Changing consumer milk-buying patterns, increased competition, and the loss of a major contract is forcing Dallas, Texas-based Dean Foods, one of the largest dairy companies in the world, to respond with a major restructuring that will lay off hundreds of workers, shutter facilities, and shed hundreds of independent milk suppliers.
Published reports have Dean shutting down seven processing plants in seven states in the next months, with plants located in Kentucky, Georgia, Pennsylvania, Massachusetts, Illinois, Michigan and Minnesota. The latest plants to close are Country Fresh in Livonia, Michigan, Meadow Brook Dairy in Erie, Pennsylvania, and Garelick Farms in Lynn, Massachusetts.
Not only are consumers drinking 28% less milk, but Dean lost a major contract to provide private-label milk to Walmart, the worlds largest grocer. Walmart is vertically integrating their supply chain to lower costs and become a more effective competitor in the grocery space that now includes Amazon and several foreign private-label operations such as Aldi and Trader Joes. Walmart will operate its own state-of-the-art, large-scale dairy processing facility in Fort Wayne, Indiana that will serve hundreds of Walmart and Sam’s Club locations in Indiana, Illinois, Michigan, Ohio and Northern Kentucky.
Dean Food’s CEO Ralph Scozzafava in announcing Dean’s First Quarter (2018) results ...
“As we move forward in 2018, we are focused on executing our commercial agenda and cost productivity initiatives that will drive our strategic plan. We have been successful in driving early results in the administrative area against our enterprise-wide productivity plan with more work to be done. We will now begin the next phase by right-sizing our network to better match volume. We will incur transitory costs as the execution of our plans will lag the exit of specific customer volume and have firm plans in place to remove the fixed costs from our system within this year. We are also implementing plans to mitigate expected headwinds in non-dairy input costs while executing our strategic initiatives.”
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