Largest Milk Producer in US Files for Bankruptcy

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Dean Foods, the largest American milk producer that makes brands including TruMoo and Land O’Lakes, announced plans to file for Chapter 11 bankruptcy on Nov. 12, 2019. The company experienced a 7% drop in sales in the first half of 2019, a 14% drop in profits, and an 80% drop in stock this year.

President and CEO of Dean Foods, Eric Beringause, stated: “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.”

The company hopes to continue to operate pending sale and reorganization of the business. In operation since 1925, the company has about 60 processing plants in 29 states.

Dean Foods partially blamed the company’s losses on “accelerated decline in the conventional white milk category.” According to US Department of Agriculture (USDA) data, Americans’ milk consumption has been in steady decline, with consumers drinking 146 pounds of dairy milk per person in 2018 (an estimated 17 gallons), compared to 247 pounds per person in 1975 (about 29 gallons). Meanwhile, sales of ice cream and evaporated milk have also declined 35% and 69% respectively since 1975.

Tanner Ehmke, Manager of Knowledge Exchange division at agricultural lender CoBank, stated, “They’re not pouring milk on their cereal anymore; they’re having a power bar instead.”

Sales of other dairy products have increased between 1975 and 2018, including yogurt (with a 570% increase, thanks in part to the popularity of Greek yogurt), butter (23%), and American cheese (91%). The USDA believes that milk consumption declined due to competition from other beverages as well as children accounting for a smaller percentage of the population.

While the dairy milk market is almost $120 billion globally, sales of milk alternatives, such as almond milk, are expected to exceed $18 billion worldwide in 2019, a 3.5% increase from last year. However, some believe the dairy milk versus plant milk battle is on shaky ground. Mark Kurlansky, a food historian and author of Milk!, stated, “A lot of scientists think this thing about how children have to drink cow’s milk is bogus. This idea that it makes you big and strong is clearly bogus. On the other hand, this idea that ‘milk is bad for you so I’m going to have almond milk or soya milk or something’ – that’s bogus, too. Because it’s a totally different food.”

Discussion Questions – Things to Think About
1. Is drinking dairy milk healthy for humans? Why or why not?

2. Do you think milk alternatives such as almond or oat milk are healthy? Why or why not?

3. Why do you think sales of liquid dairy milk, evaporated milk, and ice cream have declined while sales of yogurt, butter, and American cheese have increased? Explain your answer.

Sources:

Jacob Bunge, “Biggest US Milk Company Dean Foods Files for Chapter 11 Bankruptcy,” wsj.com, Nov. 12, 2019

Dean Foods Company, “Dean Foods Company Initiates Voluntary Reorganization with New Financial Support from Existing Lenders,” prnewswire.com, Nov. 12, 2019

Zach Meyers, “CDE Dairy Markets & Management Update,” centerfordairyexcellence.org, Sep. 10, 2019

United States Department of Agriculture, “Dairy Background,” ers.usda.gov (accessed Nov. 18, 2019)

US Department of Agriculture, “Dairy Data: Dairy Products: Per Capita Consumption, United States (Annual),” ers.usda.gov, Sep. 4, 2019

Jordan Valinsky, “America’s Largest Milk Producer Files for Bankruptcy,” cnn.com, Nov. 12, 2019

Ben Walsh, “America’s Largest Milk Producer Dean Foods Just Filed for Bankruptcy. Here’s Why.,” barrons.com, Nov. 12, 2019