Dean Foods Files Bids; DFA successful for most of assets, Court must approve bids

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Attorneys representing Dean Foods in their Chapter 11 proceedings have filed two highly anticipated notices of bids and bid results with the US Bankruptcy Court for the Southern District of Texas, Houston Division.
The notices are Document 1270, Notice of Bid Results, and Document 1271, Notice of Bids.
The Court has a hearing scheduled for April 3, 2010, for the purpose of approving the bids.
Dairy Farmers of America, Inc. has been announced by Dean Foods as the successful bidder for the great majority of Dean Assets.   This includes 8 facilities situated in the following southeast locations:
  • Athens, TN  (Mayfield)
  • Birmingham, AL (Ice Cream)
  • Nashville, TN  (2 plants – Purity and Country Delite)
  • High Point, NC
  • Winston-Salem, NC
  • Spartanburg, SC  (Pet)
  • Orlando and Orange City, FL  (TG Lee)
Prairie Farms Dairy, Inc. has filed bids which were successful for the Birmingham Fluid Plant (Barber’s), the Hammond Louisiana plant, and the Customer list related to Louisville, KY facility.  Prairie Farms also successfully bid on several plants throughout the Midwest.
The McArthur Dairy assets have a successful bid from Mana Saves McArthur, LLC.
Alternative bids were stated in Document 1270. MD-VA Milk Producers was the Alternate for High Point, NC. OP Church Street Property, LLC, is listed as an alternate for the Country Delite property in Nashville.
Details of various Bid offers for plants across the country can be found in a number of documents at the Epiq Southern Foods website.
The “Notice of Bid Results” – 6 pages long – is posted below:
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Did anyone ever ask the Shelf Stocker? (About handling fluid milk, that is)

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Did anyone ever ask the Shelf Stocker?  When it comes to milk cartons, that is.

It’s been a busy past few months for dairy farmers and dairy industry associates all over the United States.  Whether it’s called conference or summit or convention,  dairy folks across the United States have been in session after session in the months from November to March, sometimes (often!) referred to as “Meetin’ Season.”

I can’t remember a session for the past few years where the term ‘innovation’ hasn’t been used.  Sometimes, the term refers to new dairy products, but it is used equally as much in reference in packaging and handling for milk and other dairy products.

Balancing the costs associated with bringing milk and milk products to market along with visual elements which attract consumer purchases is like walking a high-wire across the Grand Canyon.  With dependable fluid milk sales losing market share to the ‘newest and shiny’ dairy toy, every level of the supply chain is in perpetual review.

On the way back to the ‘home office’ after one of those winter dairy meetings,  I stopped by a grocery store to grab some milk. (Whole milk, if you must know, and a brand in a yellow jug which I know comes from many farms in my area).

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As I often do, I just stood there evaluating the dairy case – fluid milk.  There were private label commodity milks from far away (over the ‘within 400 miles “Local” definition’ in the 2008 Farm Bill), a branded local milk, high-margin blended milks, and fake milks which are trying to convince consumers they are better than real, whole, milk.  Additionally, all of the ‘fakes’ (aka plant-based beverages) do nothing for farms and the farm economy in our southeast area of the US;  the crops or products used in them cannot be traced to a farm in the southeast.

While I was looking at the case, a very pleasant young man, the stocker clerk for the evening, brought out several cases of the yellow jug to place in the shelves.  Those yellow jugs are delivered in the plastic, open top milk crates which are as popular for home decor as for milk deliveries.

He then brought out some of the far-away jugs shipped in brown cardboard cases. In many dairy discussions with farmers, industry folks indicate that the brown cardboard is preferable to the traditional crates. Notice I said ‘industry folks.’

So, I just asked the clerk, a young man on the front line of consumer connections and milk sales,  if he would answer a question for me, and he politely said “Sure, if I can, ma’am.”

My question to the stocker:  From your perspective, do you prefer the cardboard carton, or the plastic milk crate?

The stocker clerk’s response was this: “I prefer the plastic crates.  For one thing, they are sturdier than the cardboard.  And also, their open top saves me time – I don’t have to cut open and fold cardboard boxes for bundling. I just reach in and get cartons and put them on the shelf.”

He went on to tell me of several times the cardboard cartons had weak spots in them, and extra care was required in handling.  He even had a cardboard carton break open one time, and jugs of milk fell out, crashed open, and milk went everywhere – including all over him.  (Anyone who’s had milk spill on them can identify with the dilemma, why you want to get it cleaned up quickly, and the extra time it takes to make sure you get all of it!)

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His response made sense to me – lots of sense, actually.  And anyone who has ever figured ‘time as money’ is likely to think it makes sense, too.  Those plastic milk crates actually still have some positives, and we need to remember that. They are appreciated by some folks, and their reasons make common sense. (Not to mention the physical benefits, since you get a bit of a workout while moving those cartons!)

In a society where we far too often see those on the frontlines of any type of ‘work’  never asked what they think about a situation, it is all too believable, too.

Has anyone ever considered the perspective of stocker clerks everywhere who do the actual work of getting milk on shelves, or has anyone ever done a ‘study’ or survey about what they would recommend?  Should their thoughts count on what is best for fluid milk and helping it re-gain traction?

The concept of moving more fluid milk is on smart dairy people’s minds, because it is generally the product which can be brought to market most quickly and at the least cost. For years, it has been the predominant product and ‘cash cow’ of the dairy processing industry – and it is being left behind in promotion and other aspects of cost of bringing milk to market.

Some have predicted that there may be a recession in 2020 at some point, and if that does happen, are we prepared to see dairy product prices decline by 20-40%? 

If comsumer pocketbooks are stretched by a recession, which category of milk sales will decline the fastest?  Will it be those higher priced milks, or even the fake milks / alternative beverages?  Or would such an event drive consumers back to basic milks, which are nutritional powerhouses in their own right?

There are many thoughts and opinions on how to best move more or recapture fluid milk, and there are many thoughts on which of the many attributes of whole milk are the best and should be promoted the most.  (That is another discussion for another post, or yet another convention to attend!)

But for now the question is: How often do we really consider the opinion of those who are actually doing the ‘physical work’ on getting milk to consumers?  If the “Learn by Doing” motto of 4-H is true, then there is much wisdom in all of the clerks who have ever placed milk on a shelf!  And I’m betting they’ve spoken with many consumers along the way, too.

I, like many have more questions than answers, and there are others who will say that other means of milk movement have their own merits.

I’m not suggesting companies which use the cardboard cartons change their way of doing things – that obviously works for them, and any company which sells fluid milk is a benefit to dairy farmers everywhere!  One of those in particular, another which serves a lot of southeast dairy farms, is about an hour from my location.

But I will say that a simple question asked of a pleasant young man sure gave me a new perspective.  I learned a lesson, and the conversation  made me think about things a bit differently.  I hope it’s made you think, too.

And ‘thinking differently’ – on all levels of people along the supply chain – is the first step to a brighter milk tomorrow.  The dairy industry is desperately searching for that brighter tomorrow.

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Borden Files Chapter 11; Moves to Protect Farmer Payments for Pre-Petition Milk; Interim Motion Approved on Jan. 8th

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UPDATE: Jan. 9th:  The Court issued an Order, posted late on Jan. 8th, which did indeed authorize Borden to pay independent farmers and co-ops, but there is some leeway as to the amount those producers and handlers might be paid.  Independent producers especially are encouraged to read the full 7 pgs. of the Order found here (you may also download and print), and perhaps consult with an attorney for interpretation and clarification.  Some situations may differ per state laws and milk bonding statutes.

Dave Natzke, Progressive Dairyman, has also published a report of the hearing with added information from the courtroom, which may be read here.

 

Borden Dairy Company, et al.,  now becomes the 2nd major dairy company within two months to file for Chapter 11 Bankruptcy to reorganize their financial structure.  Dean Foods, the nation’s largest processor of fluid milk, filed for Chapter 11 protection in November.

The Borden Chapter 11 filing caught many grass-roots dairy farmers off guard, especially due to renewed optimism due to recent new product introductions under the leadership of Tony Sarsam.

Progressive Dairy published an informative report written by Dave Natzke, Editor.

Borden Dairy  issued the following press release about the filing, which can also be accessed on the web:

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When a milk-purchasing company announces bankruptcy, the first question that grass-roots farmers and rural communities is concerned with is “Will those farmers get paid for ‘pre-petition’ milk?”  (That is the milk delivered in the period prior to the filing for which the farmer has not received payment.)   Payment for milk delivered from the day of filing forward is generally protected by the Court.

Normally, independent farmers, those who sell milk directly to a plant or company, and who are not members of a milk cooperative, are left holding the bag, and don’t get paid, because they are generally considered ‘unsecured creditors.’  Some states, but not all, have ‘milk bonding’ statutes, which protect payments to farmers to some degree; some states may protect payment for all or a significant portion of the milk delivered, while others may have bonding statutes which cover only a tiny portion.

In this Borden Dairy Chapter 11 process, the company has filed a Motion with the Court to ask that the Company be allowed to complete those payments to those independent farmers and five milk cooperatives. This Motion was scheduled to be heard as part of the “First Day Hearings” on January 7th, but at the writing of this blogpost, (midnigh/early am, Jan 8th) an Order has not been entered which will actually permit that to happen.  An Order must be entered on the Court’s Docket which will finalize payment.

The documents below, on page 3, paragraphs 7 and 8, note that Borden purchases raw milk from ‘approximately 262 independent family dairy farms’ and ‘five farmers’ cooperatives; collectively, those farmers and cooperatives are called ‘Milk Vendors.’  They also detail the normal times of payment.

The Borden Chapter 11 proceeding is legally known as Case 20-10010-CSS, and is being heard in the United States Bankruptcy Court for the District of Delaware.    Below are the 7 pages of Document 11 in the above captioned case, titled “Declaration of Jason Monaco in Support of Debtors’ Motion for Authorization to Pay Critical Vendors,” which is the Motion asking for payment to farmers.

Affected parties residing in or operating farms in the states of Mississippi or Texas likely need to pay special attention to a Footnote (3)  at the bottom of Page 3. Such parties may need to have this Document 1, along with other documents in this case reviewed by an attorney for interpretation, and have such a qualified attorney determine how this footnote may affect their farming operations.

NOTE:  The author of this blog is not an attorney, and any information posted SHOULD NOT be considered legal advice, only observations. These public documents are posted for information purposes only; it will be up to individual farms affected in this matter to consult attorneys to review their legal rights.

 

Here are the pages of Document 11, the Motion requesting payment to farmers:

 

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Any updates of significant events and/or official rulings by the Court will be added or noted when they are available, as will additional information related to this process.

NOTE:  The AUTHOR of this blog IS NOT AN ATTORNEY, and any information posted SHOULD NOT be considered legal advice. These public documents are posted for information purposes only; it will be up to individual farms affected in this matter to consult attorneys to review their legal rights per their individual situations.  The author has experienced a milk company bankruptcy as a producer, so therefore is familiar with the process from a farmer/producer perspective

 

ON A PERSONAL NOTE:  As Borden now joins Dean Foods in Chapter 11 proceedings, this is the second Financial Reorganization/Bankruptcy filing of a major purchaser of fluid milk in the United States within two months.  Many, many family farms will be affected to some degree by these proceedings, no matter if a farm is an ‘independent’ or a member of a cooperative. In turn, the rural communities across the country in which those farms are located will be affected as well.  May I ask that anyone who is a Believer in a Higher Power please join me in keeping the entire US Dairy Farm industry in your collective prayers?  Thank you for doing that!

May God Bless our Dairy Farms, and our Farming Communities!!

 

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Dean Chapter 11 – HUGE Step 1: Company Steps Up and Will Honor Previous Obligations to Farms

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A HUGE first step will take place in the Dean Foods Chapter 11 Bankruptcy proceedings.
Dairy Farmers will get their payments for milk delivered in the month prior to the date of the Bankruptcy Filing, an almost unprecedented event.  This news was confirmed by a Dean Foods source familiar with the situation on the evening of Thursday, November 14th.
Dean Foods announced on Tuesday, Nov. 12th, 2019, that it had initiated Chapter 11 Bankruptcy in the United States District and Bankruptcy Court, Southern District of Texas, Houston.
From the moment that filing became known, farmers, who are generally seen as unsecured creditors in a milk company bankruptcy, were extremely concerned that they would never receive payment for a month’s worth of milk. In hard dollars, this would be equal to tens of thousands of dollars to multiple hundreds of thousands of dollars, depending on the size of a producer’s herd.
In this case, officials in the Milk Procurement Division of Dean Foods advocated on behalf of payment for their producers.  In a court document titled  “Docket 29, Declaration of Robert Bruce Matson In Support of Debtors Motion to Pay Critical Vendors,”  Matson, Dean’s Senior Director of Milk Procurement, lays out a brilliant and passionate case on why these farmers deserved payment.
Nationwide, this would have been a loss of several millions of dollars scheduled to flow into dairy farm communities across the country. Those monies in turn would pay farm employees, pay feed bills, machinery repair bills, and a host of other expenses related to farm business operations.
These payments are known to apply to independent producers who contract directly with Dean Foods – it is not yet verified if this also applies to co-op handlers.  That will be clarified as quickly as possible.  Also needing more certain clarification will be payment for Nov. 1-11 milk deliveries to milk plants.  With the Nov. 12 filing date, all deliveries from that day forward will be secured as the company works through the Chapter 11 process.
The ability to make those payments, along with flexibility on how to make those distributions, was enabled by Court Orders entered on Wednesday evening, Nov. 13th, in US Bankruptcy Court, Southern District of Texas.
From that point on, it was up to Dean Foods officials to make determinations on what portions of the Settlement payment would indeed make their way to farms.
In an unprecedented bankruptcy in the dairy and food industry, an even rarer occurrence has taken place with this full payment being delivered to what the court defines as an unsecured creditor. Classification as ‘critical vendors’ helped achieve that end.
Officials at Dean Foods deserve an extraordinary amount of credit for taking farmers into consideration in their court documents and pleadings and getting this money to them which will be crucial for ongoing operations as the company determines a future.  If you have the opportunity to say “Thanks” to any of them, please do so.
While we are a very long way from a more stable future in this Chapter 11 Reorganization of the country’s largest milk processor, this is a HUGE first hurdle to cross.
Before this very complex bankruptcy is over, there will be many ups and downs, good days and bad days, and unexpected twists and turns. But on this Day 3 of Bankruptcy proceedings, many farm families are breathing a lot easier.
We hope for a brighter future for both farmers supplying the plants, and the employees processing and distributing the milk.
This will be a ‘one step at a time process.’  More information will be shared as it becomes available
Timeline thus far in a rather fast-paced and frenzied week:
  • Tuesday, Nov. 12th: Bankruptcy documents filed
  • Wednesday, Nov. 13th:  Court pleadings and Orders entered for ongoing operations
  • Wednesday, Nov. 13th: By close of day, over 125 document filed on court’s docket in less than 48 hours.
  • Thursday, Nov. 14th: Word received farmers would receive payment for their previous month’s milk.
  • Monday, Nov. 18th: Payments expected to be delivered to farmers
We are most thankful to a God who has answered many prayers with this news. The prayers for wisdom and guidance continue as we work to a more stable future.
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Dean Foods Files Chapter 11 Bankruptcy: News. Producer Questions. FAQ Sheets

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UPDATE – posted 6:35 pm Tues, Nov. 12:  “Emergency Relief Has Been Requested. A Hearing will be Conducted on this Matter on November 13, 2019 at 2:30 pm [CST] in Houston Tex.”   This information per court documents, TXSB.

Dean Foods, the nation’s largest processor of fluid milk, has filed Chapter 11 Bankruptcy in the Southern District of Texas. According to a company news release, Dean Foods states the company is working toward an ‘orderly and efficient sale of the Company.”

In the same release, Dean Foods also states it is “engaged in advanced discussions with Dairy Farmers of America, Inc. (“DFA) regarding a potential sale of substantially all assets of the Company. If the parties ultimately reach agreement on the terms of a sale, such transaction would be subject to regulatory approval and would be subject to higher or otherwise better offers in the bankruptcy.”

Related to the announcement, Dean Foods cancelled its regular Quarterly Earnings Call, which was scheduled to occur at 9:00 am on the morning of Nov. 12.

Information about the actions and proceedings can be accessed at http://www.deanfoodsrestructuring.com.

The major concern for dairy farm communities – especially the farmers, and  related agribusinesses and community small businesses across the country who serve those farmers – will be how independent dairy farms, who ship directly to Dean Foods plants, will be affected, treated, and compensated during the Bankruptcy proceedings.  Those detailed answers are not available at the time of this initial posting (11:50 am, EST, Nov. 12).

At this time, there are more unanswered questions than answers, and no doubt there will be many anxious farmers and co-ops around the country who depend on milk checks from Dean Foods.  It will take time for accurate answers and solutions to be found as this process works through the reorganizational Bankruptcy process.

For now, here are some FAQ sheets, as posted at http://www.deanfoodsrestructuring.com:

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Here is the related News Release as posted at http://www.deanfoodsrestructuring.com:

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As the news broke on the morning of November 12, here are some additional links from financial news outlets:

From ‘Seeking Alpha’: Initial (breaking) News Release – Dean Foods Files Chapter 11; posted at 7:09 am  – with a link to the news release below:

From ‘Seeking Alpha’: Dean Foods Company Initiates Voluntary Reorganization with New Financial Support from Existing Lenders, a posting with these bullets:

  • Company secures commitments for $850 Million in DIP Financing to Support Operations
  • In Advanced Discussions with Dairy Farmers of America Regarding a Potential Sale
  • Business Continues Regular Operations; Customer Receiving Uninterrupted Supply of Dairy Products as Normal

From ‘Seeking Alpha’: Dean Foods EPS misses by $0.72 – posted at $9.38 am

More information will be posted as it becomes available.

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AFBF FMMO Reform Working Group Announces Report & Recommendations

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American Farm Bureau released the report of its FMMO Working Group on Wednesday, Oct. 2nd.
The group was formed following a recommendation by voting delegates to the 100th AFBF Convention in January that “the organization convene a Farm Bureau- and producer-led coalition to review methods to restructure and modernize the current Federal Milk Marketing Order system.”
The group began meeting in June with both on-site meetings and conference calls. They heard from a variety of speakers, from the Federal Market Administrator’s office to several industry representatives from differing sectors.
The southeast area was represented by  dairy farmers Steve Harrison (TN), Everett Williams (GA) and Joe Paul Mattingly (KY), along with Brandon Cobble (TN), who served as one of a few Farm Bureau staff representatives to the working group.
 

“What next?” is the obvious question following the release of the AFBF Working Group report.

According to  AFBF’s Chief Economist, John Newton,  “Farm Bureau members will need to review the information, modify or add ideas, and submit resolutions.”  He notes that the report “will not automatically be considered, nor will it automatically go into Farm Bureau policy.

In other words, and in keeping with Farm Bureau procedure, members must take action.

Look for additional information offered in future posts.

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Beringause, Dean Foods: “It is time we stood up for the Dairy Industry, for our nation’s Dairy Farmers . . .”

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In a bold move, the largest processor and direct store distributor of fluid milk in the United States has decided to leave its membership in the International Dairy Foods Association (IDFA), due to differences of opinion with the organization on the labeling of plant-based beverages.

Announcing their decision, Dean Foods issued the following statement: 

“Dean Foods has been a strong supporter of the International dairy Foods Association (IDFA) for many years, however, we have reached a point where one of our key priorities is no longer shared by the entire IDFA organization.  More specifically, as one of the largest dairy processors in the country, we are proud of the role we play in providing one of the most nutritious products in the grocery store – milk – to consumers around the nation.  With this in mind, we believe it is wrong that many plant-based products are currently marketed using milk’s good name, yet are lacking several of the inherent nutrients of their dairy counterparts. Unfortunately, IDFA has been unable to reach consensus and take a stance on this important issue.”

“As a result, we have decided that we can no longer financially support an organization that is not behind one of our core priorities We’ll instead divert our advocacy resources to pursuing accurate product labeling for the benefit of the dairy industry, including farmers, processors, and consumers around the country. We have appreciated IDFA’s support over the years and wish the organization and its member companies the best.”

 

Eric Beringause,  Dean Foods President and CEO, stated the following:

“There are plant-based products called “milk” on grocery store shelves today that don’t include a single drop of dairy.  Even worse, consumers are being misled into believing that these imitation products are as healthy as their dairy counterparts. It is time we stood up for the dairy industry, for our nation’s dairy farmers, for the integrity of our milk products, and for the families who rely on them for adequate nutrition.

We’re exploring every potential avenue for ensuring imitation products are labeled properly, and we welcome others to join us in this effort.”

 

Beringause, who assumed the reins as CEO of Dean Foods on July 29, came with the reputation of having a record of transformation.  In an industry crying for a renewal of sales for ‘nature’s most nearly perfect beverage,’ this decision may be a step in restoring real milk’s identity and reducing consumer confusion.

This move should be well-received by thousands of dairy farmers and industry stakeholders who have been demanding proper labeling of dairy products for years, and who have been seeking a ‘big-player’ advocate with an even bigger voice.

Dean Foods, on behalf of the nation’s dairy farm families, we look forward to working with you to advance the cause of proper labeling in keeping with standards of identity.

 

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