Dean Foods has become the king of milk by taking over other dairies' thrones. A leading US producer of fluid milk and other dairy products, Dean has grown and continues to grow through acquisitions. Its retail and food service dairy products are sold under more than 50 national, regional, and private-label brands, including Borden, Pet, Country Fresh, and Meadow Gold. In addition, the company manufactures coffee creamers (International Delight), dips, ice cream, butter, cottage cheese, and specialty dairy products (lactose-free and organic milk, soy and almond milks, and flavored milks). Dean owns and operates a number of smaller dairy companies, including Horizon Organic, Berkeley Farms, and Garelick Farms.
Acquisitions and volatility in the milk business led Dean Foods to reconfigure its business at the start of 2010. The company combined its Fresh Dairy Direct and Morningstar businesses to form Fresh Dairy Direct-Morningstar, and it paired its WhiteWave business with Alpro (acquired in 2009) to form WhiteWave-Alpro. (Alpro is Europe's leading soy-based food and beverage business. The acquisition gave Dean Foods a firm presence in Europe and progress toward becoming a global brand.) The reconfiguration also separated the company's more traditional, lower-margin businesses from the higher-margin organic and value-added businesses.
Both segments performed well in 2010, with WhiteWave-Alpro logging an increase in sales of more than 18%. It outperformed the much larger Fresh Dairy Direct-Morningstar business, which saw sales increase by more than 7% in 2010 vs. 2009. Indeed, the success of the WhiteWave-Alpro unit led Dean Foods in 2011 to say that it could consider spinning off the business as a strategic option to maximize shareholder value.
The overall increase in sales in 2010 was a welcome turnaround from 2009 when net sales decreased $1.3 billion compared to 2008. The company attributed the decrease primarily to the lowered prices of its Fresh Dairy Direct products, where significantly lower commodity costs were passed on to customers. However, net income fell sharply in 2010 vs. 2009 on charges related to settling an antitrust case by dairy farmers in the Northeast and restructuring charges related to cost-cutting. (In 2010, the company cut nearly 1,400 positions at Fresh Dairy Direct-Morningstar division.) Profitability was also hurt by steep discounting of milk by retailers. Cheaper store brand milk makes Dean's branded milk look more expensive.
While Dean Foods has been focused intently on acquisitions, it has recently made some disposals. They include the Rachel's Dairy Limited (UK) business to France's Lactalis in 2010 and the sale of its Mountain High yogurt business to General Mills in early 2011. It also sold its private-label yogurt business to Schreiber Foods and later in the year OpenGate Capital acquired the dairy processing business under the Golden Guernsey brand.
Adding to its operations and brand portfolio, Dean acquired the milk brands and dairy processing plants of Wisconsin-based Foremost Farms in 2009. The bulk of Foremost's former milk assets did not remain part of Dean's network for long, however. In early 2010 the US Department of Justice (DOJ) and the states of Illinois, Michigan, and Wisconsin filed a lawsuit to undo the Foremost-acquisition, saying it resulted in a "substantial lessening of competition." Dean settled the suit a year later, and agreed to shed most of the acquired assets, including a dairy processing plant in Waukesha, Wisconsin, and the Golden Guernsey and La Vaca Bonita brands. (It retained an ex-Foremost plant in De Pere, Wisconsin.) Private equity OpenGate Capital subsequently signaled its plan to take over the Waukesha plant and dairy brand names for an undisclosed amount.
Dean's customers include food retailers, distributors, foodservice operators, educational institutions, and governmental entities throughout the US. Wal-Mart is its largest customer; it accounted for 19% of the dairy's 2010 sales. The bulk of the raw milk used by Dean to make its products is supplied by local dairy cooperatives; the rest is obtained from independent dairy farmers.