Dean Foods seeks bankruptcy protection

Associated Press
Dean Foods has filed for bankruptcy protection

With milk being squeezed out of the marketplace with a myriad of competing products in the dairy case, the nation's largest milk company is seeking bankruptcy protection.

Dean Foods filed for Chapter 11 bankruptcy protection this week, adding that it may sell off it's company to Dairy Farmers of America, national milk marketing cooperative that is owned by and serves more than 14,500 dairy farmer-members representing more than 8,500 dairy farms in 48 states.

Dairy Farmers of America buys milk from Wisconsin farmers and sells some of it to Dean Foods, which has a processing plant in De Pere and plants in Illinois, according to the Milwaukee Journal Sentinel. 

"Despite our best efforts to make our business more agile and cost-efficient, we continue to be impacted by a challenging operating environment marked by continuing declines in consumer milk consumption," CEO Eric Berigause said in a prepared statement.

"Americans are not drinking milk like they used to for a number of reasons, the most prevalent being that there is so much more to choose. We've simply diversified our mealtime and snacktime routines."

Dean Foods made the announced earlier this month that it has taken a majority stake in Good Karma Foods, the leading brand of flaxseed-based milk and yogurt alternatives.

The company's 58 national brands include DairyPure, TruMoo, Friendly's, Mayfield, Dean's, Meadow Gold, Tuscan and Alta Dena.  Regional brands sold in Wisconsin include Country Fresh, Dean's and Land O'Lakes.

Consumption falls

Since 1975, the amount of milk consumed per capita in America has tumbled more than 40%.

Dean, known for its Milk Chugs product line, has lost money in eight of its last 10 fiscal quarters and has struggled as more consumers have turned to plant-based beverages.

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To diversity its portfolio of products and to gain a toehold in the plant-based products, then Dean Foods CEO Ralph Scozzafava announced that the company had taken a majority stake in Good Karma Foods, the leading brand of flaxseed-based milk and yogurt alternatives.

"Good Karma is a fast-growing brand that gets us back into the growing plant-based food and beverage category, making it an excellent addition to our portfolio," Scozzafava said, calling the investment one example of how Dean Foods was executing against one of the major pillars of its strategic plan—to build and buy strong brands.

In March 2018, Dean Foods informed more than 100 dairy operations across eight states that their contracts with the company would be terminated at the end of May.  Dean's letter to producers and processors blamed an oversupply of raw milk, a decrease in fluid milk consumption and Walmart's new 250,000-square-foot milk processing facility in Indiana, which will result in 90 million to 100 million fewer gallons being supplied by the dairy giant.

That news hit dairy farms and milk sellers hard.

"I think that certainly was a blow for them, but it was only one of many they've had," Mark Stephenson, director of dairy policy analysis at University of Wisconsin-Madison told the Journal Sentinel.

The company says it has about $850 million secured in debtor-in-possession financing from certain existing lenders to continue its operations until a deal is finalized.

The Dallas company looked into a sale earlier this year but said two months ago that it would continue doing business as a stand-alone venture.

Dean Foods, which named Berigause as its new CEO in July, said its business is operating normally while it reorganizes. The company currently employees around 15,000 employees nationwide.

According to the company website, Dean Foods was founded by Samuel E. Dean, Sr., who owned an evaporated milk processing facility in Franklin Park, Illinois, in the 1920s. 

Colleen Kottke of the Wisconsin State Farmer and the Milwaukee Journal Sentinel contributed to this report