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:
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
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
Dec 6, 2019: Dollar General to open 5th Warehouse in Fresh Distribution Overhaul by Emma Cosgrove, Supply Chain Dive
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:
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.
At this time, this is a profound question with unknown answers. Some of those answers might be:
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.
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.
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:
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
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.
May 7th, Afternoon: From the Dallas News: “Dean Foods posts Wider Losses Than Expected in first quarter amid Conversations with Potential Buyers.”
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.”
A Compilation of stories and news about 3 challenges affecting Southeast Dairy Producers: Dean Foods, Maryland-Virginia and Piedmont
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).”
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!
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.
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!
MilkshedsBlog 