Dean Foods is the nation's largest milk bottler. The company's Fresh Dairy Direct business markets fluid milk, ice cream, cultured dairy products, and beverages (juices, teas, and bottled water) under more than 50 local, regional, and private-label brands, including Borden, Pet, Country Fresh, Meadow Gold, and TruMoo, a leading national flavored milk brand. Following the spinoff of most of its WhiteWave Foods business, Dean Foods still holds about 20% of WhiteWave, which makes coffee creamers (International Delight), dips, ice cream, butter, cottage cheese, and specialty dairy products. Dean Foods owns and operates a number of smaller dairy companies, including Berkeley Farms, and Garelick Farms.
Dallas-based Dean Foods rings up 99% of its sales in the US, where it operates more than 70 manufacturing facilities. Overseas, the dairy giant has operations in Europe (Belgium, France, the Netherlands, and the UK).
Following the sale of its Morningstar Foods division and the spinoff of WhiteWave in 2013, Dean Foods is left with Fresh Dairy Direct. (WhiteWave accounted for nearly 20% of Dean Foods' 2012 sales.)
Sales and Marketing
Dean Foods markets its products through advertising and other promotions, including media, coupons, trade shows, and other promotional activities. The company spent about $22 million on advertising in 2013, $28.6 million in 2012, and $30.7 million in 2011. Dean's customers include food retailers, distributors, foodservice operators, educational institutions, and governmental entities throughout the US. Wal-Mart and its subsidiaries, including Sam's Club, is Dean Foods's largest customer.
The company has reported a downward trend in revenues over the past few years. Net sales decreased by 3% in 2013 due to a decrease in fluid milk volumes (which had accounted for 73% of total sales volume) as the result of the loss of a portion of the private label fluid milk business from a significant customer and another customer’s decision to vertically integrate late last year, combined with general category weakness. These downward pressures were partially offset by increased pricing as a result of the pass-through of higher dairy commodity costs.
Dean Foods posted net income of $813.2 million in 2013 (up from $158.62 million in 2012) driven by a gain on the disposition of WhiteWave of $415.8 million and a benefit from Income tax expense, offset by decreased income from discontinued operations together with loss on early retirement of debt of $63.4 million, impairment of goodwill and other long-lived assets expenses of $43.4 million, and a higher other operating loss.
Net cash used in operating activities was $330.8 million in 2013 (compared to $204.9 million in 2012). This was partially attributable to lower income from continuing operations and by payments of 418 million related to Dean Foods' cash tax obligation on the sale of Morningstar and payments of $21 million related to tax obligations which were recognized upon completion of the WhiteWave spin-off, as well as a decrease in accounts payable and accrued expenses driven by the payment of their 2012 incentive plans.
After diversifying into higher-margin businesses (and piling on debt in the process), Dean Foods has reversed course to get on a sounder financial footing and has become essentially a pure-play in low-margin fluid milk and traditional diary products. After selling a 20% stake in WhiteWave-Alpro to the public for $391 million in fall 2012, it spun off the rest in 2013. The purchase of Alpro (in 2009) and its combination with WhiteWave Foods gave Dean Foods a firm presence in Europe and furthered its ambition of becoming a global brand. WhiteWave's reconfiguration also separated the Dean Foods' more traditional, lower-margin businesses from the higher-margin organic and value-added businesses. Indeed, WhiteWave-Alpro was considered by many to be the most valuable part of Dean Foods. The company's standard dairy products and its large private-label business are more vulnerable to volatility in commodity prices and consumers' dwindling appetitive for milk and other dairy foods.
While Dean Foods has been focused intently on acquisitions, it has recently made some disposals. In the company 2013 sold its Morningstar Foods division to Canada's #1 dairy processor Saputo for $1.45 billion.