Dean Foods, the largest dairy company in the U.S., which filed for federal bankruptcy protection Nov. 12, was granted interim court approval to access up to $475 million of the $850 million in committed debtor-in-possession (DIP) financing of its existing lenders.
The “first day” motions relate to the company voluntary Chapter 11 filing in the U.S. Bankruptcy Court for the Southern District of Texas. The funds can be used to continue to pay employee wages and benefits as well as making payments to vendors and suppliers.
“We appreciate the swift action by the court to approve these motions, which will enable us to continue operating as normal,” said Eric Beringause, president and CEO of Dean Foods. “As we move through this process, we remain focused on providing customers with wholesome, great-tasting dairy products and the highest levels of quality, service and value. I would also like to thank our employees, customers, dairy providers, lenders and other partners for their continued support.”
Dallas-based Dean Foods filed Chapter 11 reorganization proceedings to protect and support its ongoing business operations and address debt and unfunded pension obligations while looking to sell the company. It is in discussions with Dairy Farmers of America regarding a potential sale of substantially all assets. Sales for the company’s products have fallen 7% in the first half of the year, and profit fell 14%. Dean Foods' stock has lost 80% this year, according to a CNN report.
Beringause, who joined Dean Foods earlier this year, was brought in to turn things around as the dairy industry has continued to struggle against the onslaught of new non-dairy products in the category, such as plant-based milks, and the decline in milk consumption across the country. “I’ve taken a hard look at our challenges, as well as our opportunities, and truly believe we are taking the best path forward,” Beringause said in the press release announcing the bankruptcy filing. “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. I am confident we have the right people in place to lead us through this process.”
Sales for traditional cow-based white milk was about $12 billion for the 52 weeks ending Oct. 26, according to Nielsen. For comparison, sales were $15 billion for the same time period four years ago. While plant-based milk sales are still a small fraction of white milk, sales of oat milk grew 636% in the past year to reach $53 million. Nutrition and environmental factors are driving forces behind the growth of plant-based milks.
The effect of Walmart’s decision to open its own dairy facility can’t be discounted. The mass retailer had been one of Dean Foods’ largest customers before opening a milk processing plant in Fort Wayne, Ind., in June 2018.