Americas Dairy Giants Are Going Bankrupt As Plant
Borden Dairy, one of Americas largest milk producers and distributors, has just filed for bankruptcy, the second major dairy company in the United States to fall in less than two months. The company, which was founded in 1856, cited the rising costs of raw dairy milk and the industrys market challenges from the plant-based industry as reasons for its failure. The news reflects the fact that people are opting for dairy-free and plant-based more than ever before amid growing concerns about the environmental impact of our consumption habits.
Founded in 1856 and headquartered in Dallas, Texas, Borden Dairy Company is now the second milk giant in the United States to file for Chapter 11 bankruptcy protection. The dairy producer, which is one of Americas oldest and largest milk producers, cited tumbling milk consumption and the rising price of milk as the reasons for their crippling debt that led to their downfall. Dean Foods, the countrys largest milk producer, filed for bankruptcy last November.
Despite our numerous achievements during the past 18 months, continues to be impacted by the rising cost of raw milk and market challenges facing the dairy industry. These challenges have contributed to making our current level of debt unsustainable, said CEO Tony Sarsam in a statement.
Lead image courtesy of SGr / Shutterstock.
A Milk Giant Goes Broke As Americans Reject Old Staples
Dean Foods filed for bankruptcy protection on Tuesday. Its not the first food giant to be caught off guard by a shift in tastes.
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When Samuel E. Dean Sr. founded his milk company at a processing facility in Illinois, milkmen still delivered pints to homes all over the United States and children dutifully drank three glasses a day.
That was 1925. Nearly a century later, milk is quickly going out of fashion and Dean Foods which is now the largest milk company in the United States has found itself unable to compete as plant-based and lactose-free dairy alternatives rise in popularity.
Saddled with debt and struggling to adjust to changing consumer habits, Dean Foods filed for bankruptcy protection on Tuesday, signaling another grim chapter in the recent struggles of the dairy industry. The company, whose portfolio of brands includes TruMoo and Lehigh Valley, said it was in talks to sell itself to Dairy Farmers of America, a marketing cooperative that sells milk from thousands of farms.
Across the food and beverage industry, the challenges facing Dean Foods are becoming increasingly familiar. In recent years, consumers have moved away from brands, and even entire categories of food, once seen as household staples. The has emerged as a particularly stark example of how these changing tastes are challenging major companies whose products once crowded store shelves.
Dean Foods Seeks To Get Back Money Paid To Dairy Farmers Before Bankruptcy
Hundreds of dairy farmers nationwide fear they could owe substantial sums to the bankrupt dairy processor Dean Foods after the company sent out letters attempting to claw back payments made to farmers in the months preceding the companys Chapter 11 filing last year. Deans actions have been harshly criticized by farm groups and, for some, underscore the dangers of a heavily consolidated dairy industry that leaves farmers with few processing options.
Dean, once the largest milk processor in the country, filed for bankruptcy last November. Farmers began receiving letters from Dean representatives in late November of this year demanding that they return money that had been paid to them by Dean in the three months preceding the companys bankruptcy filing. Some farmers were ordered to pay as much as $50,000 by mid-December or face litigation.
Under bankruptcy law, a company may seek to recover payments made to its creditors within 90 days of its Chapter 11 filing. Deans actions are a legal application of the bankruptcy code, and not an uncommon way for bankrupt firms to attempt to service their debts, says Roger McEowen, a professor of agricultural law and taxation at Washburn University. But in this case, its safe to say that Dean Foods and/or the bankruptcy trustee didnt do their background research.
Dean did not respond to a request for comment.
Put plainly, your letters are a predatory shakedown, written in legalese, the AFBF said.
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Milk Company Dean Foods Files For Chapter 11 Bankruptcy
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Top U.S. milk processor Dean Foods Co. filed for Chapter 11 bankruptcy protection and is in advanced talks with Dairy Farmers of America Inc. about a potential sale.
Dean listed assets and liabilities of as much as $10 billion each in court papers filed Tuesday in Houston, and it said in a statement that it has commitments for $850 million in bankruptcy financing from existing lenders led by Rabobank. The filing allows Dean to keep operating while it works on a plan to pay creditors and turn the business around.
Losses have piled up after Deans biggest customer, Walmart Inc., built its own milk plant. The company has been squeezed by fierce competition and the rising price of milk, which has increased costs and eroded profit margins.
Americans are drinking less cow milk, with nut milks and bottled water cutting into its popularity. On top of that, retailers have been selling their house brands of milk at a loss to increase store traffic, Hoai Ngo of Bloomberg Intelligence wrote in a note.
Dean shares have tumbled 79% this year, the worst performance among peers tracked by Bloomberg. The stocks trading was halted Tuesday. Its bonds dropped to fresh lows, plunging to as little as 14.5 cents on the dollar, according to Trace trading data. As recently as January of last year, the bonds were trading at full value.
According to Rabobank, Dairy Farmers of America is the sixth-biggest dairy company in the world by sales, and Dean Foods is No. 11.
Dairy Giant Borden Files For Bankruptcy Protection
The Dallas company, which employs 3,300, had been trying to renegotiate its debt agreements for months, but talks fell through.
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Borden, the dairy producer founded a century and a half ago, has filed for Chapter 11 bankruptcy protection, the latest victim of an industry battered by declining prices, rising costs and changing tastes.
The company, which is based in Dallas and reported $1.18 billion in sales in 2018, has been trying to adjust to those unfavorable trends but was hampered by debt, Bordens chief executive, Tony Sarsam, said on Monday.
The biggest cause, if you dial it back, is a circumstance where we have debt that is inappropriately sized for the company, he said.
Executives at Borden, which employs 3,300 people, had been trying to renegotiate its debt agreements for months, Mr. Sarsam said, but filed for bankruptcy on Sunday after talks with lenders fell through.
Just two months ago, Dean Foods, the largest milk company in the United States and one of Bordens biggest competitors, also said it was seeking bankruptcy protection.
Bordens financial troubles extend to 2017. After arranging for about $275 million in loans that year, the company, known for its spokescow, Elsie, suffered net income losses in each of the next two years.
The company, whose business is largely focused on the Southeast, attributes that misfortune to dairy industry trends, including shifting consumer preferences and increased competition.
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Facing Heavy Debt And Industry Headwinds 163
Borden Dairy filed for bankruptcy Sunday, becoming the second major milk producer in as many months to seek Chapter 11 protection.
Chief executive Tony Sarsam said the companys debt burden, coupled with industry head winds, left Borden with few options. This was our final resort, he told The Washington Post on Monday.
Dean Foods, the nations largest milk producer, filed for bankruptcy protection in November. From major corporations to small farmers, milk processors are seeing their margins pinched as wholesale milk costs climb and consumers gravitate to dairy-free options such as almond, soy and oat beverages.
The industry head winds go on from there. Milk producers are up against a decline in cereal sales as consumers shift toward breakfast options with more protein and less sugar. Walmart, the nations largest retailer, has started processing some of its own milk, cleaving sales from legacy brands like Borden and Dean, which have had to keep prices low to stay competitive. Americans are even milking goats as never before.
All told, more than 2,700 dairy farms have gone out of business in the past 18 months, Borden noted in its filing.
In 2018, Borden had $1.2 billion in net sales and losses in excess of $14.6 million. From Jan. 1, 2019, through Dec. 7, Borden reported a net loss of $42.4 million.
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Got Milk? Probably not anymore.
Americas largest milk producer, Dean Foods, filed for bankruptcy Tuesday as more people are choosing to ditch the household staple for non-dairy alternatives like almond, soy, coconut and oat milks.
The Dallas-based 94-year old dairy processor responsible for some of US grocery stores most recognizable brands including Dairy Pure, Organic Valley and Land OLakes has seen a drastic 14 percent drop in profits so far this year, CNN reported. Sales also fell 7 percent.
But instead of crying over spilt milk, the company filed for Chapter 11 Bankruptcy to keep the business open, replenish debts and pay off pending pensions.
Company bigwigs are the first to admit that the rise in lactose-free milks is responsible for their financial woes.
We continue to be impacted by a challenging operating environment marked by continuing declines in consumer milk consumption, said Dean Foods President and Chief Executive Officer Eric Beringause in a statement.
Over the last two decades, Americans have drunk 26 percent less cows milk per capita, according to data from the US Department of Agriculture.
Dean Foods is now in advanced discussions with Dairy Farmers of America about a possible sale, the press release states.
In the interim, Dean Foods secured $850 million in debtor-in-possession financing from lenders to keep the company afloat.
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Dairy Producer In Talks About Sale To Dairy Farmers Of America
Dean Foods said it has secured financing to continue operations and pay employees while it discusses a potential sale.
Dean Foods Co. , the biggest U.S. milk company, filed for bankruptcy protection, a fresh setback to a U.S. dairy industry struggling against and rising competition.
Dean and dairy farmers for years have grappled with consumers decadeslong move away from traditional cows milk, as beverage sales shift toward bottled water, fruit juices and milk alternatives made from soy and oats.
Within the milk business, Dallas-based Deans brands have struggled as grocery chains push low-price store brands and in some cases build their own milk plants, reducing their reliance on Dean. A recent jump in milk prices, up 10% over the past three months, boosted costs while Dean has worked to close plants and reduce expenses.
The company said it has secured financing to continue operations and pay employees while it discusses a potential sale to Dairy Farmers of America Inc., the largest U.S. dairy cooperative.
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 Eric Beringause, Deans chief executive, who joined the company in July as its third CEO in three years.
Dean Foods is integral to the dairy landscape and our largest customer representing more than 20% of DFAs raw milk sales, she said.
How Two Years Of Changes In Dairy Led To Two Major Bankruptcies
Within two months, two of the largest milk processors in the U.S. filed for bankruptcy. First came Dean Foods, which made the announcement in November. By January, Borden Dairy was doing the same. So what happened?
For at least two years, the dairy giants have increasingly struggled with competition from milk alternatives, innovative startups and deeply discounted private label dairy.
Its going to take some disruptors to wake up some of the folks who havent made those decisions to invest in the future. If youre not investing in the category today, youre going to have a major challenge to survive, Paul Ziemnisky, EVP of global innovation partnerships at Dairy Management Inc., told Food Dive.
Consumer preferences shifted, but Borden and Dean didnt change enough, leaving them in dire financial straits and facing significant debt. Dean Foods net income dropped from $61.6 million in 2017 to a loss of $327.4 million last year. And while Borden once had a presence in all 50 states, as of last summer, it offered only 35 products in parts of the Midwest, South and Southeastern U.S.
The company continues to be impacted by the rising cost of raw milk and market challenges facing the dairy industry, Bordens CEO Tony Sarsam said in a statement when it filed for bankruptcy. These challenges have contributed to making our current level of debt unsustainable.
Its just too much debt on the books for businesses that can no longer support it, he said.
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Borden Dairy Files For Bankruptcy Protection
Borden, whose mascot, Elsie the Cow, has smiled out at consumers from milk, cheese and butter cartons for more than 80 years, has filed for bankruptcy protection, becoming the second major U.S. dairy company to seek help as milk prices soar and more Americans turn to milk alternatives.
Borden Dairy Co., which is based in Dallas, reported losses of $42.4 million in 2019. In a filing Sunday in U.S. Bankruptcy Court in Delaware, it listed debts between $100 million and $500 million to more than 5,000 creditors.
The company filed under Chapter 11 of the bankruptcy code, allowing it to try to reorganize its debts and remain in business. That’s less drastic than filing under Chapter 7, which would have required it to sell off its assets to pay its creditors and potentially go out of business.
Its largest creditors are two of its pension funds, which together are owed more than $33 million, Borden said.
Dean Foods, the country’s biggest milk producer, similarly filed for Chapter 11 protection in November. Borden and Dean products made up a little more than one-eighth of all U.S. milk sales last year, according to industry data.
Another Dairy Giant Just Filed For Bankruptcy
Borden Dairy Co. has filed for bankruptcy. The 164-year-old company is the second major milk producer in the U.S. to do so in the space of a few months.
Borden follows Dean Foods Americas largest milk producer which filed for chapter 11 bankruptcy protection back in November 2019.
According to Bloomberg, Bordens chief financial officer Jason Monaco revealed in court papers that a number of factors have put pressure on the Dallas-based company. The rising popularity of vegan milk has had an impact, as well as rising prices for raw milk.
Theres also competition from major supermarkets, like Walmart, which now produce their own private label milk.
U.S. consumers also dont drink as much dairy as they used to. People are simply drinking less of it,Monaco said. In parallel, since the turn of the century, the number of U.S. dairy farms has rapidly declined.
In the U.S., consumer attitudes toward milk are starting to change.
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America’s Largest Milk Producer Dean Foods Files For Bankruptcy
The company has numerous well-known brands.
America’s largest milk producer files for bankruptcy
Dean Foods, America’s largest milk producer and home to multiple well-known brands, filed for bankruptcy protection on Tuesday.
The Dallas-based company announced it initiated Chapter 11 proceedings “to enable us to continue serving our customers and operating as normal as we work toward the sale of our business,” Eric Beringause, who recently joined the Dean Foods as president and CEO, said in a statement.
Dean Foods products include Dairy Pure, TruMoo, Land O’Lakes, Lehigh Valley Dairy Farms and Oak Farms.
Its bankruptcy filing comes amid a sour year for the milk industry.
Last year, total sales dropped $1.1 billion, according to the Dairy Farmers of America. The net sales for 2018 were $13.6 billion, compared to $14.7 billion in 2017.
However, sales of dairy alternative products have been soaring.
Over a 52-week period that ended in June 2018, oat milk and non-dairy milk blends saw the highest growth, with dollar sales up 23% and 51%, respectively.
Dean Foods announced that it had received around $850 million in debtor-in-possession financing, a type of financing for companies that are financially distressed and in bankruptcy, from some existing lenders.
Dean Foods will operate normally amid the reorganization efforts.
The company has approximately 15,000 employees across the country.
The Changing Future Of Dairy
In Wisconsin, two dairy farms go out of business a day, according to a recent report. In August 2003, Wisconsin was home to more than 16,200 dairy farms. At the end of 2019, that number stood at 8,463.
In California, the oldest dairy farm in the state Giacomazzi Dairy decided to end operations last year. Instead, the 125-year-old company is beginning to farm almonds. Vegan milk made from nuts, like almonds, as well as peas and other plant-based ingredients is rising in popularity. According to the Good Food Institute, the market is now worth around $1.8 billion.
But Dino Giacomazzi says the dairy industrys problems are far more complex than competition from the dairy-free sector. Globalization, for example, has meant global price constraints. We have to compete with Europe, which has been subsidizing dairy for generations,the owner of Giacomazzi Dairy told Quartz.
Giacomazzi also recognizes that the habits of U.S. consumers are changing. He said, theyre not having breakfast anymore. The raisin industry and the cereal industry are having trouble surviving because nobody sits down and eats breakfast.
The future of food is also changing outside of the U.S. In the UK, one dairy farmer leaves the industry every week. A recent study revealed that 60 percent of Scottish farmers believe the dairy industry is in full decline.
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