Dean Foods files Chapter 11 bankruptcy amid dairy woes

Dean Foods and its subsidiary companies DairyPure, Land O’Lakes and Lehigh Valley Dairy Farms, has engaged discussions with Dairy Farmers of America regarding the potential liquidation sale of all assets.

“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 Beringause said in a statement.

The dairy industry has been impacted by plant-based milk makers encroaching on the market. Trade groups for the dairy industry are fighting to get the U.S. Food & Drug Administration (FDA) to prevent non-dairy options from using the term “milk” on labels. In October, Dean Foods announced it was leaving the International Dairy Foods Association over concerns of how plant-based beverages are labeled.

“We believe it is wrong that many plant-based products are currently marketed using milk’s good name yet are lacking several of the inherent nutrients of their dairy counterparts,” the company said.

This week, Dean Foods initiated voluntary Chapter 11 bankruptcy proceedings, with the move including substantially all of its subsidiaries. The 95-year-old company is the nation’s largest milk producer. Based in Dallas, the company recently received $850 million in financing to keep the company afloat while it tries to restructure.

The rise in consumers who have vegan diets and those looking for plant alternatives are pushing sales of nut-based milk, soy milk, rice milk and oat milk higher at the expense of traditional dairy milk. The Plant Based Foods Association reports nut and plant-based milk sales grew by 9% in 2018, raking in approximately $1.6 billion.

Aside from alternative milk, Dean Foods’ largest customer, Walmart, opened its own dairy last year. Walmart’s dairy only provides the retailer with a small fraction of the milk it sells. Walmart said it opened the dairy as a way to drive costs down and control quality.

Analysts say it not just a lower demand for milk. Consumers are also choosing store brands at a higher rate. The debt and pension obligations of Dean Foods are other reasons the company is strapped for cash, according to analysts.