Dallas-based Dean Foods filed for Chapter 11 bankruptcy protection in the Southern District of Texas on Tuesday in order to keep the company running until it can address unfunded debt and pension obligations and keep deliveries going without interruption until the company can find a buyer to acquire the business.
The company is in advanced talks with Dairy Farmers of America, the largest dairy farmer cooperative in the U.S., for a potential sale.
As part of the bankruptcy proceedings, the company received $850 million in debtor-in-possession financing (usually reserved for companies in deep distress) from its existing lenders, led by Rabobank, in order to keep the business going until a deal on a sale is reached.
Crucial quote: “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 CEO Eric Beringause in a statement.
Big number: According to the U.S. Department of Agriculture, milk consumption among Americans decreased 18.4% from 2008 to 2018.
Key background: While still a small part of a dairy market, sales of nut and plant-based milk, like soy and oat milk, have increased dramatically. According to the Plant Based Food Association, plant-based milk sales rose 9% in 2018 while cows milk sales sunk 6%. Dean Foods in particular has been suffering as big retailers such as Walmart and Kroger have started to produce their own store branded milk, undercutting Dean Foods products in price or even opting to no longer sell Dean Foods milk altogether. In seven of the last eight quarterly earnings reports, the company reported a net loss. The company’s stock, too, has lost 80% of its value this year.