Original title: Dean food, the largest dairy company in the United States, filed for bankruptcy, and its market value fell 80% during the year
On Tuesday (12th), Dean Foods Co, the largest dairy company in the United States, announced that it had filed for bankruptcy protection under Chapter 11 of the bankruptcy law to maintain business operations and seek to solve its debts when selling the company.
However, Dean food said it had obtained a debtor financing commitment of $850 million. The company also said it was conducting 'in-depth discussions' with dairy farmers of America, Inc. to seek potential asset sales.
Dean food was founded in 1925 and listed on the New York Stock Exchange in 1981. It is the largest dairy company in the United States. It has more than 60 manufacturing plants in 29 states of the United States. The company has 50 brands such as dairypure, trumoo and friendly.
However, with the continuous decline of consumption in the U.S. milk market and the intensification of competition, Dean food has been struggling.
Before filing for bankruptcy, Dean food had lost money for five consecutive quarters. According to CNN, the company's sales fell 7% and profits fell 14% in the first half of this year. In 2018, Dean food's sales were only $7.8 billion, down 38% from a decade ago.
In late June this year, the company's share price closed below US $1 for the first time in more than 20 years. Since the beginning of the year, its share price has fallen by more than 80%. At present, it is tentatively reported at US $0.8/share.
Some people believe that the decline of dean's share price may be related to trade friction.
Since 2018, the US government has imposed several rounds of tariffs on imports from China. As a counter measure, the Chinese government also imposed tariffs on some commodities imported from the United States, including agricultural products such as dairy products. The move has dealt a blow to U.S. agriculture, and the U.S. dairy industry is gradually losing the Chinese market.
The reference news network quoted the head of the American dairy export association as saying that due to China's imposition of tariffs, the export of milk powder, cheese, whey products, lactose and other major dairy products to China decreased by 54% year-on-year in the first half of 2019. China is one of the main overseas markets of American dairy enterprises.
Macro analysts of seekingalpha, an investment analysis agency, predicted in June 2018 that Dean food would be adversely affected by the imposition of tariffs, and suggested shorting Dean food. The share price of Dean food also started a sharp decline in the second half of 2018.
In addition, the U.S. dairy market has been bleak in recent years. According to the data of the U.S. Department of agriculture, the per capita consumption of liquid milk in the United States has decreased by 26% in the past two decades.
USDA data also show that licensed dairy farms have shrunk to an all-time low, closing more than 2700 last year alone.
In addition, in 2018, American consumers drank 146 pounds of milk per capita every year, a new low since 1975, which has decreased by 39% in the past 40 years.
Milk was once one of the main foods in American refrigerators, but as consumers seek low sugar or plant-based alternative drinks, milk is gradually 'out of favor' among consumers.
According to Euromonitor, an information consulting firm, the global milk substitute market is expected to exceed US $18 billion this year, an increase of 3.5% over 2018.
In recent years, Dean food has been reducing the size of the company. According to the Wall Street Journal, the company had about 15000 employees in March this year, down from 23000 10 years ago.
At the same time, the company tried to curb the decline in sales by cutting costs and closing underperforming factories. But Dean food lost customers of large retail companies such as Wal Mart and Albertson cos., which hit the former hard.
According to CNBC, Wal Mart began to launch its own brand milk in 2017, which triggered industry turmoil and led Dean food to cancel more than 100 milk contracts with dairy farmers in eight states. To make matters worse, the supermarket chain foodlion also cut off the cooperation relationship with Dean food in 2018.