Dairy Giant Dean Foods Files for Bankruptcy

Texas-based Dean Foods, the largest milk processor in the U.S., has filed for Chapter 11 bankruptcy protection.

The dairy producer announced today it will use the process to “protect and support” ongoing business operations and address debt and pension obligations. Dean Foods has secured $850 million in debtor-in-possession financing from existing lenders, including Rabobank, to support continued operations ahead of an eventual sale.

“The actions we are announcing today are designed to enable us to continue serving our customers and operating as normal as we work toward the sale of our business,” said president and CEO Eric Beringause (in a statement). “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. Importantly, we are continuing to provide customers with an uninterrupted supply of high-quality dairy products, as well as supporting our dairy suppliers and other partners.”

Beringause joined Dean Foods in July, following the resignation of former CEO Ralph Scozzafava. Beringause had previously served as president and CEO of Gehl Foods.

Dean Foods also indicated it is in “advanced discussions” with Dairy Farmers of America (DFA), a national milk cooperative with members representing over 8,500 farmers, to sell the company. In a statement sent to BevNET, DFA EVP and chief of staff Monica Massey confirmed talks were ongoing with Dean Foods regarding a potential sale.

“As Dean Foods is DFA’s largest customer, our focus is ensuring we have secure markets for our members’ milk,” Massey wrote. “Thanks to the strategic planning and management by our farmer Board of Directors and management team, the Cooperative is in a financial position to withstand a situation like this. We remain committed to delivering value to our members and dedicated to preserving the family farm for generations to come.”

Founded in 1925, Dean Foods’ brand portfolio includes more than 50 national and regional dairy brands, including Country Fresh, DairyPure, Friendly’s, Garelick Farms, Land O’Lakes, Meadow Gold, Oak Farms Dairy, Swiss Premium, TruMoo and Tuscan Dairy Farms, among others. The company also owns juice maker Uncle Matt’s Organics and is a majority stakeholder in flax-based dairy brand Good Karma.

The filing’s effect on those companies is uncertain at this point. In an email to BevNET, Good Karma CEO Doug Radi said Dean Foods’ bankruptcy has “no impact” on the brand, which remains an independent company with a separate leadership team and board of directors. “We remain dedicated to our mission of making dairy alternative food and beverage products that deliver a plant-based mighty bundle of nutrition,” he said.

In a statement, CROPP Cooperative — which includes Organic Prairie, Organic Valley and Mighty Organic — said that, while it is “disheartened” by the bankruptcy, the Organic Valley Fresh joint venture is outside of the Dean Foods filing, meaning “it has no impact on the venture’s customers or vendors.”

“Organic Valley remains strong and our business overall has been bolstered by new innovations we’ve brought to market, including Ultra, the first organic ultra-filtered milk,” the statement read.

Representatives for Uncle Matt’s did not respond to a request for comment.

Like others across the dairy industry, Dean Foods has struggled as U.S. consumers have increasingly turned away from milk in recent years. According to market research group SPINS, refrigerated milk is one of the fastest-declining categories for natural food and beverage, contracting by 2.8% through May of this year. In March 2018, citing low sales, Dean Foods ended contracts with 100 independent farmers in eight states following the announcement that Walmart, Dean Foods’ biggest customer, planned to build its own dairy processor to produce private label milk for the chain.

In February, Dean Foods announced it would undertake a strategic review to facilitate growth, including explorations of a merger, joint venture, sale, or disposal of certain assets.

Meanwhile, the global market for plant-based beverages is expected to reach $19.67 billion by 2023, growing at an annual rate of 12%, according to Markets and Markets. The burgeoning segment has attracted the interest of some of the biggest names in CPG, including Groupe Danone, General Mills and The Coca-Cola Company.

Note: This article has been updated from its original version to include comment from CROPP Cooperative.