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.
Although for Dean and Borden, the troubles date back further than just 24 months, the issues have accelerated to a breaking point.
Eric Snyder, partner at law firm Wilk Auslander and chairman of the firms bankruptcy department, told Food Dive that for both Borden and Dean, debt was building as people were drinking less traditional milk. He said that dairy processing facilities are also extremely cost intensive, and it can be very difficult to scale down businesses like these.
Its just too much debt on the books for businesses that can no longer support it, he said.
For decades, milk consumption has been declining while new innovations and plant-based options have taken away some consumers who once turned to the popular drink. Non-dairy milk sales in the U.S. increased 61% from 2013 to 2017, while overall sales of dairy milk dropped 15% from about $18.9 billion in 2012 to $16.12 billion in 2017, according to Mintel.
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, Dean Foods CEO Eric Beringause said in a statement when the bankruptcy filing was announced.
Although the economy is strong, certain industries have seen increased bankruptcies because of changing consumer demands, Snyder said.
Its a function of the times, its a function of the cause and its a function of the debt. So it doesnt look good for dairy just like it doesnt look good for coal and it doesnt look good for retail, Snyder said. There are certain businesses that just dont have bright futures and we know what they are.
Snyder said that about 90% of bankruptcies end in a sale today.
In February, Dairy Farmers of America agreed to buy a substantial portion of Dean Foods business for $425 million. If the deal is approved by the bankruptcy court and the U.S. Department of Justice, DFA will acquire 44 of the companys fluid and frozen facilities, but could still face the same issues that have weighed down Dean for years.
Kenneth Rosen, a partner focused on bankruptcy and financial reorganization at Lowenstein Sandler, previously told Food Dive that Dean is facing a lot of problems that likely wont just be resolved with a change in ownership.
Ziemnisky, however, believes there is a bright future for dairy when looking at the growing international market and the players that are adapting, finding innovative ways to produce and sell the staple beverage.
New Zealands a2 Milks products, for example, lack a protein that can cause stomach discomfort, and more than doubled its retail count in 2018. Meanwhile, Fairlife, a joint venture with Coca-Cola, produces ultra-filtered milk, a higher-protein and lower-lactose product that has seen substantial growth.
Retailers themselves are launching their own products into the space.
In 2018, Walmart held a grand opening for its first U.S. food production facility, a milk processing plant that produces whole, skim and chocolate milk under its own Great Value brand a move that led Dean to cancel its contracts with more than 100 dairy operations across eight states. Kroger and Albertsons have also introduced private label lines.
So retailers today, if youre a mainstream product and youre not bringing innovation in the market, theyre asking what are you going to do to drive a category, Ziemnisky said.
Below is a compilation of some of the major events that happened over the last two years, offering the big picture of how Borden and Dean got here and whats next for the industry.
Read more:
How two years of changes in dairy led to two major bankruptcies - Food Dive
- Alitalia Files for Bankruptcy, but Italy Balks at a Third Bailout - New York Times [Last Updated On: May 3rd, 2017] [Originally Added On: May 3rd, 2017]
- A Slow Bankruptcy Process Stops Locale-Reviving Jobs - Wall Street Journal (subscription) [Last Updated On: May 3rd, 2017] [Originally Added On: May 3rd, 2017]
- Bankruptcy auction for property of NASCAR artist Sam Bass ... - Charlotte Observer [Last Updated On: May 3rd, 2017] [Originally Added On: May 3rd, 2017]
- Obamacare helped make a 50% dent in personal bankruptcies ... - MarketWatch [Last Updated On: May 3rd, 2017] [Originally Added On: May 3rd, 2017]
- Pennsylvania Toy Seller Files For Bankruptcy - Wall Street Journal (subscription) [Last Updated On: May 3rd, 2017] [Originally Added On: May 3rd, 2017]
- Puerto Rico Enters Bankruptcy - Wall Street Journal (subscription) [Last Updated On: May 3rd, 2017] [Originally Added On: May 3rd, 2017]
- Puerto Rico Declares a Form of Bankruptcy - New York Times [Last Updated On: May 3rd, 2017] [Originally Added On: May 3rd, 2017]
- Farmer Mac Early Exclusive: Farm Bankruptcy Rates Low - AgWeb [Last Updated On: June 6th, 2017] [Originally Added On: June 6th, 2017]
- Washington weighs in on Westinghouse bankruptcy | News ... - Aiken Standard [Last Updated On: June 6th, 2017] [Originally Added On: June 6th, 2017]
- 4 Reasons Why Puerto Rico's 'Bankruptcy' Process Matters to US Residents - NBCNews.com [Last Updated On: June 6th, 2017] [Originally Added On: June 6th, 2017]
- Valeant: There Is Significant Bankruptcy Risk Here - Seeking Alpha [Last Updated On: June 6th, 2017] [Originally Added On: June 6th, 2017]
- Westinghouse bankruptcy draws federal scrutiny as VC Summer nuclear project's future remains unclear - Charleston Post Courier [Last Updated On: June 6th, 2017] [Originally Added On: June 6th, 2017]
- Bebe Avoids Bankruptcy Filing With Real-Estate Deals - Wall Street Journal (subscription) [Last Updated On: June 6th, 2017] [Originally Added On: June 6th, 2017]
- rue21 Bankruptcy Objections Filed - Bankrupt Company News (press release) (blog) [Last Updated On: June 7th, 2017] [Originally Added On: June 7th, 2017]
- ISH to emerge from bankruptcy as Seacor subsidiary - WorkBoat (blog) [Last Updated On: June 7th, 2017] [Originally Added On: June 7th, 2017]
- Curtains for the Pearl, as the Theater Company Files for Bankruptcy - New York Times [Last Updated On: June 7th, 2017] [Originally Added On: June 7th, 2017]
- Bankruptcy fraud earns Pepperell man 18 months | Boston Herald - Boston Herald [Last Updated On: June 9th, 2017] [Originally Added On: June 9th, 2017]
- Vikki Lindemuth favors appointment of trustee to handle husband's bankruptcy - Topeka Capital Journal [Last Updated On: June 9th, 2017] [Originally Added On: June 9th, 2017]
- Creditors seek to force bankruptcy of Tinley Park firm - Chicago Tribune [Last Updated On: June 9th, 2017] [Originally Added On: June 9th, 2017]
- Abengoa Bankruptcy Liquidation Plan Confirmed - Bankrupt Company News (press release) (blog) [Last Updated On: June 9th, 2017] [Originally Added On: June 9th, 2017]
- Retailer BCBG Unveils Going-Concern Bankruptcy Sales - Wall Street Journal (subscription) [Last Updated On: June 9th, 2017] [Originally Added On: June 9th, 2017]
- For Hartford, bankruptcy not an easy way out - The CT Mirror [Last Updated On: June 9th, 2017] [Originally Added On: June 9th, 2017]
- Why Students Should Be Able To Declare Bankruptcy On Their Loans - ATTN: [Last Updated On: June 10th, 2017] [Originally Added On: June 10th, 2017]
- Bankruptcy forces curtain to fall on community theater - Chicago Tribune [Last Updated On: June 10th, 2017] [Originally Added On: June 10th, 2017]
- Ex-Pepperell man jailed in bankruptcy case - Lowell Sun [Last Updated On: June 10th, 2017] [Originally Added On: June 10th, 2017]
- Owner of Joe's Crab Shack files for bankruptcy | Jacksonville News ... - Florida Times-Union [Last Updated On: June 11th, 2017] [Originally Added On: June 11th, 2017]
- Why test for bankruptcy law is a larger test for India - The Indian Express [Last Updated On: June 11th, 2017] [Originally Added On: June 11th, 2017]
- Tax trouble firms' most likely road to bankruptcy - Albuquerque Journal [Last Updated On: June 12th, 2017] [Originally Added On: June 12th, 2017]
- Darius Miles' Bankruptcy Sale Includes Signed LeBron James, Larry ... - Bleacher Report [Last Updated On: June 12th, 2017] [Originally Added On: June 12th, 2017]
- Winter Haven attorney gets prison for concealing assets in ... - News Chief [Last Updated On: June 12th, 2017] [Originally Added On: June 12th, 2017]
- Children's retailer Gymboree files bankruptcy, closing up to 450 stores - USA TODAY [Last Updated On: June 12th, 2017] [Originally Added On: June 12th, 2017]
- Another retailer has filed for bankruptcy - mySanAntonio.com [Last Updated On: June 13th, 2017] [Originally Added On: June 13th, 2017]
- Esperanza Unida bankruptcy delays city redevelopment efforts - BizTimes.com (Milwaukee) [Last Updated On: June 13th, 2017] [Originally Added On: June 13th, 2017]
- Square 1 Burgers files bankruptcy, blames over-saturated restaurant market - Orlando Sentinel [Last Updated On: June 13th, 2017] [Originally Added On: June 13th, 2017]
- Big KC manufacturer files for bankruptcy - Kansas City Business Journal [Last Updated On: June 13th, 2017] [Originally Added On: June 13th, 2017]
- Canadians Have Been Refinancing To Delay Bankruptcy - Seeking Alpha [Last Updated On: June 13th, 2017] [Originally Added On: June 13th, 2017]
- Gymboree Files For Bankruptcy, Plans To Close At Least 375 Stores - Forbes [Last Updated On: June 13th, 2017] [Originally Added On: June 13th, 2017]
- Sears, J. Crew, Claire's Are Bankruptcy Risks (SHLD) | Investopedia - Investopedia [Last Updated On: June 14th, 2017] [Originally Added On: June 14th, 2017]
- Tampa's Square 1 Burgers files for bankruptcy protection - Tampabay.com [Last Updated On: June 14th, 2017] [Originally Added On: June 14th, 2017]
- RBI, Banks And NPAs - First, Reform India's Bankruptcy Code, Then Force Defaulters Into It - Forbes [Last Updated On: June 14th, 2017] [Originally Added On: June 14th, 2017]
- Retail bloodbath: Bankruptcy filings pile up - CNNMoney [Last Updated On: June 14th, 2017] [Originally Added On: June 14th, 2017]
- Bankruptcy cases show we've become a nation of selective justice - New York Daily News [Last Updated On: June 14th, 2017] [Originally Added On: June 14th, 2017]
- Soupman of 'Seinfeld' Soup Nazi fame files for bankruptcy protection - USA TODAY [Last Updated On: June 14th, 2017] [Originally Added On: June 14th, 2017]
- Strack & Van Til bankruptcy case moved to Illinois - nwitimes.com [Last Updated On: June 16th, 2017] [Originally Added On: June 16th, 2017]
- Lawsuit: Wells Fargo revised mortgages in bankruptcy without permission - USA TODAY [Last Updated On: June 16th, 2017] [Originally Added On: June 16th, 2017]
- France's CGG files for bankruptcy protection - MarketWatch [Last Updated On: June 16th, 2017] [Originally Added On: June 16th, 2017]
- 'Soup Nazi' company files for bankruptcy - CNNMoney [Last Updated On: June 16th, 2017] [Originally Added On: June 16th, 2017]
- France's CGG Group Files for Bankruptcy Protection - Wall Street Journal (subscription) [Last Updated On: June 17th, 2017] [Originally Added On: June 17th, 2017]
- Company of businessman behind polo facility expansion files for bankruptcy protection - Fauquier Times [Last Updated On: June 17th, 2017] [Originally Added On: June 17th, 2017]
- Vehicles involved in Dusty Old Cars bankruptcy to be auctioned - WMUR Manchester [Last Updated On: June 17th, 2017] [Originally Added On: June 17th, 2017]
- Could Illinois be the first state to file for bankruptcy? - CBS News [Last Updated On: June 17th, 2017] [Originally Added On: June 17th, 2017]
- Takata Said to Ready Bankruptcy Filing Ahead of Sale to Rival - New York Times [Last Updated On: June 17th, 2017] [Originally Added On: June 17th, 2017]
- Greece escapes brush with bankruptcy but austerity still bites - FRANCE 24 [Last Updated On: June 17th, 2017] [Originally Added On: June 17th, 2017]
- Pawnbroker A-OK cites embezzlement in multimillion-dollar bankruptcy - Wichita Eagle [Last Updated On: June 18th, 2017] [Originally Added On: June 18th, 2017]
- Clock is Ticking on India's Bad Bank Debts Under Bankruptcy Laws - Bloomberg [Last Updated On: June 18th, 2017] [Originally Added On: June 18th, 2017]
- Surveyor dealing with fine, bankruptcy - Muncie Star Press [Last Updated On: June 18th, 2017] [Originally Added On: June 18th, 2017]
- Mode Media Assets Acquired by Wedding Ad Network BrideClick in Bankruptcy Deal - Variety [Last Updated On: June 18th, 2017] [Originally Added On: June 18th, 2017]
- San Bernardino officially out of bankruptcy - San Bernardino County Sun [Last Updated On: June 20th, 2017] [Originally Added On: June 20th, 2017]
- 22 retailers that are at serious risk of bankruptcy - Chron.com [Last Updated On: June 20th, 2017] [Originally Added On: June 20th, 2017]
- What to expect in defective air bag maker Takata's looming bankruptcy - USA TODAY [Last Updated On: June 20th, 2017] [Originally Added On: June 20th, 2017]
- Could Illinois file for bankruptcy? - FOX Illinois [Last Updated On: June 20th, 2017] [Originally Added On: June 20th, 2017]
- Exploding airbags: Takata shares plummet 17% on bankruptcy reports - CNNMoney [Last Updated On: June 20th, 2017] [Originally Added On: June 20th, 2017]
- These 14 Stores May Be on the Brink of Bankruptcy | NBC Southern ... - NBC Southern California [Last Updated On: June 21st, 2017] [Originally Added On: June 21st, 2017]
- Medical bankruptcies - WEAR [Last Updated On: June 21st, 2017] [Originally Added On: June 21st, 2017]
- After five long years, San Bernardino is officially out of bankruptcy. What's next? - Los Angeles Times [Last Updated On: June 21st, 2017] [Originally Added On: June 21st, 2017]
- Takata to file for bankruptcy Monday, SMFG to provide bridge loan: sources - Reuters [Last Updated On: June 22nd, 2017] [Originally Added On: June 22nd, 2017]
- Sears Canada files for bankruptcy - CNNMoney [Last Updated On: June 22nd, 2017] [Originally Added On: June 22nd, 2017]
- Foundation Healthcare Chapter 11 Bankruptcy - Bankrupt Company News (press release) (blog) [Last Updated On: June 23rd, 2017] [Originally Added On: June 23rd, 2017]
- Implant Sciences Bankruptcy Objections Filed - Bankrupt Company News (press release) (blog) [Last Updated On: June 23rd, 2017] [Originally Added On: June 23rd, 2017]
- Puerto Rico Bankruptcy: Uncertainty, But Also Stock Profit Opportunity - Seeking Alpha [Last Updated On: June 23rd, 2017] [Originally Added On: June 23rd, 2017]
- Lakeland day care files for bankruptcy without paying workers - wreg.com [Last Updated On: June 23rd, 2017] [Originally Added On: June 23rd, 2017]
- Sears Canada Closing 59 Stores as It Seeks Bankruptcy Protection - Fortune [Last Updated On: June 23rd, 2017] [Originally Added On: June 23rd, 2017]
- Takata to file for bankruptcy Monday, SMBC to provide bridge loan: Sources - CNBC [Last Updated On: June 23rd, 2017] [Originally Added On: June 23rd, 2017]
- How Sears Canada's Bankruptcy Impacts Sears Holdings Corp. - Seeking Alpha [Last Updated On: June 23rd, 2017] [Originally Added On: June 23rd, 2017]
- Augusta native sworn in as newest Bankruptcy Court judge - The Augusta Chronicle [Last Updated On: June 24th, 2017] [Originally Added On: June 24th, 2017]
- Takata reportedly planning to file for bankruptcy - CNBC [Last Updated On: June 24th, 2017] [Originally Added On: June 24th, 2017]
- Bankruptcy - money_selfhelp [Last Updated On: June 24th, 2017] [Originally Added On: June 24th, 2017]
- Japan press - Takata expected to file for bankruptcy protection in Tokyo - ForexLive [Last Updated On: June 26th, 2017] [Originally Added On: June 26th, 2017]
- Bankruptcy guru Edward Altman sees similarities to 2007 in the credit market today - Yahoo Finance [Last Updated On: June 26th, 2017] [Originally Added On: June 26th, 2017]
- Takata's woes expected to continue beyond bankruptcy filing amid mounting recall costs - CNBC [Last Updated On: June 26th, 2017] [Originally Added On: June 26th, 2017]