- Borden Dairy filed for bankruptcy late Sunday, becoming the second major dairy processor to do so in the last few months. Dean Foods filed for bankruptcy in November.
- Tony Sarsam, Borden's CEO, said in a company statement the milk supplier will use the bankruptcy process to reduce its debt load. It will continue normal business operations during the reorganization. "The company continues to be impacted by the rising cost of raw milk and market challenges facing the dairy industry," Sarsam said in a press release. "These challenges have contributed to making our current level of debt unsustainable."
- Sarsam said Borden, founded in 1857, is "EBITDA-positive and growing" — a reference to earnings before taxes, interest, depreciation and amortization. "We must achieve a more viable capital structure," Sarsam said. "This reorganization will strengthen our position for future prosperity."
Just two months after the country's largest dairy producer Dean Foods filed for bankruptcy, Borden is following suit — a reflection of the mounting challenges facing milk processors across the U.S.
According to Borden's CEO, there were signs things were improving for the company financially, but ultimately its debt proved to be too much. For Borden, cutting its debt load, and the interest that it pays on that obligation, can free up cash to invest in its business, which is facing its own share of challenges.
Milk companies like Borden have struggled in recent years as falling milk consumption, increased popularity of teas and sport drinks, and rapid growth in plant-based options have siphoned away business. In addition, retailers including Kroger, Publix and Walmart have invested in milk processing and bottling facilities — reducing how much milk they purchase from suppliers, including Borden.
Sarsam, who has more than three decades of experience in the food industry working for companies including PepsiCo and Nestlé, wasted little time in trying to rejuvenate Borden after taking over in March 2018. Within weeks, he added a head of marketing and hired a research and development team.
"The brand, it was asleep," Sarsam told Food Dive last summer. "There was not external communication or marketing, not even really a lot of work to keep labels or point of sales fresh."
Borden once had a presence in all 50 states. As of last summer, it offered 35 products in parts of the Midwest, South and Southeastern U.S.
Unlike Dean, which has been in talks to sell itself to cooperative giant Dairy Farmers of America, Borden is expected to continue operating as a standalone company. One major advantage Borden has is that it is a regional dairy operator. Regional dairies tend to benefit from their local roots and deep connections with multiple generations of consumers.
But while a smaller footprint, improved balance sheet and lower debt payments could buy Borden some time, the dairy industry as a whole remains under pressure. If current trends continue to worsen, it could put further pressure on Borden and other competitors, prompting more companies to file or bankruptcy or liquidate.
To be sure, there are bright spots within dairy. Whole milk and products with value-added options such as grass-fed, hormone-free, lactose-free, organic or non-GMO resonate with consumers. These value-added options with higher margins explain why ultra-filtered Fairlife milk, produced and distributed in a joint venture with Coca-Cola, and New Zealand's a2 Milk, whose product lacks a protein that can cause stomach discomfort, have been successful.
Borden has responded to shopper demand by replacing high fructose corn syrup in its chocolate milk with sugar — a change that is more expensive, but one the company claims consumers prefer. It's also making new milk products, including one with 50% more protein, one that is lactose-free, and a high-nutrient and no-added-sugar drink for kids. Last summer, Sarsam said Borden had no plans to enter the plant-based space using the iconic name synonymous with dairy products, but he wouldn't rule it out in the future under a different name.
As of now, Borden appears intent on following through with its current product offerings as it navigates bankruptcy — albeit with a stronger balance sheet. Borden could decide to focus more of its innovation on trendy products such as plant-based or ultra-filtered milk, but it's likely that given its status, the company will be cautious to invest in these types of products. The risk is that by the time Borden does, it's competitors, which are also hungry to survive, will have entered these spaces on their own.