Dive Brief:
- Dean Foods reported fourth quarter adjusted earnings of $33 million Monday, or $0.36 per share, a 371.4% increase year over year that beat Wall Street estimates. Revenue came in at $2.02 billion, a 15.8% decline from last year.
- For full year 2015, the company posted a loss of $0.09 per share on $8.12 billion in sales.
- The company expects to see first quarter adjusted diluted earnings of between $0.32 and $0.42 per diluted share.
Dive Insight:
A major milk surplus has sent milk costs plummeting to the benefit of milk and dairy producers like Dean Foods. As of last July, global milk prices had fallen 39% from a record high in February 2014 and were at their lowest level in five years at that time, according to United Nations data. In the most recent quarter, milk prices showed a 0.2% sequential decrease from Q3 2015 and a 31% drop from Q4 2014, according to a news release.
The USDA predicts these price declines to continue for the next three years before they stabilize (2018) and then another three years until they start increasing again (2021). However, fluid milk manufacturers continue to battle slowing demand and declines in per-capita consumption.
Dean Foods expects the "favorable commodity environment" to continue and contribute to sustained profits along with "the continuation of commercial and brand initiatives [and] diligent cost focus," CEO Gregg Tanner said in a statement.
To turn around falling revenue, Dean Foods has turned to branding initiatives, like last year's debut of DairyPure, the country's first national fresh white milk brand and a consolidation of the company's more than 30 dairies. The company is also relying on product innovation, including the release of TruMoo Calcium Plus, a more functional version of its TruMoo chocolate milk product with the on-trend addition of more calcium.
Dean Foods and other conventional milk producers feel the pressure from alternative dairy competition, including soy and almond milk products. WhiteWave Foods reported a 12.5% revenue jump for 2015 with a 29% increase from sales of plant-based foods and beverages and 18% bump for premium dairy products.