Dean Foods Co. has announced that it has filed for Chapter 11 bankruptcy protection as mounting losses continue to grapple with the company.
The Dallas-based 94-year old dairy company that owns a number of brands including DairyPure, TruMoo, Land O’Lakes, Country Fresh, Dean’s, Garelick Farms, and Friendly’s has been suffering losses for seven out of the last eight financial quarters.
Last June, after its second-quarter earnings call, Dean Foods announced a total net debt of around $968 million.
In a bid to turn the business around, appraise its debt liability, and help honor overdue pensions, the milk producer opted for Chapter 11 bankruptcy protection.
At the time of filing for bankruptcy, CEO Eric Beringause who joined Dean Foods as president and CEO on July 29 said: “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.
The company informed that it was also deliberating to sell “substantially” all of its assets to the Dairy Farmers of America- a marketing conglomerate owned by thousands of farmers.
The company has now secured $850 million in debtor-in-possession financing from certain lenders to keep its business afloat.
The company’s financial struggle has been attributed to a steep decline in traditional milk demand coupled with lost business partnerships with two grocery giants.
According to the Dairy Farmers of America, total milk sales nosedived $1.1 billion in the last year.
The net sales for 2018 were $13.6 billion, compared to $14.7 billion in 2017.
Whereas, Nielsen data statistics estimated that U.S. sales of oat milk spiked 636% to more than $52 million just in the last year.
A 52-week analysis that ended in June 2018 showed oat milk and non-dairy alternatives register the highest growth, with dollar sales up 23% and 51%, respectively.
“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,” said Beringause.
Walmart on the other hand started its own dairy plant in 2017 and Dean Foods had to forgo more than 100 milk contracts with dairy farmers across eight states.
The next setback for the company came when grocery chain Food Lion too ditched the milk producer in 2018 to process its own milk.
However, despite the financial trouble the CEO is upbeat about seeing the company through. He said: “In recent months, we have put in place a new senior management team that not only has considerable experience in the dairy and consumer products industries, but also in executing major turnarounds,” in a statement.
- Read: Cow farmers switch to growing almonds: “You’re better off putting your money into trees … almonds, pistachios, grapes”
Is the dairy industry doomed to extinction? Share your thoughts in the comments section below!
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