5 charts that show

how milk sales

changed and made it
tough for Dean Foods
to avert bankruptcy
PUBL I SHED WED, NO V 13 20 19 3:00 P M EST

Amelia Lucas

KEY POINTS
• Dean Foods filed for Chapter 11 bankruptcy Tuesday.

• The filing comes as milk prices have risen in recent months.

• Fewer Americans are drinking dairy milk, and competition from the likes of Walmart has
drawn away customers who still drink the beverage.
Noel Hendrickson | Getty Images

The milk industry is under pressure.

The latest sign of upheaval: Dean Foods, the nation’s largest milk maker, filed for
Chapter 11 bankruptcy Tuesday. The Dallas-based company is engaged in discussions
with the Dairy Farmers of America, the biggest dairy co-operative, to sell all or part of
its business.

That deal will need to be reviewed by regulators and the bankruptcy court. The Dairy
Farmers are hoping to make sure that the group’s 14,500 members have a market for
the milk they supply.

But if they clear antitrust hurdles, and successfully buy Dean Foods out of
bankruptcy, they will still need to contend with the big shifts that are occuring in
demand.

Here are 5 charts that show why the milk processor filed for bankruptcy:
Changing consumer tastes

Demand
U.S. milk consumption has been falling for decades. In 1984, milk consumption
represented a 15% share of all eating occasions, according to the NPD Group. By
2019, milk represents only a 9% share.

Sales of cereal, a common mealtime companion for milk, have also fallen in recent
years as consumers shun sugar and embrace higher protein breakfast options.

Bottled water, which has exploded in popularity since the turn of the century, has been
stealing customers from milk. Bottled water appeals to consumers who are on the go
and health conscious, although increased concern about plastic waste and pollution
has led its own growth to slow in recent years. However, some people are still
drinking water instead of milk. They just bring it along in a reusable bottle.

Rise of nondairy alternatives

The decline of milk consumption has accelerated in the last decade as alternatives
have soared in popularity.

In the last four years, sales of nondairy milks have risen 23%, according to Nielsen
data. Alternatives like soy and almond milk have become popular as health-conscious
consumers have grown wary of dairy.

Trendy coffee shops like Stumptown Coffee or Blue Bottle Coffee have also
introduced their customers to nondairy milks by making lattes with alternatives, such
as oat milk.

Dean Foods owns Good Karma, which makes flaxseed-based milk and yogurt
alternatives, but the majority of its portfolio is dairy products. In 2013, the company
spun off WhiteWave, the parent company of Silk and a leading maker of soy and
almond milks.
Out of all nondairy milks, almond is the most popular. Soy, rice and coconut milks
have seen sales decline in the 52 weeks ended Oct. 16, according to Nielsen.
High milk prices

Supply
In 2019, milk prices have risen 16%, according to data from the U.S. Department of
Agriculture. In September, prices spiked to $19.30 per hundredweight, its highest
level since December 2014.

Historically, milk prices have soared even higher. In September 2014, they hit $25.70
per hundredweight. But this year’s surging milk costs come as Dean Foods is
struggling with higher freight and fuel costs. At the same time, grocery stores are
willing to lose money to sell their private label milk to lure shoppers through their
doors.
Mounting losses

Dean Foods has reported net losses in seven out of its last eight quarters as increased
competition has led to declining volumes and plant closures.

In 2017, Walmart, Dean Foods’ largest customer, started processing some of its milk,
drawing a sizable chunk of sales away from Dean Foods. The retail giant accounted
for 17.5% of the milk processor’s revenue that year, according to the company’s
annual report. In 2018, Walmart only accounted for 15.3% of its net sales.
Elasticity
In 2018, Dean Foods held 12.5% of the market share for milk, according to
Euromonitor data. Euromonitor is projecting that the company’s market share will fall
to 12.1% during 2019 but will still hold onto its top spot.