Dean Foods, America’s largest dairy corporation, has officially declared bankruptcy. The announcement came on Tuesday and was quite frankly not a shock to analysts. Americans consistently have been reducing their milk consumption in favor of milk alternatives and water.In the past two decades, American milk consumption has fallen by over 26 percent. They are opting instead for more environmentally-friendly options such as soy, almond, and oat milk.
The company’s bankruptcy filing comes as the country’s dairy farmers struggle to adapt to the changing milk market. Falling dairy prices, trade turmoil and labor shortage have all hit the dairy industry hard.
Dean Foods, which owns several household names including Land-O-Lakes Butter, Deans, Dairy Pure, and Trumoo, has been an absolute mess for about the past decade. The company has reported a net loss in 7 of the last 8 quarters. In the past 5 years, their stock price has dropped by over 18 dollars per share. And as disclosed in recent SEC filings, the company has approximately $2.18 billion in debt.
Concerning the bankruptcy, Eric Beringause, the company’s recently appointed CEO, stated that, “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.”
Moving forward, Dean Foods is looking to sell itself off to pay its outstanding debts. Dean Foods has secured commitments for $850 million in debtor-in-possession financing, a type of funding for companies in financial distress.
When it comes to the potential sale of the company, some have speculated that Prairie Farms could be a potential buyer, but the most likely candidate is the Dairy Farmers of America. According to some sources, Dean Foods has engaged in “advanced discussions” with the corporation about selling either all or a substantial portion of its assets. According to bankruptcy filings, these assets are equal to about $2.09 billion.
Upon news of the bankruptcy, Dean Foods stock dropped by over 90 percent from about one dollar per share to less than ten cents per share. I actually am a Dean Foods stockholder, and am very disappointed in their poor financial performance. I will just have to wait and hope that the price per share rises once again.
For fans of Dean Foods products, the good news is that operations and production have not yet ceased, and customers are expected to receive their dairy products without any interruptions, at least for the time being.