Dean Foods Explores ‘Strategic Alternatives,’ Including Sale

February 27th, 2019


Category: Dairy

(Food Dive) – The announcement of this potential sale came the evening before Dean Foods reported its quarterly earnings. The country’s largest milk producer posted losses for the fourth consecutive quarter and suspended dividends. For the full year, Dean reported a net loss of $3.63 per share. Announcing a review of its options before the release of this poor earnings report makes sense. And given the company’s recent issues in the category, it shouldn’t come as surprising news.

Amid the increase in options and consumer interest in plant-based milks and other dairy alternatives, Dean Foods has struggled. Plant-based and even lab-created milk has been sweeping the industry, hurting farms and milk producers. U.S. non-dairy milk sales were up 61% over the past five years, while dairy milk sales plunged 15% from 2012 to 2017, according to Mintel.

Adjusting to the change in demand, Dean has been working to diversify its investments in waters, juices and plant-based products. Dean bought a minority stake in Good Karma Foods, which sells non-dairy milk and yogurt, and later announced it was taking majority stake in the company. The dairy manufacturer also purchased Uncle Matt’s Organic, a maker of probiotic-infused juices and fruit-infused waters. In 2016, it expanded its reach into other dairy segments, buying the manufacturing and retail ice cream business of Friendly’s Ice Cream, a Northeast-U.S. restaurant.

In previous years, the company divested some of its plant-based and organic lines, including WhiteWave Foods and Morningstar.

The moves to diversify Dean’s portfolio haven’t been enough to avoid plant closures and layoffs. Late last year, Dean Foods closed two milk processing facilities and laid off 207 workers. Earlier in the year, the company shuttered three facilities. Dean also terminated more than 100 dairy contracts with the company to curtail how much milk it was purchasing.

Despite these measures, Dean Foods’ earnings have continued to disappoint. Last quarter, profits dropped 12% from the same time a year ago. But that decline hasn’t just been a result of plant-based competition. The company has battled with an oversupply of milk and tariffs. Since 2014, dairy prices have been falling consistently. Private label brands have also hurt Dean’s business, as stores like Walmart and Amazon have launched store-branded milk that bring even more competition to the crowded space.

It seems that the company’s cost-cutting measures haven’t been enough and an outright sale could be likely. However, it’s unclear who will want to buy Dean Foods. More companies are investing in plant-based beverages and innovations rather than regular dairy brands. It might be a tough sale, so it could take a while and the company might not get as much as was hoped out of the deal.

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