Dean Foods files for bankruptcy after decline in milk consumption

US milk producer Dean Foods Company has announced it has filed for Chapter 11 bankruptcy protection.

The Dallas-headquartered company intends to use the process to support its ongoing operations and address debt and unfunded pension obligations while it works toward a sale.

The business said it is engaged in “advanced discussions” with Dairy Farmers of America regarding a potential sale.

Dean has received a commitment of approximately $850 million in debtor-in-possession (“DIP”) financing.

“Despite our best efforts to make our business more agile and cost-efficient, we continue to be impacted by a challenging operating environment marked by continuing declines in consumer milk consumption,” said Eric Beringause, who was appointed Dean Foods CEO earlier this year.

“Since joining the company just over three months ago, I’ve taken a hard look at our challenges, as well as our opportunities, and truly believe we are taking the best path forward. In recent months, we have put in place a new senior management team that not only has considerable experience in the dairy and consumer product industries, but also in executing major turnarounds.”

Dean expects to use the DIP financing, together with cash on hand and operating cash flows, to support its continued operation, including payment of employee wages and payment to suppliers and vendors.

Beringause added: “The actions we are announcing today are designed to enable us to continue serving our customers and operating as normal as we work toward the sale of our business.

“We have a strong operational footprint and distribution network, a robust portfolio of leading national brands and extensive private label capabilities, all supported by approximately 15,000 dedicated employees around the country.”

The Dean Foods portfolio includes brands such as DairyPure, TruMoo, Alta Dena, Berkeley Farms, Country Fresh, Dean’s, Friendly’s and Garelick Farms. The company also makes and distributes ice cream, cultured products, juices, teas, and bottled water.

According to the US Department of Agriculture, Americans’ per capita consumption of fluid milk has fallen 26% in the past two decades. Meanwhile, as consumers have become more conscious about animal welfare and the environment, sales of non-dairy alternatives have surged.