Pensions Major Cause of Milk Producer Going Bankrupt

The cost of milk has gone down due to a downturn in demand for the product.  That is the way of free markets.  Consumers are turning to alternatives to real milk—like “almond or coconut milk”.  That is also the way of a free market.  But there was another issue that helped cause the bankruptcy of the largest dairy in the nation.

“The company’s woes, driven by Americans seeking alternatives to white milk, have pushed sales down by seven percent in 2019, cutting profits by 14 percent.

Combined, those two metrics led an 80 percent decline in stock price for the processor.

A key driver in the decision to file for Chapter 11 bankruptcy proceedings was meeting pension obligations for the company’s workers. In a statement, the company said the move for bankruptcy would allow it to continue operations and address debt while allowing for the firm to explore a sale.

Like government, pensions are causing an economic disaster.  It was pension plans that also brought down steel makers, auto makers and many others.   Not mentioned is whether the pension problem was due to union contracts and negotiations—as with other industries that have had financial problems.

Milk giant Dean Foods files for bankruptcy protection

Alex Tavlian, The Sun,   11/12/19 

Dean Foods, America’s single largest milk processor, filed for bankruptcy on Tuesday as another casualty of declining milk demand in the United States.

The company operates a bevy of national dairy brands – including DairyPure and TrueMoo – along with regional brands Berkeley Farms and Alta Dena in California.

The company’s woes, driven by Americans seeking alternatives to white milk, have pushed sales down by seven percent in 2019, cutting profits by 14 percent.

Combined, those two metrics led an 80 percent decline in stock price for the processor.

A key driver in the decision to file for Chapter 11 bankruptcy proceedings was meeting pension obligations for the company’s workers. In a statement, the company said the move for bankruptcy would allow it to continue operations and address debt while allowing for the firm to explore a sale.

In a statement issued Tuesday, Dean Foods said it was engaged in “advanced discussions” with dairy co-operative Dairy Farmers of America for a sale of nearly all of its assets.

In the interim, while it pursues bankruptcy and negotiating a sale with Dairy Farmers of America, the company has secured $850 million in financing from its existing lenders, led by Rabobank.

Dean Foods’ financial trouble comes as little surprise to dairy farmers in the San Joaquin Valley, especially America’s largest dairy county – Tulare.

Detailing the problems it faced recently, Dairy Farmers of America reported a $1.1 billion drop in sales in 2018 as consumers look to plant-based alternatives and dairy prices dropped by an average of $1.45 per gallon.

Dairies in the region have similarly been squeezed due to declining milk consumption by American consumers. With high debt and slackening profits, many dairies have gone into bankruptcy or shifted into other farming ventures.

Earlier this year, California’s oldest dairy – the Giacomazzi Dairy located in Hanford – shuttered dairy operations after 125 years in business and is pivoting its acreage to nuts.

About Stephen Frank

Stephen Frank is the publisher and editor of California Political News and Views. He speaks all over California and appears as a guest on several radio shows each week. He has also served as a guest host on radio talk shows. He is a fulltime political consultant.