Dean Foods plans to close two milk processing facilities this fall — one in Illinois and one in Kentucky — and lay off 207 workers. According to letters the company sent earlier this month to state officials, 76 layoffs at Dean's facility in Newburg, Kentucky, will begin Sept. 7 and continue until Sept. 21, while layoffs of 131 people will start Sept. 14 and wrap up by Sept. 28 at Dean's plant in Huntley, Illinois.
The letters didn't give any reason for the closures, but the company's 2017 annual report cited by the Northwest Herald in Crystal Lake, Illinois, noted that Walmart's plan to open a 250,000-square-foot milk processing facility in Fort Wayne, Indiana, was a major factor.
"In connection with Walmart Inc.’s dairy processing plant in Indiana, we expect to lose approximately 60 million gallons of private label fluid milk volume beginning in the second half of 2018, which equates to approximately 100 to 110 million gallons annually," Dean officials wrote in the annual report.
Dean Foods has been struggling as consumer interest in plant-based milks and other dairy alternatives continues to grow. Add in the current oversupply of milk, declining prices, recent tariffs on U.S. dairy products — plus the new Walmart processing plant — and the writing appears to be on the wall for the country's largest milk producer.
Dean lost a big chunk of business due to Walmart's Indiana plant and was forced to notify more than 100 milk producers in eight states this spring that their contracts were being canceled. While Dean will continue to provide milk to Walmart stores outside the Midwest region, the company and its suppliers have taken a financial hit. Dean has been diversifying through investments in juices, waters and plant-based products, but apparently such moves haven't been enough to avoid plant closures and layoffs.
The plants in Illinois and Kentucky aren't the only facilities Dean is closing this year. The company announced in May that it would shutter the Garelick Farms manufacturing facility it owns in Lynn, Massachusetts, idling about 300 workers, and also the Meadow Brook Dairy in Erie, Pennsylvania, affecting 75 jobs. The Garelick Farms plant closure was blamed on declining milk sales, according to The Boston Globe.
Chances are that more tough days are ahead for Dean before things start to improve. Sales have slipped during the past several quarters, with the company's most recent earnings report showing a 0.8% net sales drop during the first quarter of this year and a net loss of $265,000. In 2017, shares fell by close to 50%, prompting a "right-sizing" initiative to reduce overhead that began last fall and was expected to realize $150 million in annualized savings by 2020.
Dean's second-quarter earnings are due to be released Aug. 7, so it should be clearer at that point how well the company's cost-cutting efforts are going and whether any further plant closures and layoffs are being contemplated.