Dean Foods, the nation’s number-two milk producer behind Nestle, continues to shutter businesses in cost-cutting moves. The latest Dean Foods plants to close were in Pennsylvania and Massachusetts. Milk Business Dot Com says supply-and-demand economics appears to be the driving force behind the downsizing.
U.S. milk production is continuing to climb as the demand for fluid milk wanes. That’s been hard on Dean’s bottom line as the company reported a year-over-year eight percent drop in gross profit during the fourth quarter of 2017, as well as a four percent drop in the first quarter of this year. Company share prices have dropped more than 50 percent in the last 12 months.
Earlier this year, Dean also notified more than 100 producers that their milk contracts would be terminated on May 31. At the time of the announcement, Dean Foods cited a “surplus of raw milk at a time when the public is already consuming less fluid milk.” When the contract announcement was made, Dean Foods also acknowledged that more consolidation was on the way.