Top US milk processor declares bankruptcy amid drop in demand

Dean Foods, America’s biggest milk processor, filed for bankruptcy Tuesday amid a decades-long drop-off in U.S. milk consumption blamed on changing trends and a growing variety of alternatives.

The Dallas company said it may sell itself to the Dairy Farmers of America, a marketing cooperative owned by thousands of farmers.

“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 Berigause said in a statement.

40% drop since 1975

Since 1975, the amount of milk consumed per capita in the U.S. has tumbled more than 40%. Americans consumed around 24 gallons per year in 1996, according to government data. That dropped to 17 gallons in 2018.

An increasing variety of beverages, including teas and sodas, has hurt milk consumption. So have protein bars and other on-the-go breakfasts, which take the place of a morning bowl of cereal.

More recently, health and animal-welfare concerns have also contributed, as more shoppers seek out non-dairy alternatives like almond milk. Oat milk, for example, saw U.S. sales rise 636% to more than $52 million over the past year, according to Nielsen data.

Sales of cow’s milk have dropped an average of 6% per year over the last four years, Nielsen said.

That has hit dairy farms and milk sellers hard, leading some smaller family farmers to quit the business.

It also had an outsize effect on Dean Foods, which derived 67% of its sales from fluid milk last year, according to its annual report. Fifteen percent came from ice cream and just 4% came from fruit juice, iced tea, water and flax-based beverages.

Dean employs 16K

Dean employs 16,000 people and operates 60 processing facilities across the country. On any given day, it is running 8,000 refrigerated delivery trucks on U.S. roads.

The company supplies milk for its own brands, like Dairy Pure, Meadow Gold and TruMoo, as well as store brands. One big blow came last year, when Walmart opened its own milk processing plant in Indiana.

Dean has lost money in eight of its last 10 quarters and posted declining sales in seven of the last eight.

The company said it will continue operating normally while it puts its finances in order under Chapter 11 bankruptcy. It has lined up about $850 million in financing from lenders.