Dean Foods sees Q4 earnings growth, but expects future milk volume declines

Dive Brief:

  • Dairy distributor Dean Foods Co. reported a 78% profit increase in its fourth-quarter earnings, with a profit of $32.8 million, or 36 cents per share, compared to $18.5 million, or 20 cents per share, for the year-ago period, according to a company release
  • Total volume across all products fell 0.8% to 653 million gallons, but the company's share of U.S. fluid milk volumes saw an uptick of 0.1% in Q4. Dean Foods said it expects dairy commodity inflation of up to 20% and an estimated 1% decline in total volume performance for Q1 2017. 
  • The dairy distributor reported adjusted earnings of $1.35 to $1.55 per share for fiscal 2017 and earnings of 12 cents to 20 cents a share for Q1. Last year, the company made adjusted earnings of $1.57 a share during the Q1 period. 

Dive Insight:

As dairy alternatives like nut and plant-based beverages continue to encroach on the milk space, Dean Foods' milk volumes will continue to feel pressure in 2017. As a result, the company has shifted its focus to branded milk products and ice cream offerings that yield stronger top-line growth. The company also united all of its white milk brands under one national brand, DairyPure, last year. It will be interesting to see how much this strategy will aid the company as traditional dairy products continue to fall out of consumer favor. 

The dairy distributor has also looked to the organic space to bolster its portfolio offerings and better reach consumers who care about the environment and their health. In November, Dean Foods announced a strategic joint venture with CROPP, the largest independent organic farmer cooperative in the U.S., allowing CROPP to use its selling and processing operations to produce Organic Valley products. This partnership gives Dean Foods 50% of Organic Valley's profit, the addition of a leading organic dairy brand to its product line and a new channel for future growth. However, this is not a sure method of growth; other players in the organic dairy space have seen profits slow.

The company has also recently seen a leadership change. Former EVP and COO Ralph Scozzafava succeeded Gregg A. Tanner as Dean Foods CEO and board member on Jan. 1, though Tanner will remain a company adviser through the annual stockholders meeting in May. Scozzafava has been with Dean Foods since 2014, but spent more than 30 years at companies including Wrigley and Campbell. His track record of growth and innovation will be key to continuing Dean Foods' path as consumers are starting to look away from dairy.

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Filed Under: Manufacturing Corporate Beverages