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America’s oldest biggest milk company files for bankruptcy

Founded in 1925, American milk giant, Dallas-based Dean Foods, has filed for bankruptcy protection, signalling another grim chapter in the struggles of the dairy industry.

As milk is quickly going out of fashion, the company has found itself unable to compete. Milk alternatives made from almonds, soy, cashews and coconuts have exploded in popularity for several reasons: they are seen as more nutritious than cow’s milk, or a salve to those with a milk allergies or lactose intolerance. Others deem them better for the environmental, or because they want a vegan diet.

Another travail is a decrease in cereal consumption: more and more Americans are switching to yoghurt, power bars and other breakfast options that can be consumed on the go.

Across the country, milk consumption is steadily declining. Americans drank 37% less milk in 2017 than they did in 1970, according to the Agriculture Department.

This year, the Dairy Farmers of America reported that its milk sales had dropped to $13.6-billion in 2018, from $14.7-billion in 2017.

Saddled with debt and struggling to adjust to changing consumer habits, Dean Foods, whose portfolio of brands includes TruMoo and Lehigh Valley, said it was in talks to sell itself to Dairy Farmers of America, a marketing cooperative that sells milk from thousands of farms.

Facing familiar challenges

In recent years, consumers have moved away from brands, and even entire categories of food, once seen as household staples. The decline of the milk industry ia a particularly stark example of how these changing tastes are challenging major companies whose products once dominated store shelves.

“Long ago, the public figured out that diets do just fine without milk and no, we don’t have to drink three glasses a day,” said Marion Nestle, food studies professor at New York University. “Maybe plant-based milks are the coup de grâce, but this industry just can’t seem to keep up with changing tastes.”

Dean Foods is not the only major brand struggling to keep pace as consumer habits shift. Outside the dairy industry, Kraft Heinz has also stumbled.

In 2015, the merger between Kraft and Heinz, owners of some of the best-known brands in packaged foods, created a giant with $28-billion in annual revenue and dozens of products that Americans have eaten for generations.

But as demand for unprocessed and organic alternatives rose, the company’s sales and profits plummeted. Kraft Heinz also made steep budget cuts at a time when research and development should have increased, analysts say, with startups competing for shelf space.

Like Kraft Heinz, Dean Foods has watched from the sidelines as smaller rivals dominated the growing market for trendy alternatives, like almond milk and plant-based dairy products. In fact, in 2012, the company started spinning off its units that made such alternatives — a move that in retrospect looks like a strategic error.

Those brands, Silk and Horizon Organic, are now owned by Danone, the French food company.

The two struggling companies have also faced competition from private-label brands developed by retail chains. Once one of Dean Foods’ most important customers, Walmart opened its own milk-processing plant in 2018.

Before its bankruptcy filing, Dean Foods had reported losses for five straight quarters and closed some of its plants, laying off hundreds of workers. The company’s senior leadership has been in a state of flux, with three chief executives in three years. (The Dean family hasn’t held a large stake in the company for years. It was sold in 2001 to a rival, Suiza Foods, which took on its name.)

Dean Foods has 66 manufacturing facilities, employing 16,000 people, in 32 US states and distributes its products across all 50.

Source: New York Times, News-Journal.com, CNN

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