWave organization for the hard work and commitment to our great company. And with that I’ll now ask the operator to open the call for your questions. Operator?

Question-and-Answer Session

Operator

Operator

(Operator Instructions). And your first question comes from the line of Ryan Oksenhendler of Bank of America. Please proceed.

Ryan Oksenhendler - Bank of America

Gregg, I just wanted to ask you about, for Silk and for International Delight, really continues to grow well above the scanner data. Can you talk about what you're seeing in the non-measured channels? And maybe how much of that growth is coming from new customer wins. And maybe also if you could frame the size of the categories, the measured versus non-measured so we can get an understanding of what the opportunity is and how much white space is out there for you guys.

Blaine McPeak

Just to give you a little bit of context around it. Broad based we had about an additional 2 points of net sales growth that would be contributed to overall growth profile that would be well beyond the measured channels outlook here. And then answer of your question with respect to that is most of that would fall into both the Silk and coffee creamers and beverages portfolios we have little bit stronger distribution their overall. As you can imagine the capturing that full category of the away from home marketplace can be a bit of challenge due to limited amount of information available but we estimate that we have roughly a 50% distribution level and the away from home marketplace. And coffee creamers and beverages, we are the share leader across that particular segment and we see growth underlying in both coffee creamers and beverages and providing coffee solutions in the away from home marketplace as well as bringing healthier options with overall silk brand. So, consistent with the third quarter we had about 2 points of growth due to non-measured channels and I would expect that to continue to the foreseeable future here.

Ryan Oksenhendler - Bank of America

So there is some distribution gains, maybe that you can have there. But also the growth rates of the categories for measured versus non-measured, are they similar?

Blaine McPeak

It's hard to get out a complete unmeasured channel growth rate just because of the limited data that’s available overall; I would think that there are probably turning similar to what you see in the regular retail environment. So, we may be picking up a little bit of share along the way and really with the silk brand more of that is just a pure play penetration growth within the channel.

Operator

Thank you. Your next question comes from the line of Farha Aslam of Stephens Inc. Please proceed.

Farha Aslam - Stephens Inc.

A question regarding the growth again in both Silk and International Delight, could you just give us color on how much of that growth is driven by new households and how much is driven by increased penetration from existing users?

Gregg Engles

I think just to try to characterize them a little bit; we’re seeing solid growth in household penetration across most of our categories. I think as we came into this year we had talked about how the plant base category had reached 26% household penetration at the end of last year which was up about 300 basis points and we continue to see that expansion as we go throughout this year, I think the third quarter we saw picking up to about 27% household penetration. So another 100 basis points there.

Even in the flavored creamer segment which is really where you’re seeing the majority of the growth. We continue to drive household penetration there as well at the category that has about 36% household penetration on a 52 week basis is up about 100 basis points. So, you’re seeing the growth at household penetration which really reflects the growth in overall at home consumption of coffee as well as the consistency in terms of how consumers want to enjoy that cup of coffee which is a more flavorful sweet experience which the category of flavor creamers and international delight provide.

So, we’re pleased with what we continue to see in overall household penetration growth. You are seeing continued growth in overall buy rate across the categories as well with respect to the different variants that are available to consumer. So, that’s the play across the number of these categories and that’s how we plan to drive the growth of the categories as to continue to invest in brand-building efforts to educate the consumers about these categories and our brands as well as continue to expand with innovation that not only drives household penetration but also expands depth of usage within the household.

Farha Aslam - Stephens Inc.

Thank you. And then my second question would be regarding M&A. Could you share with us if you as a company believe you're ready for M&A, now that you're completely separated from Dean Foods, what the size and scale of your M&A interest would be, and what opportunities in terms of brands or geographies would be interesting for you?

Gregg Engles

Farha, I think that we've been effectively ready from an organizational standpoint for M&A since we became a public company. Now we have had some focus on separation issues, but that certainly would not have kept us from M&A, had we found the right opportunity. This is a topic that we talked a lot about. Starting with our IPL process and I think on most of our investor certainly road shows and presentations. M&A is something that we view as a way to augment the growth rates of our business, but augment in a way that is sustainable and relatively long term. So we’re looking in the M&A environment to acquire companies and brands in categories that have the same sorts of supporting secular trends behind them that our existing categories have.

And also then the sort of management and operating structure that we have here at WhiteWave, so again we are a company that runs relatively large brands in a pretty traditional organizational structural model for the CPG industry. So we are interested in businesses and brands that can fit into the framework either at the time that we buy them or over a period of development where we can grow those brands in the meaningful sized businesses. So that’s really the screen that we are looking at M&A activities through. They need to be an on-trend categories that are supported by strong consumer trends and we need to be able to see our way to relatively large businesses that can be managed effectively within the context of the operating structures that we have here at the company. So we’re ready. I think we’re going to be relatively selective about the types of things that we buy. But I believe that at some point in time M&A will become a part of this story that will augment what we believe is very-very exceptional organic top-line growth. So, not something we feel pressed to do but something we think we will have the opportunity to do.

Farha Aslam - Stephens Inc.

You wouldn't want to use M&A to expand into China -- into Canada and Mexico more aggressively?

Gregg Engles

No. If those opportunities presented themselves, we would certainly consider that. We’re not saying no to them. So we look at a lot of things and when we find the right thing, at the right kind of valuation, you’ll see us do M&A.

Operator

Thank you. Your next question comes from the line of Amit Sharma of BMO Capital Markets. Please proceed.

Unidentified Analyst

This is Andrew (inaudible) for Amit. The growth in single-serve Horizon organic milk appears to have decelerated, at least in the measured channels. Can you talk about what you're seeing there, if that's due to the emergence of branded and private label competition or overall category slowdown? And also if you can provide some perspective on the extent to which TruMoo chocolate milk might cannibalize Horizon sales in the school lunch segment.

Gregg Engles

I think we did see a bit of a slowdown in the third quarter that we saw within the measured channels overall on our single-serve business. We had a very large comp last year with absolutely incredible year around back to school on our Horizon brand and as you know at that time we didn’t have any distribution on the TruMoo brand overall. So I think there is some interaction there with respect to those two brands, I do. I believe overall that in longer term it will be healthier for the category to provide another entry point with respect to pricing for that consumer. We did see some additional competitive activity within the quarter both from a branded standpoint as well as a private label standpoint that, you know with time I think things will be no different than what we see in the overall Horizon business or we attract additional entrants. But I think we still believe we are bullish on the overall opportunities to grow single-serve overall. You know more to come on it, but I am optimistic about the trends that we will continue to see of moms seeking better-for-you foods. And that will be consistent with what the Horizon brand can offer.

Unidentified Analyst

Great. And my last question and I will pass it on, what is your outlook for the size and pricing of next year's almond crop? And have you begun to lock in supplies for next year? Thank you.

Gregg Engles

Yes, so we have begun the lock-in supplies as we go into next year. As I think Kelly provided in the prepared remarks that we will see continued inflation year-on-year in particular in the first half of next year and as such we announced a price increase effective middle part of this month here on our Silk business such that we can maintain those margins, and we saw a little bit of gross margin impact within the quarter of that, which is largely just a small timing issue in terms of the overall input cost and when we are able to reflect that price increase. On retail like it would be appropriately covered with respect to supply as well as our margin basis going forward and look forward to continuing to drive that segment overall, we believe it's hot on trend segment that we will continue to focus driving brand building efforts and continue to drive penetration behind Silk almond.

Operator

Your next question comes from the line of Judy Hong of Goldman Sachs. Please proceed.

Judy Hong - Goldman Sachs

Couple of questions, first so great top line performance and operating profit growth performance. But just on the growth margin side just wanted to get a little bit better understanding in terms of the compression both sequentially and year-over-year. I think you called out a few factors but if I can just get a little bit better color on the quantification of that and then how we should be thinking about that for the next few quarters?

Kelly Haecker

This is Kelly, as we mentioned as had a number of factors that kind of conspired together to drive the margin gross margin compression in Q3, [indiscernible] just reemphasize one of them while we did experience some year-over-year increase in input cost, almonds was the notable impact there. And as we talked on previous calls we continued to be challenged from an overall chain standpoint as we grow and prior to bringing on these additional capacity projects both in our plans and our warehouses. That's challenging to the manufacturing operations, so we're seeing some inefficiencies in some areas as a result of that.

We also start up one new line in Q3, so ultimately that will provide us benefits going forward, but during the start-up that can cause some disruption, and as we also mentioned in the prepared remarks, we did selectively increase promotions in some areas of our business. So overall pricing is just slightly below a year ago. So not one factor Judy but a number of factors were indicative of that margin performance both on sequential and year-over-year basis.

Now looking forward I think for Q4 you can expect our gross margin to be roughly flat perhaps slightly down on a year-over-year basis, I think about 35% a year ago. So we’re expecting something in that neighborhood in Q4 in large part driven by the issues that we mentioned in Q3, some of those will continue. And then as we also mentioned in the prepared remarks we're starting up two lines in Q4. So I will provide some additional headwind on gross margin as well.

But as we also mentioned in our prepared remarks, reminding that that we remain confident that from an operating margin standpoint we will continue to deliver at least 50 basis points of margin expansion in Q4. And then as we look forward in '14 and '15 as we have also previously indicated we would anticipate that the continued leverage in our P&L from our volume growth relative to our fixed cost structure along with the benefits that ultimately will receive in our P&L as we bring along these capacity expansion projects should allow us to expand our operating margins 75 basis points a year over the next couple of years.

So we remain very confident in continuing to drive strong operating margin expansion along with our strong top line growth.

Judy Hong - Goldman Sachs

And then my second question maybe for Gregg, just where are you in terms of thinking about taking Horizon into other category outside of dairy. Just wondering if you now at a point where you identify some of those categories and you are starting to build up capabilities related to that. Is 2014 going to be a year where you put a lot of focus behind that initiative, just curious how you are thinking about that?

Gregg Engles

We see lots of potential for the Horizon brand and we're at the point of beginning to exploit that and I will let Blaine give you more of the details around where we are and what to expect in 2014.

Blaine McPeak

As we have talked a number of different cases Judy this is a $750 million retail brand, it has a very strong clout with moms, moms with younger families. And we don't have any big news to share today I guess let's say but to answer to your question about 2014 I do think that 2014 will be the year where you begin to see us migrate into new categories, new parts of the overall retail store environment. And those categories will be -- those categories that we believe have potential that have a strong linkage to function amongst a household that have younger kids.

So I don't expect a big bang here, I do expect that this is going to be a slow burn. We're fully conscious of moving it to the store and the competitive activities that's there some very strong brands, but we also believe that we have a brand that bring a lot of clout to those parents with younger kids as well. So I think as early as the first half of next year I think you are going to begin to see that start to emerge with respect to Horizon, we'll probably share more of that as we come out of the fourth quarter earnings call.

Judy Hong - Goldman Sachs

And is there something that you need to either invest ahead of it or build more capabilities [and fund it] or is this something a little bit more incremental in nature?

Kelly Haecker

Yes, I think in the short term you are going to see some investments put behind that, those investments with respect to achieving shelf placement with also respect to driving overall awareness that Horizon might have other categories that we participate in. So as I mentioned I think it's going to be more of a measured approach versus any type of big bang approach here. And it's not going to just be one category over time. We believe that this a brand that can compete in a multitude of different categories and that will take some different capabilities, different capabilities with respect to the both the manufacturing side as well as the distribution side. But given some of our businesses today that are already in the different areas of the store we have demonstrated that we can call on different buyers and penetrate new territories and stores. So there will be a little bit of a learning curve I think and I think we will build some new capabilities along the way but I think what was demonstrated that we’re fully capable of expanding our shoulders a little bit in terms of where we compete and how we compete and I’ve got full confidence in the team to build those capabilities along the way.

Operator

And your next question comes from the line of Chris Growe of Stifel. Please proceed.

Chris Growe - Stifel Nicolaus & Company

I had two questions for you if I could please, the first was to ask about innovation in particular and with International Delight and with Silk I guess and just to understand how the innovation this year versus last year compares, it seems like just looking at some of the measured channel data on say silk, fruit and protein or on the ice coffee products they are little more challenges given the surge a year ago and the launch a year ago. So I’m curious how you would rate the innovation this year versus last year and how those are holding up versus the contribution last year?

Gregg Engles

I think overall we’re pleased with the broad based performance of our innovation pipeline that we had. Most of that would have launched in the first quarter of this year. The two that you mentioned there crude and protein as well on the Silk brand as well as the ice coffee are call it 18 months into their overall product life cycle. I’ll characterize pleased with the performance overall and continue to demonstrate progress.

On those two particular ones crude and protein is softer than what we would have expected. I think what we’ll see is that we’ll probably see a tightened ACV profile distribution profile in that business and focus within on where we see the strongest velocity that select customers or select region. But that will remain around and more limited fashion. On the Silk brand we just launched almond lights as well which have a third fewer calories than the base silk almond product line up and already we’re seeing some pretty encouraging results coming out of those and we have further plans to continue to expand the brands position on silk as we move into the January time period of which we’re not prepared to share exactly what those are at this point but I am excited about the news that we have coming up into the first quarter of next year.

On International Delight any time you take a look at the overall measured channel performance here you’re going to see very different numbers whether you dissect the numbers in terms of ice coffee or the flavored creamers profile. I think the ice coffee category overall is playing up pretty as we would have expected it. We expect that this is a robust category and I think you’re seeing that you’re seeing a category that over the past 52 weeks is about $150 million category that we essentially created 18 months ago.

We also expected fully that we wouldn’t be the only players in this category and you’ve seen both other branded players come into the category as well as private label. But I’d say this is at we still hold a 50% market share in that overall category. The next nearest branded player would have roughly a mid-20 share so like our position I like the fact that we’re going to continue to innovate there and I like the fact that we're going to remain committed to continue to drive the category despite the fact that we’re going to feel some short term pressure here just because of the year-on-year comps have been the only player in town versus a multitude of players in the category this year.

And from an innovation standpoint in International Delight I am really pleased with what we see. We just launched some new flavors in Cold Stone this year and we’re seeing solid performance behind the Cold Stone flavors and we’re really pleased with the early performance of our seasonal products that we have here that Gregg mentioned previously the Pumpkin Pie Spice as well as peppermint mocha coming up here in the fourth quarter. So I think we’ve had a really, really solid year I don’t compare it to last year which was a big bang year behind ice coffee but I think it’s -- we made very, very solid place in each of our categories.

Chris Growe - Stifel Nicolaus & Company

It was a good overview. Just a quick follow up then on the cost inflation, sounds like it’s a little more almond now. Are there any other pressure points for cost inflation or getting those [indiscernible] what I’m thinking off? And then just understand how the pricing you put in place in almond is that comparable to what your peers are doing if you’ve seen other competitors moving?

Gregg Engles

Yes, I think first it’s early to tell with respect to what marketplace will do. We don’t go into a lot of details on their pricing actions but we just recently announced this so I don’t know what to expect with respect to the balance of the competitive set and ultimately the retailers are going to control what that impact is essentially on retailer. I’d say that we see ups and downs across the entire commodity complex with respect to input cost. But you also have to keep in mind that you see other inflationary pressures be it packaging, be it any type of increases with respect to wages and things on the manufacturing side.

So I think we’ve proven in the past that we’ve been pretty adopt at implementing price increases and pretty smart about how we play these prices increases with respect to their impacts on the category and on the volume. But essentially we’re still going to fall back to advertising and strong customer relationships and innovation to continue to drive the category growth overall from both a price and a volume standpoint.

Operator

Thank you for your question. Your next question comes from the line of Phil Terpolilli of Longbow Research. Please proceed.

Phil Terpolilli - Longbow Research

Just a couple of quick clarification question, with the Silk price increase you were just talking about, is that only on the Almond line or is that across the portfolio?

Gregg Engles

We don’t go into the full details about all of our pricing actions on the call. I think broad base we announce that the cost of Silk line and that’s really as far as I think we can comment on pricing actions.

Phil Terpolilli - Longbow Research

And then just if you can remind us historically, with the Silk line, what's has happened in the past in terms of pricing, if you’ve taken price increases like this before. And maybe what you are expecting in terms of elasticity. Thanks.

Gregg Engles

I'll say this without going into all the details of the price increases with the elasticity and everything. We -- for the past several years we have not had price increases on the Silk business. Despite seeing some input cost inflation, we’ve been able to offset those with a variety of different cost saving measures that we've had in place. I think the last price increase that we might have taken on the Silk business might have been three to four years ago overall. And you’ve seen incredible response on the volume side here and we don’t just look at a pure play of input cost with respect to our pricing actions we take a look at what we expect the overall market reaction to be from a customer and consumer standpoint. We feel pretty confident that we can pass this through and continue a strong growth profile on the Silk business.

Operator

Thank you for your question. Your next question comes from the line of Bill Chappell of SunTrust. Please proceed.

Bill Chappell - SunTrust

I know it's small, but maybe you can talk about the loss or the discontinue with the customer over the coffee chain. And just so I understand it, if that has to do also with your further entry into iced coffee, and making those as competitors, or whether you see any other type actions like that going forward.

Gregg Engles

I think this is a case whereby its one of our customers strategies in terms of the grant that they intend to offer in the front of their stores. It’s not just going to have an impact on our business here with respect to Horizon of the strategy shift with respect to that customer.

I don’t anticipate that that’s going to be anything material to our business overall with respect to the bottom line as we’ve indicated in the prepared remarks and I don’t expect that that will have any type of knock on effect within the other customers as I think it's fairly isolated to this particular one. I don’t think it has anything else to do with our business overall other than this customers intended strategy in terms of what they’re offering is in their stores.

Bill Chappell - SunTrust

Okay. And then just, do you mind giving just a little more background on kind of the Idaho farm. Is this the only one really left in your portfolio? And what did it represent in terms of sales or profits, as we're looking forward?

Gregg Engles

Yes, I think as it was mentioned in the prepared remarks, the Idaho dairy represents just under 5% of our overall milk supply. The vast majority of our milk supply is represented by the 600 family farmers that we have in our overall network and then we also have a company owned farm in Maryland as well.

Important part about the potential transaction here with respect to our Idaho dairy is that we’ve seen no change in the overall milk supply with respect without being able to service the Horizon organic brand. And so I don’t believe that it will have any impact with respect to our ability on supply standpoint here to meet our overall sales efforts. It’s just one of those that as we take a look at our overall core competencies as a company and the amount of supply that we have at Idaho dairy. We intend to focus really on the overall, the processing, the distributing of the product and the marketing of the product line is really where our strength lies and as we continue to proceed with the potential sell here, I think we’ll be able to convey more.

Unidentified Company Representative

It’s also a function of where we want to invest. So, as you heard for the last several calls, we’re investing very significantly in our manufacturing and distribution supply chain. We have this large one off farm in Idaho that’s quite capital intensive. And its frankly a capital allocation question for us, its 5% of our milk supply, it's not a strategic part of our supply base. It's an important piece of the supply that we believe we’ll able to maintain that supply in the context of this transaction. So, it’s really making sharper choices about where we’re going to have our money invested.

Bill Chappell - SunTrust

And there is nothing in reported sales, it is all inter-Company?

Gregg Engles

No. We use all the milk that’s come out from that farm, horizon operation just goes into cost of sales.

Operator

Thank you for questions ladies and gentlemen. I would now like to turn the call over to Gregg Engles for the closing remarks.

Gregg Engles

Thank you, operator. And thank all of you again for joining us on the call this morning. We appreciate your interest in the WhiteWave Foods Company and your great questions. And we look forward to talking with you about our fourth quarter results on the next call in February. Thank you all very much.

Operator

Thank you for joining today’s conference ladies and gentlemen. This concludes the presentation. You may now disconnect. Have a very good day.

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