{"id":9459,"date":"2016-11-03T23:30:57","date_gmt":"2016-11-04T03:30:57","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/riding-the-heat-wave-will-whitewave-survive\/"},"modified":"2016-11-04T15:31:12","modified_gmt":"2016-11-04T19:31:12","slug":"riding-the-heat-wave-will-whitewave-survive","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/riding-the-heat-wave-will-whitewave-survive\/","title":{"rendered":"Riding the Heat Wave \u2013 Will WhiteWave Survive?"},"content":{"rendered":"

In July 2016, WhiteWave Foods (\u201cWhiteWave\u201d), the organic consumer packaged goods company, announced its $10 billion sale to French dairy company Danone.\u00a0 But larger problems loom for WhiteWave.\u00a0 With increasingly erratic weather conditions, water shortages and sustained heat, the company\u2019s business is vulnerable to raw product shortages, lower product quality and more volatile price fluctuations.<\/p>\n

The following outlines climate change\u2019s impact on some of the primary components of WhiteWave\u2019s business:<\/p>\n

Soy:<\/u><\/strong> WhiteWave notes in filings that the company depends heavily on soybeans. \u00a0Indeed we know that plant-based food and beverages, which include beverages such as soy milk, almond milk and coconut milk, among other products, comprised approximately 38% of WhiteWave\u2019s 2015 net sales[1]<\/a>.\u00a0 Recent research suggests that, if climate change continues at its current pace, soybean yields in the U.S., which supplies 38% of the world\u2019s soybeans, will drop by as much as 82% by 2100[2]<\/a>.<\/p>\n

To add complication, research suggests that increased demand for soy products has contributed to deforestation; during 2000 to 2003, 17% of total forest loss in Brazil, the world\u2019s second largest provider of soybeans, was attributable to the expansion of soy cropland[3]<\/a>.<\/p>\n

Naturally, these dynamics can have detrimental effects on WhiteWave.\u00a0 First, WhiteWave may face supply shortages and commodity price volatility because of poor soy growing conditions, something the company alludes to as a business risk in their filings.\u00a0 Second, WhiteWave may face public and regulatory scrutiny for producing a product that contributes to deforestation.<\/p>\n

Almonds:<\/u><\/strong> WhiteWave sources most of its almond supply from the Central Valley in California[4]<\/a>. \u00a0Climate change has resulted in less water supply in this region.\u00a0 According to The\u00a0Risky Business Project<\/em>, \u201cAs the Southwest climate heats up, the region is likely to see significantly less snow in the mountains, leading to decreases in spring runoff especially in California and the Southern Rockies\u2026 this translates into less available groundwater\u2026\u201d[5]<\/a>.\u00a0 What\u2019s worse, almonds are particularly thirsty nuts, requiring 1.1 trillion gallons of water per year, or roughly 10% of California\u2019s total water supply[6]<\/a>.\u00a0 Because WhiteWave has a highly concentrated supply base, the company is arguably more at risk of supply shortages and related price fluctuations with almond-based products than with any other product the company produces.<\/p>\n

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The company has led a concerted effort to dampen its own environmental footprint, but is still vulnerable to broader, systemic issues related to climate change.\u00a0 To reduce the company\u2019s contributions to climate change, WhiteWave has set the following resource usage targets during 2015 to 2025[7]<\/a>:<\/p>\n

\"climate-change-jpeg\"<\/a><\/p>\n

In addition to implementing initiatives that reduce WhiteWave\u2019s environmental footprint, the company has incorporated tackling climate change as part of its corporate mission.\u00a0 The company claims to work with NGOs, and is supportive of U.S. and global efforts to regulate greenhouse gas emissions[7]<\/a>.<\/p>\n

Although WhiteWave presents impressive materials on ways the company is addressing climate change as a socially responsible business, there is little mention of how the company is addressing corresponding risks in the short-term, i.e., supply shortages.\u00a0 In the short-term, the company could consider the following:<\/p>\n