Changes in Dollar General Dairy Coolers in the Southeast; DG Fresh Distribution Centers Shift Available Brands

17_Dollar_General_Changes_East_TN_SE_3c3

Changes are happening in Dollar General dairy cases. In the southeast, this means that there will be visible changes in brands on the cooler shelves.  In some cases, depending on location, this means that familiar ‘local’ brands, which supported farms in the immediate local area, will no longer be available to consumers in at their community Dollar General.

In late 2018, Dollar General announced plans for a new “DG Fresh” Distribution plan, and opened their first regional distribution center for perishable goods in Pottsville, Pennsylvania. During 2019, 4 more regional warehouses were built, with several of those coming on-line in late 2019 and early 2020.

Part of this plan included the expansion of the Dollar General’s in-house Clover Valley brand onto milk cartons sold in the regular DG stores, whereby Dollar General would further utilize its own private label. For a few years, Clover Valley branded milk has been available in the Dollar General Markets (the grocery format DG, but without a huge footprint like the stores you see every 5-6 miles).

Affecting the lower Southeast milkshed most directly are two of those warehouses, one in Atlanta, GA, and another in Montgomery, AL.  In some regions, this means that familiar local brands will no longer appear on the shelves of their local Dollar General stores.

Perhaps the most affected region will be East Tennessee.  Beginning in the second week of June, 2020, local dairy farmers and their families, following their habits, went into Dollar Generals specifically to purchase Mayfield brands (Mayfield in the yellow carton and Fieldcrest in a translucent carton), but were startled to see they were no longer available.  Instead, they saw Clover Valley private labels and PET branded milks.

For several years, local consumers in East TN could rest assured they would be supporting their local dairy farm neighbors by purchasing either Mayfield or Fieldcrest brands at a Dollar General store.  Many dairy farm families and their friends and neighbors shopped at Dollar General because they knew the chain supported their farms.  This grass-roots promotion by the farmers themselves, who knew retail brands were a means of connecting their farms with a consumer sale, sent many customers to Dollar General.  Those farmers will now be sending those consumers to other retailers.

This Dollar General move ultimately means local milk from East Tennessee dairy farms, processed at the Mayfield Dairy plant in Athens, has lost a significant amount of retail shelf space in the immediate area.   Sources, who asked not to be identified, said the milk will still have a Dollar General home, but will be processed and packaged in Athens, then hauled to a warehouse in the Montgomery, AL area, for distribution in the coastal southeast.

Dollar General has now built 5 of a projected 17 regional distribution centers for refrigerated and fresh products.  Those distribution warehouses will serve as hubs in which Dollar General will supply their own stores, instead of relying on Direct Store Delivery (DSD) from various vendors and other regional food distributors.

Atlanta DG Fresh Warehouse will serve East TN:   Up until now, Dollar Generals in East Tn, North Georgia, and SW Virginia had received their milk deliveries directly from Mayfield trucks, arriving 2-3x a week.   Beginning this June 2020, they will receive milk from a DG Fresh warehouse located in the Atlanta area.  That warehouse will receive packaged milk from the Pet Dairy Plant at Spartanburg, SC, which does buy milk from southeast farms, just generally not Tennessee farms.

Change was underway before the Dean Foods bankruptcy:  Both Pet and Mayfield were previously owned by Dean Foods, but as of May 1st, are now owned by Dairy Farmers of America, Inc, the nation’s largest milk cooperative.  The Dollar General plan was initiated in the latter half of 2018, and was well underway before the Dean Foods / Southern Foods Group, LLC Chapter 11 bankruptcy was  filed in November of 2019, and long before the DFA purchase of Mayfield, Pet and other Dean Foods operations.

So, what’s in store for Dollar General dairy cases?  Here’s a sampling of what’s being seen thus far (as of June 19, 2020).  The changeover isn’t quite complete, and it hasn’t been determined how wide a geographic area this will affect. At this time, it’s unknown how Dollar Generals in the middle TN area, which has been served by Purity and its private Dairy Belle label, will be affected.

Point of Pride now gone for East Tn Farmers:  Many dairy farmers in East TN were very happy that Dollar General carried the Mayfield and Fieldcrest brands, and many shopped at Dollar General for that very reason. After all, it was a Tennessee-based company carrying a highly nutritious product that was produced on Tennessee farms. And that milk not only affected dairy farms, it was a means of connection for other farms who grew grains and hay that went to feed those Mayfield cows. That intense in-state connection has now been broken by a Dollar General corporate decision for ‘efficiency’ for Dollar General.  Farmers may understand it, but it doesn’t make it any less painful for them to not be able to make that connection with a product on a shelf.

The ‘short-description’ of the new ‘milk domino game’ type of distribution:

  • Milk, largely from farms in the Carolinas and NW Georgia, will be processed at the PET plant in Spartanburg, SC, then shipped to a DG Warehouse in Atlanta, for distribution to DG stores in GA, East TN, and as far west as Birmingham AL. (there might be slight variations in the distribution territory).
  • Milk from East TN and North Georgia farms will be processed at Athens, TN, packaged in cartons wearing the Mayfield and Clover Valley brands, then shipped to Montgomery, AL for distribution in the Coastal South.
  • It’s not yet known how this switch will affect FL, VA, and KY and areas farther west.
  • Observation: As Covid-19 panic buying ensued in March and April, Dollar General stores in the southeast experienced milk shortages like grocery stores.  However, some of the shortages in DG were also likely due to DG personnel getting adjusted to this new distribution schematic.  Even this week, there have been some very empty Dollar General coolers, particularly a couple of days after a delivery.

But above all, Dairy Farmers in the South do appreciate everyone who buys any of these southeast brands, and we appreciate Dollar General for buying milk from southeast farms!

Photos tell the story:

The Changes in Chugs in East TN (the ‘drop in and get it to go cause it’s local’ size):

17_Dollar_General_Changes_Chugs_June_20

GALLONS:  Some Comparisons of the new and previous in East TN:

17_Dollar_General_Gallons_Fieldcrest_Clover_Valley

PLANT CODES:  How we know where the milk was processed (most farms in the southeast know where the farms are) along with a note about the “Best By” date:

17_Dollar_General_Codes_Dates_TN

 

History of DG Fresh Implementation, and Background:

Dollar General has over 16,000 stores, and approximately 5,000 are now receiving goods from their DG Fresh Perishable Goods warehouses.  The company hopes to be nationwide with this effort within 3-4 years.  Here’s a progression:

Mar 15, 2019: Dollar General Shifting to Self-Distribution of Fresh and Frozen; by Russell Redman for Supermarket News

  • The effort began in very early 2019 with 300 stores in the Northeast, distribution facility located in Pottsville, PA
  • CEO Todd Vasos said “DG Fresh will allow us to control our own destiny in fresh foods.”
  • Vasos: “In addition, self-distribution will allow us to offer a wider selection of our own private brands to provide our customers with even more compelling value. Overall, we expect DG Fresh to allow us to do a better job of tailoring our product selection to fit the needs of our customers, particularly in rural areas.”

March 19, 2019:  Dollar General Brings Perishables Distribution In-House, Will Open 975 New Stores in in 2019, by Glenn Taylor, for Retail Touch Points

Aug 29, 2019: Dollar General Encouraged by DG Fresh Rollout,by Ron Ruggles for Supermarket News

Aug 29, 2019: Dollar General Expanding DG Fresh to Fourth Distribution Center, posted at Produce Blue Book

  • From one warehouse in PA in Jan of 2019, then one in NC and GA during the spring and summer of 2019,  adding another in Indiana last fall

Dec 6, 2019: Dollar General to open 5th Warehouse in Fresh Distribution Overhaul  by Emma Cosgrove, Supply Chain Dive

17_Dollar_General_Changes_East_TN_SE_3c3

Dean Foods (Estate) Makes Payment of April Settlement Checks to Previous Dean Independent Producers

20_May_Dean_Foods_Settlement_Payments_June_8_A

UPDATE – JUNE 9th, 2020:  Southeast area farmers, previous Dean Independent producers, report that they have received funds for their April Settlement milk checks via electronic deposit into their bank accounts.   This action follows several letters from producer organizations both to the Court and to the Committee for Unsecured Creditors.

Please scroll for letters from Zippy Duvall, President of the American Farm Bureau Federation, and H. Barlow, Executive Secretary of the Kentucky Dairy Development Council (KDDC), which were sent to the Court. 

The Pennsylvania Milk Marketing Board was also active in the process to recover those payments to producers. Read more about their efforts here.

On behalf of the (former) Dean independent producers, we say “THANKS” to the Honorable Judge David Jones, the Court, Dean Foods estate officials, and to all who advocated on their behalf.

At this time, it is not known if dairy co-ops or the FMMO Producer Settlement Funds have received the balance of the funds owed to them by the Dean Foods Estate.

 

Letter from Zippy Duvall, President, American Farm Bureau, to the Court and Dean Foods (Estate) Officials

28_AFBF_Dean Letter_20_1b

28_AFBF_Dean Letter_20_2b

Letter from H. Barlow, Executive Secretary, KDDC, to the Court:

9_KDDC_Barlow_Letter_Dean_Estate

 

 

 

The story as first reported:

 

Payments to Farmers Late at Best, in Question for the Future

A May 13, 2020 memorandum from USDA-Agricultural Marketing Service, Appalachian Order, reads as follows:

TO:  Regulated Handlers

FROM: Harold H. Friedly, Jr., Market Administrator, F.O. 5

SUBJECT: Producer Settlement Fund Non Payment

On May 12, 2020, Dean Foods, DIP (debtor-in-possession), a regulated handler on the Appalachian Order, did not pay its obligation to the Producer Settlement Fund (PSF) as required by Federal Milk Marketing Order regulations. USDA recognizes the significance of this non-payment and is continuing to work with the Department of Justice to attempt to recover these monies as part of the Dean Foods, DIP, estate.

When payment is not made to the PSF, Federal Milk Marketing Order regulations prescribe procedure for how the remaining marketwide pool monies should be distributed to handlers (1005.72).  When PSF monies are not sufficient to make full payments to handlers, the Market Administrator shall reduce uniformly such payments to handlers due a payment from the PSF.

Accordingly, for milk pooled on Order 5 during April 2020, payments to handlers from the PSF have been reduced pro rata.  Should the PSF payments be recovered from Dean Foods, DIP, Estate at a later time, full payments will be distributed.  In the meantime, Federal Milk Marketing Order regulations provide for reduced payments to producers from regulated handlers who did not receive full payment from the PSF (1005.73(c)). Consequently, the enforced minimum payments to producers will be at the pro rata amount.

USDA will continue to monitor the situation and work to assist the dairy industry. Additional information will be provided as it becomes available to all market participants. Please feel free to contact Jason Nierman, via nierman@malouisville.com, or (502) 499-0040, ext. 222, if you have any questions.

The memorandum also had this addendum included:

14_FMM0_5_Dean_Non_Payment_Southeast_Chart

This schematic explains workings of a Producer Settlement Fund:

14_FMM0_5_Dean_Non_Payment_Producer_Settlement_Diagram

News could not have come at a worse time:

From an industry viewpoint, this non-payment could not come at a worse time for the farmers themselves.

When monies are received by the Producer Settlement Fund, they in turn are paid back out to handlers (co-ops or agents), who then distribute the money to farmers, paying them for milk sold (see the diagram above).  This process is highly regulated by FMMO rules, and has proven to be predictable, and reliable for decades.

Farmers then use their money to pay bills to any number of agribusiness and service firms with whom they do business.   Since this process has been so reliable, most farmers have set-up automatic withdrawals to pay supply companies.  Farmers will now be dealing with any issues related to those automatic withdrawals and any repercussions due to lack of funds. Agribusinesses will lose money as well, and incur any number of extra costs.

Ravaged by a myriad of challenges due to Covid-19, farmers are facing financial stress of an untold magnitude, and many multi-generational farms with long histories of serving consumers are at risk of being lost. The mental health and fortitude of those farmers is a prime concern across the country, due to the stresses which were already in place. Many fear that this news could catalyze additional health issues in farm communities.

An industry insider, who asked not to be identified, said this Dean Foods payment to the PSF could normally be in a range from $160-$250 million, affecting dairy co-ops, individual farms and the communities they serve in many states.  (Note – this figure will be verified and updated if needed – Covid 19 has changed almost everything.)

 

PERPLEXING:  WHY did this happen given Chapter 11 processes?

This payment, which is a regular course of business in both a predictable amount and timing in getting farms and co-ops paid for milk,  had regularly been made by Dean Foods during the course of the Chapter 11 proceedings.

Therefore, it stands to reason that attorneys, accountants, and consultants representing Dean Foods should have budgeted and accounted for these payments as Dean Foods books were closed out over the course of the next few months. In the last months of the process, fluid milk sales were up substantially according to many sources, which should also have added to Dean Foods income.   (An email inquiry to an attorney representing Dean Foods in the proceedings has not received a response as of this posting.)

This gets even more perplexing since farmers were named as critical vendors in the early days of the Chapter 11 process.  Dean Foods officials filed motions, which were granted by the Court, to ensure that those payments were indeed accomplished. It was believed those financial obligations to farmers for products delivered would have been honored until the last payment was due.

Impact on an individual farm:  During this payment cycle, any single farm would be due payments from thousands of dollars to even hundreds of thousands of dollars, depending on the size of the herd.

POSSIBLE SOLUTIONS OR HOPE AHEAD?

At this time, this is a profound question with unknown answers.  Some of those answers might be:

  • Payment to Settlement Funds in all FMM Orders might come at one of the later dates in this payment cycle, being only a few days late
  • Payment to the Producer Settlement Fund might come later, as accounts receivable from product and property sales come into the Dean Estate
  • Payment to farmers might not come at all, which is a bitter pill to swallow at this juncture in history.

Whatever the answer is, farmer co-ops and individual farmers deserve that answer, and deserve it quickly.  Perhaps a projected payment schedule could be stated by the Dean Foods Estate officials.  Even if it’s a worst case answer, to know what that answer is will honor the dignity of earnest farmers who deserve an answer so they can make some possibly excruciating decisions,  instead of ‘the system’ tap dancing around farm families like performers on a Broadway stage.

According to the Dean Foods / Southern Foods Group, LLC Chapter 11 website, two additional Omnibus Hearings are scheduled for May 20 and June 24. 

One dairyman has often said “The dairy industry at the grass roots level is a dairy community full of really good, decent people who want to earn an honest living and contribute to their communities. However, those good people often have to endure some very wicked events.”

Dean Foods has historically paid its ‘independent producers’ well, which is much appreciated.  It is sincerely hoped that Dean Foods closes its chapter on a better note than this non-payment, and quickly rectifies this payment shortfall to farmers.  For the sake of the mental and physical health of many farmers and their families, lets hope they do just that.

 

14_May_Dean_Foods_Settlement_Payments_Not_Made_2

Dean Foods Sells Majority of Assets to Dairy Farmers of America (DFA) & Prairie Farms

 

1_Dean_Foods_DFA_Sale_3

 

DALLAS  – May 1, 2020  – Dean Foods Company (“Dean Foods” or the “Company”) today announced that is has completed the previously announced sales of substantially all of its assets, including the sale of the assets, rights, interests, and properties relating to 44 of the Company’s fluid and frozen facilities to subsidiaries of Dairy Farmers of America (“DFA”).

Dean Foods also announced that it has completed the sale of the assets, rights, interests and properties relating to eight facilities, two distribution branches and certain other assets to Prairie Farms Dairy. The Company also completed the sale of its facility in Reno, Nevada and its “Berkeley Farms” trademark and related intellectual property to Producers Dairy Foods.

These transactions follow a Chapter 11  process which began with a filing under the official name of Southern Foods Group, LLC, on November 12, 2019 in the US Federal Bankruptcy Court, Southern District of Texas, Houston. As early as the day the Chapter 11 was announced, DFA was named as the leading contender to purchase the company.  The Honorable Judge David Jones has served as  the presiding judge.

At the current time, three additional hearing dates are posted on the Epiq website which has been housing the dockets and filings of the proceeding.

  • May 11, 2020: Governmental Bar Date
  • May 20, 2020: An Omnibus Hearing
  • June 24, 2020: An Omnibus Hearing

The process has taken place during a time of monumental chaos in agriculture and dairy created by shifts in consumer behavior exacerbated by the Covid-10 Pandemic.  As consumers followed “Shelter At Home” guidance issued across the country, fluid milk sales rose astronomically for 2 months.  Although they have leveled off a bit, fluid sales are still at much higher levels than in recent years.

The stage seems to be set for  the new owners to capitalize on consumer sentiment to reinvigorate fluid sales of the Dean brands, which have risen considerably during the past two months.  It is not known if  the new owners will maintain,  consolidate, or alter brands as they assume the reins.

“We are pleased to complete these transactions which maximize value for our stakeholders and will enable substantially all of our businesses to continue operating and serving customers across the country,” said Eric Beringause, President and Chief Executive Officer of Dean Foods.

“Our team has put in considerable work over the last several months to find the right partners for our assets that would enable them to continue to succeed while preserving the most jobs possible and to ensure a smooth transition for our customers and partners.

The completion of these sales is a testament to our employees’ efforts. I also want to thank our entire team for their commitment and dedication to Dean Foods not only over the last several months, but over the past several years.  Their hard work has helped Dean Foods build and grow brands and products that customers love, and I feel fortunate to have had the chance to work side-by-side with this extraordinary group.”

The Company also announced that as part of the US Department of Justice’s (“DOJ”) approval of Dean Foods’ transaction with DFA,  DFA has entered into a Consent Decree with the DOJ under which DFA has committed to hold separate and ultimately divest the dairy processing plants located in DePere,WI, Franklin, MA, and Harvard, IL together with certain assets related to the operations at each plant.

Upon closing of these sales, Mr. Beringause has stepped down from his role as President and CEO.

As previously announced on April 4, 2020, the U.S. Bankruptcy Court for the Southern District of Texas (the “Court”) also approved the sale of Dean Foods facility in Miami, Florida to Mana Saves McArthur, LLC, for $16.5 million. The company anticipates completing the transaction early next week.

As previously announced on April 30, 2020, Dean Foods completed the sales of the Company’s Uncle Matt’s business to Harmoni, Inc., and of its Hilo facility and related distribution branches on the Big Island, Kauai and Maui, as well as a license to the Meadow Gold Hawaii brand name and related intellectual property, to MGD Acquisition, LLC.

Additional information is available on the restructuring page of the Company’s website, DeanFoodsRestructuring.com.

In addition, Court filings and other information related to the proceedings are available on a separate website administered by the Company’s claims agent, Epiq Bankruptcy Solutions LLC, at https://dm.epiq11.com/case/southernfoods/dockets, or by calling Epiq representatives toll-free at 1-833-935-1362 or 1-503-597-7660 for calls originating outside of the U.S.

Davis Polk & Wardwell LLP and Norton Rose Fulbright are serving as legal advisors to the Company, Evercore is serving as its investment banker and Alvarez & Marsal is serving as its financial advisor.For Court filings and documents:

To read more about the Department of Justice report – a posted news release:

1 May 2020:   Justice Department Requires Divestitures as Dean Foods Sells Fluid Milk Processing Plants to DFA out of Bankruptcy  – Department Also Closes Investigation into Acquisition of Other Dean Plants by Prairie Farms.

The DOJ news release closes with these words:

As required by the Tunney Act, the proposed settlement, along with a competitive impact statement, will be published in the Federal Register.  Any person may submit written comments concerning the proposed settlement during a 60-day comment period to Eric Welsh, Acting Chief, Healthcare and Consumer Products Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street NW, Suite 4100, Washington, DC 20530.  At the conclusion of the 60-day comment period, the U.S. District Court for the Northern District of Illinois may enter the final judgment upon finding it is in the public interest.

Sources: Business Wire, News Releases, and Industry Reports

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

0_1_30_Dean_Foods_Bids_Milksheds.jpg

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 hearing any objections and furthering the sale process.     Any objections to a Sale Order or a Sale Transaction must be filed by April 1, 2020 at 12:00 pm, CST.
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:
1_30_Notice of Bid Results_P1
1_30_Notice of Bid Results_p2
1_30_Notice of Bid Results_p3
1_30_Notice of Bid Results_p4
0_1_30_Dean_1270_Bid_Results_p5
0_1_30_Dean_1270_Bid_Results_p6

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

9_Oct_Dean_Foods_Beringause_IDFA_A

 

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.

 

9_Oct_Dean_Foods_Beringause_IDFA_A

Dean Foods: Earnings. Farms. Jobs. Communities. What’s Ahead?

7_Dean_Foods_Milksheds_Header_Q1_19_2_S
The Dean Foods Earnings Call, a webcast relaying financial news of Dean Foods, a publicly traded company, was held on the morning of Tuesday, May 7th, 2019.
The timeframe immediately before and after these publicly available Earnings Calls, for any company generally provide a wealth of information concerning the financial health and status of that company, along with various industry perspectives.
According to company information, Dean Foods is the “nation’s [US] largest processor and direct-to-store distributor of fluid milk.”  As such, any decisions made by the company will have a direct impact on local/regional dairy communities across the country, affecting many dairy farms and jobs within and related to the processing plants.
It can be said that Dean Foods is perhaps the company which is most supportive of the local and regional farm communities within a fairly close radius of each of its 58 plants.  Additionally, there are 19,000 local jobs in processing and distribution and related company functions at the plants.
Here are general takeaways from the Earnings Call – a grassroots perspective:
  • First: No really horrible news for farms or local business, or even Dean’s resulted from the Q1 call, which I consider a positive, given the company’s downward trending stock prices of late.
  • Second: Stock value was generally up for the day, with market share price at $1.75 at the time of close of business on May 7th.
  • Third: No immediate transitions or sales of the company were announced (as of that day), even though it is no secret the company is exploring options.  Whatever the company’s eventual decisions, there is no doubt that local communities and farm economies across the country will be impacted – but no one knows if that will be in a harmful or helpful manner at this writing. 
  • Fourth: The world of food in general – and dairy companies in particular – is fast-changing, so any news today may be very different a week from now.
Stockholders Meeting: The Dean Foods Stockholder Meeting occurred Wed, May 9th at 9 am, CDT.  The meeting is archived here if readers would like to listen in. There is a delay at the front of the meeting in the recording.
 
Prior to and following the May 7th Earnings Call: These Posts  (chronological)
  • May 6, 2019: Dean Has Got Milk but Few Growth Prospects as it Hunts for Buyer, by Lydia Mulvany and Katherine Doherty for Bloomberg
  • May 6, 2019: Dean Foods Falters from More Concentrated Milk Market – authored by Heather Haddon, for the Wall Street Journal:    (and in case you can’t get to the online edition, here’s a photo of the article as it appeared in print)
  •       5_WSJ_Dean_Foods_S
  • May 7, 6:58 am, by Seeking Alpha: Dean Foods Misses Q1 Estimates – notes that sales declined in 9% in Q1 2019, and to this blogger’s understanding, the comparison point is Q1 in 2018 (will verify). Remember, in 2018, the company still had branded shelf space in Walmarts in several states in the projected distribution radius of the new Walmart plant at Fort Wayne, Indiana.
  • May 7, 10:23 am (after the call): Dean Says It’s Turning the Corner with Dairy Drain Set to End – by Lydia Mulvany and Katherine Doherty for Bloomberg – authors note the report was a ‘mixed bag,’ stated the company’s bonds gained on Tuesday (the day of the call) after ‘tumbling since late February.’
  • Dean Foods Company SEC Filing – Current report (8-K) May 7, 2018 (Financial Statement)
  • A Transcript of the Entire Call – posted by Seeking Alpha – access at this link  (21 pages if you print, follow a link to an audio recording): includes the opening statement by Dean Foods officials, including CEO Ralph Scozzafava, and a Q&A Session with Financial Analysts  from well-known companies
  • Slides – played in conjunction with the Dean Foods officials portions of the call, includes graphs and charts further explaining the verbal points – access at this link

And then following the call:

May 7th, Afternoon:  From the Dallas News:  “Dean Foods posts Wider Losses Than Expected in first quarter amid Conversations with Potential Buyers.”

An article by Dom Difurio, a breaking news business writer for the Dallas Morning News, included these three statements of note:
  • “On a call with analysts frustrated with a lack of details around when the company could turn a financial corner, Dean Foods also reiterated that it’s looking at strategic alternatives to accelerate its business transformation and enhance its value.”
  • “When asked whether the company was in talks with any potential buyers for the company, Scozzafava said it’s possible the company could do nothing.
  • “We’ve been in conversations with some folks, and we’ll leave it at that . . . we are very open minded and exploring some things,”  Scozzafava said.

May 7th, Afternoon:  Dean Foods (DF) Reports Q1 Loss, Misses Revenue Estimates  from Zacks Equity Research, a financial publication.

“Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Food-Dairy Products is currently in the bottom 8% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.”
May 7, 2019 at 3:55 pm:   Dean Foods Needs an Activist Investor  
Posted at Seeking Alpha, authored by Holmes Osborne, of Osborne Global Investments
This is a blunt, tell-it-like-it-is perspective from a financial analyst’s viewpoint, who describes the company’s real estate and transportation assets as interesting. He also suggests some action items for the company to take in order to cause company value to rise.
With most of this blog’s readers in agriculture, it should be noted he suggests the company needs to widen its portfolio to include more plant-based or alternative beverages, or expand whey-protein production.
Parts of this article are a bit hard to read, but may be necessary to absorb in order to take action.
Also – take note, some of the $$$ referring to milk sales are not as impactful as he suggests due to market conditions of two different time frames, and some of his other statements related to agriculture show a bit of a lack of knowledge about grass-roots agriculture.
The Good News?  Osborne also suggests it may be time to buy stock, acknowledging it is risky at the moment.  The opening click title was  “Bottom-Fishing Investors, Snag Dean Foods.
May 8th, 2019, Morning:  “Dean Foods Sees Positives After a Quarterly Loss,” by Jeff Gelski for Food Business News.
  • CEO Ralph Scozzafava notes that a cost productivity plan and improvements in free cash flow provide optimistic things about the quarter
  • Scozzafava: “We believe we have passed the inflection point in our transformation, as many of the initiatives we implemented over the past 12 months are now beginning to take hold.”
  • Scozzafava (when asked about a potential sale):  “It’s very possible that we won’t do anything, and we’ll continue to execute the plant that we have, which we’re very happy with, and we’ll continue to make progress on it. “So look, we’ve been in conversations with some folks, and we’ll leave it at that.”
May 8th, 2019, 1:42 pm: “Dean Foods Seen Trading at Fair Value,” posted at Seeking Alpha and authored by Clark Schultz.
  • Notes this from Wells-Fargo Analyst John Baumgartner:  “The outlook features some positives (seq. EBIT improvement, positive FCF, new business wins), but we think weak volumes, expansive price gaps, and inflationary price basis to dairy costs maintain DF in a vulnerable position.”
  • “Wells-Fargo has a Market Perform rating and a target price of $2 on Dean Foods.”
May 9th: Stock closed at $1.65/share
May 10th, 2019, Afternoon:   “Why Dean Foods (DF) Stock Price Advanced Up to 5.76% Today”  by Samuel Moore for Find News
  • Moore observes that stock has an (average analyst) potential target price of $3.47 share, thus a potential to rise 98.29% increase from recent ranges of $1.57 to $1.71.
  • Trading volume was considered high
Dean Foods stock closed at $1.76 for the week of the Earnings Call, up 11 cents from a close at $1.65 on Friday May 3rd.
May 13th, 2019 (Monday):  Dean Foods Shares Up 11.4%”by Harvey Truce for Rockland Register.  Surprisingly,  Dean Foods stock rose 20 cents/share in light trading volume.   A midday report was posted by Ethane Eddington for the Press Recorder, “Dean Foods (DF) Add 4.5%, Cementing Place as Top Mover Today.”
May 13th, Market Close: Stock closed at $1.96/share, and traded as high as $1.98 during the day.
June 3rd, 2019:  (Monday) Now is the Time to Bet on Dean Foods Company’s Stock: by William Josephs for Finch News, an online publication.
June 3rd, 2019:  Stock closed at $1.06.
June 5th, 2019  (Wed am):  Dean Foods Company (DF) Among Top Stocks to Watch Today:  by Denise Gardner, for Press Recorder
June 5th, 2019 (Wed, 1:34 pm): Dean Foods +13% after skirting with dropping below $1;    posted on Seeking Alpha by Clark Shultz
June 5th, 2019 (Wed):  Should Traders Take A Bit Out of Dean Foods Company?; by Kiel Taylor for US Post News
June 5th, 2019:  Stock closed at $1.22/share
June 6th, 2019: Stock closed at $1.22/share
June 7th, 2019, 8:44 am:  “Saputo takes a pass at Dean Foods”: Seeking Alpha news alert breaks news Saputo will not be acquiring Dean Foods, after earlier announcements Saputo was considering that acquisition.
June 7th, 2019, Midday: “Let’s Make some Money with: Dean Foods (DF) Company” – posted at Nasdaq News Updates, compiled by the NNU Team.  This article explains many of the terms and acronyms commonly used in financial reports about stock prices.
June 26th, 2019: America’s Biggest Milk Processor is Trading at Less than a Buck, by Lydia Mulvany and Katherine Doherty for Bloomberg.
June 26, 2019:  Dean Foods Stock closed at 95 cents / share  (Volume 2,552,000)
June 27, 2019:  Dean Foods Stock closed at 93 cents / share  (Volume 2,974,000)
June 28, 2019:  Dean Foods Stock closed at 92 cents / share  (Volume 4,959,000)
July 1, 2019: Dean Foods Stock closed at 93 cents / share (Volume 2,537,000)
July 2, 2019: Dean Foods Stock closed at 97 cents / share (Volume 2,264,000)
July 3, 2019: Dean Foods Stock closed at $1.07 / share (Volume 2,397,0000)
July 5, 2019: Dean Foods Stock closed at $1.10 / share (Volume 2,338,0000)
July 6th, 2019: Dean Foods Cut to “Sell” at ValuEngine, posted by Steve Reilly on Riverton Roll.
As those in the dairy industry know too well, this is an evolving story with lots of moving parts.  Look for additional updates as they become available.
And please keep in mind, this is mostly a chronicle or digest of information which has been published by other sources. This blog in no way suggests advice on taking actions either in the stock market or in a related business due to information published here.
7_Dean_Foods_Milksheds_Header_Q1_19_2_S

3 Southeast Dairy Events: Networks Working Together to Find Solutions

A Compilation of stories and news about 3 challenges affecting Southeast Dairy Producers:  Dean Foods, Maryland-Virginia and Piedmont

 Southeast Dairy:  In the News. Pushing Forward.
 
Introduction:
In the past two weeks, in a time of already depressed milk prices, there has been a three-fold challenge to dairy farms in the southeast.  Tennessee, Kentucky, Virginia, and North Carolina all have farmers affected, with varying degrees of uncertainty about their milk buyer futures.
To say these past days have been painful and a flurry of concern, high emotions, and rumor mills have resulted is an understatement, but yet, as the dust settles, some activity has encouraged some hope, and herd owners are beginning to look forward. Many are making decisions based on faith, and in a calm fashion based on what they believe best for their farm. Some of those farms are being public, while others are remaining cautious and quietly seeking answers behind the scenes.
Bright Spot? Yes!   One farmer asked if there was going to be any good news to share about this whole mess, and yes, actually, there are two:
First, phone calls, texts, and Social Media outcries have indicated loudly and clearly that consumers, government officials, fellow farm organizations, and economic development personnel are indeed concerned about preserving ‘local’ or ‘regional’ milk in their areas, and appear to be eager to learn how they can help accomplish that.
Hopefully, this newfound energy can be channeled for long-term purchases of local milk, from local farms.  Time will tell. Consumer outreach is going to have to continue.
The second is this:  We still have upwards of 40 herds (at least in TN) shipping to Dean. The company is still the largest volume buyer of ‘local’ milk in TN at its three plants.  Putting that in perspective, every Dean Direct herd in Indiana,  with the exception of one, received letters of notice. Several were herds well over 1000 cows.
Background:  The three part challenge:
1.) Dean Foods:  On Friday, March 2, news broke of upwards of 115 (tallies still underway) farmers in 8 states receiving 90-day termination notices of their supply agreements to Dean Foods plants.  10 Tennessee herds and 22-25 Kentucky herds were affected, with 25-27  in Indiana, 42 in Pennsylvania, 6 in the Carolinas, and a yet unknown number in New York.  Three plants in our area – at Athens, TN, Spartanburg, SC, and Louisville, KY are involved in the contract termination decisions.   Herd sizes in all states range from under 100 to 1000 cows; 20 Million pounds of Indiana milk will need to find a new home, or be removed from the already overabundant nationwide supply.
The herds involved were Dean Direct producers, meaning the farm itself had a purchase agreement with Dean Foods plants, instead of gaining access to the plant through a milk co-op. Farmers who were members of co-ops did not receive these termination letters.  All of this activity followed a Dean Foods Earnings Announcement on Monday, Feb. 26 in which the phrases such as ‘rescaling the supply line’ foretold of company wide cuts to come.
2.)  During:  the week prior to the Dean Foods announcement, rumors began to circulate that Piedmont Milk Producers, based in Blountville, TN and serving farms in TN, VA, and NC,  was restructuring their business. (Story below with a video link)
3.)  MD-VA Milk Cooperative with 1,500 members from Pennsylvania to Florida, and some in Kentucky and Tennessee, sent a Feb. 27th letter to all of its members that their advance milk payment checks, expected at the end of the month, would fall to levels of $12.62 cwt in FO 5 & 7, and $10 in FO 1 and $33. The company said it was working on financial restructuring and was renegotiating credit facilities. Over the weekend, sources have begun to indicate that the problems may have been resolved to some degree, but the company has not made any official announcements. With settlement checks expected within a couple of days, some direction will be known.
In the days since, there has been a flurry of activity following the first notices: meetings of  farmers, meetings of farmers and agribusiness personnel, meetings of dairy organizations, and frequent phone calls between many parties in positions to help chart a future course.  AgCentral has been busy assisting producers in a variety of ways in a three-state area. While we have yet to have a formal working group to address what can be done and how to approach a dairy future, a tremendous amount of contacts have been made information gathered.
Following is a “Digest” of some the best information available, in no particular order – stories mentioned include stories of the Watsons and the Stooksburys, as well as a couple of stories from Ohio which further outline the far-reaching affects of the Dean announcements:
1.) Dave Natzke, an experienced and respected dairy industry reporter, now with Progressive Dairyman, published a broad perspective view of the Dean Foods story, and puts it in context with the dairy industry and events across the country. In his article, Dave reports that the Walmart plant was originally announced as a $165 Million Dollar venture, and provides a glimpse into how the Walmart plant may source their milk.
2.) Sherry Bunting, Farmshine, reports with a focus on PA, where 42 herds lost Dean contractsShe notes hauling routes were a factor in terminated Pennsylvania herds, and reports the loss of a Food Lion contract, which was a factor which triggered a decision regarding 5 TN herds in Greene and Hamblen Counties.
From the article: “This affects all size herds and is not a large or small farm thing,” said [Reace] Smith, [of Dean Foods Corporate Communications.]  While she was unable to supply specific information about the farms that were terminated, she said the widespread volume adjustments at multiple plants across four Federal Orders was necessary do to the new Class I plant (Walmart) coming online this month and the loss of a contract through a competitive bidding process. (Food Lion).” 
It is the loss of that Food Lion contract, previously filled largely through a Carolina plant(s), which created a shift in milk hauling from plant to plant, and created an excess at the Dean/Pet plant at Spartanburg, SC, which had to be eliminated.  The milk from five (5) producers in Hamblen and Greene Counties in TN was being hauled to Spartanburg. Those producers are now searching for new markets or making decisions to sell cows.
Dewey Morgan, of the Daily Post-Athenian, in the hometown of the Mayfield plant,  cites these significant stats:
Regarding declining consumption and increased production: “Americans are drinking about 3 gallons less per person since 2010, and 11 gallons less than 1975, while every year, 350 Million more gallons of milk are produced than the year before.”
Amount of local milk: The Dean Foods plant in Athens ‘still sources 90% of our milk from Tennessee.’
The Watson Family: their stories on WVLT-TV and on the Knoxville News-Sentinel website:
The Watsons, who farm near Sweetwater, TN, were one of the southeast TN farms who received 90-day notices.  The senior generation is Robert and Rosemary Watson (mom and dad), who farm with their sons Josh and Caleb.  The family is known for being extremely generous members of their community.  Both Josh and Caleb have been featured in news stories in Knoxville, TN media:
  •  Josh: From WVLT-TV, a story and video clip: Josh states that he doesn’t entirely blame Dean Foods. He adds: “there’s a lot of jobs that revolve around the dairy – it will hurt them.”
  • Caleb: Both a video and a photo album have been posted at the Knoxville Sentinel website. Caleb notes the family will continue to look for a milk buyer, and will look at other options to diversify, he says they will survive.
  • Front Page: The Knoxville News Sentinel published a front page story featuring Caleb on Tuesday, March 13.
Piedmont considering new business structure and how the company operates: story on Knoxville WBIR-TV
  • Brant Stooksbury, and his father Brian in Jefferson County, currently ship their milk through Piedmont Milk Sales, with offices at Blountville, TN. Piedmont, who represents farms in Northeast TN, Virginia, and North Carolina (the great majority are in NC) is making business changes.
 
Farm & Dairy:  Provides additional details on  WalMart distibution
WKBN-TN at Waynesboro, Pennsylvania – a video story describing some of the trickle down effects.
Ongoing:  This story will continue to evolve over the next few weeks, and spring crop work is already cranking up.  We know this challenge is great, but this region has overcome challenges before: at this time 25 years ago, many of us were digging out from a record blizzard, and some went without power for days. 27 years ago, in February of 1991, 400 herds received notices of a Pet bankruptcy, and lost a month’s worth of milk payments, along with having to scramble to find new milk handlers – there were no 90-day notices.
No doubt, our dairy industry is changing, but we have proven we can survive.
P.S.   Rod Carmichael has scheduled a complete herd dispersal for April 27.  Please mark that date on your calendars and keep Rod and Donna in your thoughts.

 

 

A Milkshed of a TN Dogwood Winter

We’re back!

After a hiatus that was longer than it was meant to be; Milksheds Blog is back up and running. This post isn’t going to be real complicated –  just a quick reminder of what a milkshed is – courtesy of a cup of hot chocolate!

Today, in East Tennessee, despite sunny skies, we woke up to a rather chilly morning in our ‘Dogwood Winter’  – freeze and frost warnings were a forecaster’s Sunday morning hymn!

00_Dogwood_Winter_Milksheds_3134_F

And after church, there was still a chilly undertone, and a cup of hot chocolate was the perfect answer to warming my bones.

My general definition of a milkshed is “all of the elements that come together to bring any glass of milk or other dairy product from the cow to the consumer.”    The picture below is a ‘snapshot’ of almost everything in the economic chain that came together in that one very delicious cup of hot chocolate.

00_Milkshed_DairyPure_AgriVoice_F

In this area, Dean Foods has a big footprint, and the ag community is so glad to have them in East Tennessee and North Georgia, bottling under the national Dean brands of DairyPure and TruMoo, the beloved regional brand name of Mayfield, and several private labels for regional grocery chains and big box retailers.   The direct jobs at the processing plants in the Athens, TN and Braselton, GA communities are important to economic developers in each of those townships.

And the pride that is found regionally in that Mayfield brand and those plants can’t be measured!

But not often considered is the much wider impact those milk plants have as they drive the farming industry in this geographic corridor.  There are hundreds of dairy farms and thousands of cows that have a purpose and are sustained because of those milk plants.  And extended from that, hundred of row crop and hay farmers grow grains and hay that get milled into feed for those dairy herds. Even farmers outside the area benefit, because commodities find their way to feed mills in the area to get blended into TMRs for  those cows.  At some point, maybe some numbers can be put to that, sequence of farm economic events, but that will wait for another day.

I would be remiss if I didn’t mention there are several other milk plants within a 150 mile radius that utilize ‘local’ milk, but we’ll discuss them on a future day.  Today, DairyPure was in my fridge, and thus in my hot chocolate.

As for the hot chocolate mix – I bought it because of the ‘milk bottle’ container originally, but wow, is it great!  It is made by Burnham & Mills in Vermont – if you’d like to order, try clicking on their name.

Milk is white, and looks simple.  But a milkshed can be far more complicated.  We’ll explore more – after I finish that cup of hot chocolate mix!  These chilly days won’t last long!  Until next time – drink a few gallons of milk in your milkshed!