Does Dean Foods' Bankruptcy Filing Signal More Pain For Dairy Farmers?
Dean Foods was founded by Samuel E. Dean, Sr. in 1925. Dean bought an evaporated milk processing facility and began buying other dairy plants to build a diversified food company. Dean Foods ended up becoming America's largest milk producer, five times the size of its next largest competitor, with more than 15,000 employees.
Dean Foods is proof that dominating a market doesn't insulate you from business challenges, as the company announced it has filed for Chapter 11 bankruptcy protection. The company, which secured $850 million in debtor-in-possession (DIP) financing, will still run the business during the Chapter 11 proceedings with customer deliveries uninterrupted. Dean Foods has discussed selling "substantially" all of its assets to the Dairy Farmers of America.
"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, CEO of Dean Foods.
Americans’ per capita consumption of fluid milk has plummeted 26% over the last two decades, according to data from the U.S. Department of Agriculture. Plant-based milks such as almond milk, soy milk, rice milk and coconut milk are becoming increasingly popular. According to data from The Good Food Institute and Plant Based Foods Association, plant-based milk now makes up 13% of total retail milk sales. Sales of plant-based milk grew 6% over the last year, compared to a 3% decline in sales of cow’s milk.
The decline in milk consumption is spilling over to other popular dairy products as well. Over the same period, sales of plant-based yogurt increased by 39% compared to a 3% decline for regular yogurt. Sales of plant-based cheese increased by 19% compared to flat growth for conventional cheese. Finally, even ice cream trends are changing as sales of plant-based ice cream increased by 27% compared to only a 1% increase for dairy ice cream.
U.S. dairy farmers are feeling the pain. According to the U.S. Department of Agriculture, the U.S. lost 2,731 licensed dairy farms from 2017 to 2018, a decline of 6.5%. The total number of dairy farms now stands at 37,468. The reason? They're not making money. According to data reported by the National Farmers Union (NFU), the average dairy farm has reported positive net income only once over the last decade, in 2014.
2014 was a record year for dairy farmers. To take advantage of higher milk prices, they began adding cows to increase production. In a classic case of supply and demand, supply increased as demand didn't, which caused milk prices to subsequently fall. Milk prices are finally inching up as the U.S. dairy herd shrank last year due to farm closures and culling cows as a result of high beef prices.
With consumers' tastes evolving and dairy farmers trying to weather the storm, the bankruptcy filing of Dean Foods serves as a reminder that if the country's largest milk producer is struggling, then the smaller dairy farmers may continue to face tough times as well.
The hits keep coming. After firing their CEO last week for having a relationship with an employee, McDonald's is now being sued for enabling sexual harassment to take place and fostering a "toxic work culture from the very top." The class action lawsuit filed in Michigan accuses the company of "lacking policies to address sexual harassment, failing to train managers to prevent it, and retaliating against workers who complain." The lawsuit, which is the first class action lawsuit of this nature brought against McDonald's, follows more than 50 similar complaints filed against the company and its franchisees in the U.S. over the last three years.
Their market capitalization is nearly $900 billion. Google has won its case against a London cab driver for "unfairly free-riding off its reputation." The cab driver, Sohail Nagi, operated a company named 'Goooglie Cars' using the same font and color scheme as Google. Google asked him to change it in 2012 but he only did so this year after the company filed a lawsuit. Nagi must pay Google 10,000 pounds, which is close to $13,000, after the company agreed to cap its legal costs. "I’m a very poor man, and it’s very hard to survive," Nagi told the court.
Don't they test these things first? The Walt Disney Company's debut of its highly anticipated streaming service Disney+ didn't go quite as planned. Users complained of glitches and connection problems when trying to access the service. "The consumer demand for Disney+ has exceeded our highest expectations. ...we are aware of the current user issues and are working to swiftly resolve them," Disney said in a statement. The issues even prompted some pretty creative responses.
Non-GAAP OSHA reporting. According to a months-long examination by USA Today, some injuries at Tesla's Nevada Gigafactory are not being reported as required by law. An employee details how he lost part of his index finger when a rack he was moving fell. The accident was not reflected in OSHA’s records because Tesla never reported it. Last year, more than one 911 call originated from the Gigafactory each day, on average, for incidents such as fights, suicide attempts, DUIs, thefts and drug overdoses. In response to the report, Tesla said in a statement "A few isolated incidents ... are not representative of our overall safety culture at Gigafactory 1."
Maybe she read Market Crumbs on Monday. A senior executive of AARP, the American Association of Retired Persons, decided she wanted to join the "OK Boomer" conversation. The manner in which she did, though, immediately backfired. Myrna Blyth's response to the increasingly popular saying was "OK, millennials. But we're the people that actually have the money." Abigail Disney, whose grandfather co-founded The Walt Disney Company with Walt Disney, had a complete opposite take on the phrase. She went on a tweet storm saying "When did you get so easily triggered? Face up to the fact that the world is changing fast but you are not."