DEAN FOODS BANKRUPT
By Todd Horwitz
Dean Foods Files for Bankruptcy
Dean Foods, America’s largest milk producer, is filing for bankruptcy. The 94-year-old company has struggled in recent years because Americans are drinking less cows milk. 2019 has been particularly brutal: the company’s sales tumbled 7% in the first half of the year, and profit fell 14%. Dean Foods stock has lost 80% this year. The company, which produces some of the country’s most recognizable milk and dairy products, including Dairy Pure, Organic Valley and Land O’Lakes milks, has blamed its struggles on the “accelerated decline in the conventional white milk category.”
The company is saddled with debt and has been unable to fund all of its workers’ pensions. So on Tuesday, Dean Foods filed for Chapter 11 bankruptcy protection to keep the business operating, reorganize its debt and help fund the pensions while it looks to sell the company. Dean Foods said in a statement that it is working with the Dairy Farmers of America cooperative on a potential deal, in which the cooperative would buy almost all of the company.
As part of the bankruptcy process, the company secured $850 million in financing from its existing lenders, including Rabobank, to keep the company running. Once a staple of the American refrigerator, milk has slowly fallen out of favor with consumers as they seek less-sugary or plant-based alternatives.
Dean operates about 60 dairy processing plants in 29 states, a network it built through years of acquiring regional dairy companies to become the top U.S. milk processor by volume. The company, which supplies restaurants, supermarkets and schools and also sells ice cream and creamers, traces its history back to 1925, when Samuel E. Dean Sr. acquired a northwestern Illinois evaporated milk plant. Dairy Farmers of America, which represents about 14,000 dairy producers, has been closely tracking Dean’s financial situation and has financially prepared for the company’s bankruptcy, said Monica Massey, executive vice president of the Kansas City-based cooperative.
Tanner Ehmke, manager of knowledge exchange at agricultural lender CoBank, said consumers aren’t totally abandoning milk, with some purchases shifting toward organic and ultrafiltered varieties. But the days of the gallon-size plastic jug as a staple in U.S. refrigerators are fading, he said. “They’re not pouring milk on their cereal anymore; they’re having a power bar instead,” Mr. Ehmke said. Until its bankruptcy filing Tuesday, Dean had reported five straight quarterly losses, and some analysts anticipated the company would continue losing money throughout 2020. The company’s 2018 sales of $7.8 billion were down 38% from a decade ago, and its shares have been trading around $1 since May, down from above $21 at the end of 2016.
Todd “Bubba” Horwitz