- Dean Foods completed its review of strategic alternatives — including a sale — and decided to continue operating independently.
- The Board of Directors, which has been studying the company for about seven months, felt the new leadership of Eric Beringause will "provide the best opportunity to enhance long-term shareholder value."
- The board touted the new CEO's leadership experience in the announcement. Beringause, who was appointed in July, said in a release he plans to increase focus on customers and continue "to execute on our cost-savings and supply chain productivity programs.”
With just about one month on the job, the pressure is on for Beringause to turn around Dean Foods' bottom line.
The dairy giant has struggled in recent years, facing competition from milk alternatives and plummeting sales. In an attempt to overcome these hurdles, the company has already cut costs, increased its borrowing base, replaced its CEO and turned to a strategic review in February. Since Dean's board concluded the review without any action, it seems like they are really betting this latest executive shift can change the negative trajectory. But it will likely be a difficult feat, given all of the efforts that Dean has already been making.
Although a newfound confidence in the top executive at the company is the stated reason for why the board decided to continue operating independently for now, it likely wasn't the only factor that led to this decision. The reason for staying independent could also have to do with its lack of interest from potential buyers. Reports that Montreal-based dairy company Saputo was interested in Dean were disputed. The Canadian CEO later said he wasn't interested.
Since a sale is out of the picture for now, Beringause will likely need to produce results fast, even though he just assumed the role. Dean's previous CEO Ralph Scozzafava had headed the company for only about two years, and was pushed out as the company continued to struggle. Dean, which owns TruMoo and DairyPure, has seen stocks decline almost 70% in the last year.
The board said in a release that Beringause's more than 30 years as a "transformational" leader in the food and beverage industry gives them confidence he will be successful in helping Dean.
Before taking this role, Beringause served as CEO of dairy products company Gehl Foods. During his three years in that position, the company expanded facilities and acquired California Natural Products. Beringause has also held various finance, business development, sales and marketing positions at companies including Nestlé ,Pillsbury and Nabisco Brands.
Since his most recent role was at another dairy company, Beringause likely understands the challenges facing the segment today. Farms and milk producers have been hurting as plant-based and other dairy alternatives sweep the industry. Dairy milk sales dropped 15% from 2012 to 2017, while non-dairy milk sales were up 61% over the past five years in the U.S., according to Mintel. Consumers said they are now buying both dairy and plant-based varieties of milk.
Dean Foods has also faced pressure from competition from large retailers' store-branded products. These private label dairies can undercut producers like Dean because losses can be absorbed elsewhere in the business. And retailers have been using low milk prices — sometimes even selling at a loss — to bring shoppers to their stores.
The company, which is the biggest milk producer in the U.S., has been trying to cut expenses to offset the declines. Last year, Dean Foods laid off 207 workers with the closure of two milk processing factories, ended more than 100 dairy contracts with the company to curtail how much milk it was purchasing and shuttered three other facilities. Beringause seemed to indicate in the release announcing the end of the strategic review that these cost-cutting measures will continue in order "to be more agile and cost-efficient in the marketplace."
Beringause could also look to further diversify its portfolio to boost its bottom line. As dairy continues to decline, Dean has started to branch out its investments in other beverages like water, juice and plant-based products. The company bought a majority stake in Good Karma Foods, which sells non-dairy milk and yogurt; purchased Uncle Matt's Organic, a maker of probiotic-infused juices and fruit-infused waters; and bought the retail ice cream business of Friendly's Ice Cream. Although these efforts haven't been enough so far, Dean could continue making outside investments and even turn to more dairy alternatives.
Dean has already been working an unsuccessful growth plan for several years now, so Beringause seems to have an uphill battle. Since Scozzafava only had two years to make waves in the company, the clock is ticking for Beringause to make significant changes. If not, the company could end up in the same place with another strategic review and a different end result.