About Tuscan/Lehigh Dairies, Inc.
Dean Foods is the nation's largest milk bottler. The company 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 DairyPure, Borden, Pet, Country Fresh, Meadow Gold, and TruMoo, a leading national flavored milk brand. Dean Foods owns and operates a number of smaller regional dairy companies, including Friendly's, Berkeley Farms, and Garelick Farms. The company distributes dairy products across the US from regional manufacturing facilities.
About 70% of Dean Foods' revenue comes from its fluid milk while ice cream products account for about 15%. The rest of the company's sales come from fresh cream cultured products, extended shelf-life dairy and other products, and other beverages. The company's heavy reliance on fluid milk puts it at the mercy of milk prices, consumer demand, and competition. Changes in any of those forces could affect the company's operations.
The company has a wide reach around the US, operating more than 60 production facilities around the country. It ships most of its products directly to stores in a fleet of refrigerated trucks. It buys milk produced by more than 930,000 cows from some 4,350 farms.
Dean Foods rings up 99% of its sales in the US, where it operates manufacturing facilities in 32 states (and distributes across all 50 states). The company's nationwide manufacturing and distribution capacity could be strengths as it tries to roll out products such as Friendly's and Mayfield ice creams across bigger regions and countrywide.
Outside of the US, the dairy giant has some operations in Europe.
Sales and Marketing
Dean Foods markets its products through advertising and other promotions, including media, coupons, trade shows, and other promotional activities. The company has significantly increased its advertising spending in the past several years to drive consumer awareness of its national brands.
Dean Foods' customers include food retailers, distributors, foodservice operators, educational institutions (some 32,500 schools), and governmental entities throughout the US. Walmart and its subsidiaries, including Sam's Club, is the company’s largest customer, accounting for more than 15% of revenue. The next four biggest customers account for less than 20% of sales.
The company's products are sold primarily on a local or regional basis through local and regional sales forces, although some national customer relationships are coordinated by a centralized corporate sales department.
After a couple years of declining revenue Dean Foods' sales inched up 1% in 2017 from 2016. The rise was attributed to higher prices for fluid milk, which were caused by higher commodity prices. The company also had contributions from the Friendly's and Mayfield ice cream acquisitions. Increases were offset to a degree by lower fluid milk volume from overall category softness and reductions in private label fluid milk volume due to competitive pressures. Dean Foods also blamed an increase in retailers investing more in their own private label products.
Dean Foods' profit fell to about $61 million in 2017 from about $120 million in 2016. The company had higher expenses for several items in 2018 including increased commodity prices, costs associated with closing facilities and reorganization, and impairment charges for long-lived assets.
The company's cash and cash equivalents fell to $16.5 million in 2017 from $18 million in 2016. It had lower cash from operations because of reduced operating income and a discretionary payment made to the company-sponsored pension plan.
Dean Foods is trying to move into higher margin products such as ice cream to lessen its dependence on low-margin milk products, particularly private-label products. The transition has been interrupted, however, by rising milk prices, declining demand, and looming competition from Walmart, the company's biggest customer.
Dean Foods looks to its size and scale to provide flexibility to serve customers the country with private label and branded products. The company counts on its national brands such as DairyPure, TruMoo, Organic Valley, and Friendly's to win space in grocery dairy sections. It began selling extensions of the brands such as DairyPure cottage cheese that includes a mix-in product, as well as DairyPure sour cream.
Another challenge on the horizon is Wal-Mart's construction of its own dairy processing plant in Indiana. The plant is to supply dairy products to some 600 stores in the Midwest. Walmart will shift an estimated 90 million gallons of production from Dean to the plant in 2018 and 2019, reducing Dean's annual volume by about 4%. Dean will continue to supply Walmart in other parts of the country.
Dean Foods is responding to these challenges with cost cutting measures, plant closures, and the shift to a more profitable product mix. In a program the company calls OPEX 2020, it plans to cut expenses to bring them into line with revenue and give the company flexibility to respond the market opportunities and challenges.
With fluid milk volumes declining, Dean Foods believes a switch to more profitable branded products and reducing its large-format private label business will provide higher gross margins. Increased sales of products such as ice cream and cottage cheese is to improve profitability.
Dean Foods' strengthened its ice cream offerings with the 2016 acquisition of Friendly's. Friendly's bolstered Dean Foods' market position in the Northeast US and provides a platform for nationwide expansion. Dean Foods also is looking to expand the Mayfield Creamery product line in the southern US. Another step to sell higher margin products is Dean's 50-50 production and distribution partnership with Organic Valley and its line of organic dairy products.
Mergers and Acquisitions
In 2016 the company bolstered its ice cream product lineup after it acquired Friendly's Ice Cream's retail and manufacturing ice cream business for $155 million in cash. Prior to the acquisition, Friendly's made and distributed a variety of ice cream products; it also operates a restaurant chain in the northeastern US that was not part of the acquisition. The Friendly's brand complements Dean's line-up of ice cream brands, including Mayfield and Dean's Country Fresh.
117 CUMBERLAND BLVD
Burlington, NJ 08016-9722
Phone: 1 (570) 385-1884
Employer Type: Privately Owned
Employees (This Location): 82
Employees (All Locations): 360