QUOTE AND NEWS
Market Intelligence Center  Jul 15  Comment 
For a hedged play on Dean Foods Co (DF) MarketIntelligenceCenter.com’s patented trade-picking algorithms selected a Dec. '14 $17.00 covered call for a net debit in the $15.81 area. That is also the break-even stock price for the covered call....
Market Intelligence Center  Jul 14  Comment 
After Friday’s trading in Dean Foods Co (DF) MarketIntelligenceCenter.com's patented algorithms uncovered a trade that offers a 8.90% return or 17.38% on an annualized basis (for comparison purposes only), while providing 10.60% downside...
newratings.com  Jul 14  Comment 
DGAP-DD: DF Deutsche Forfait AG english Notification concerning transactions by persons performing managerial responsibilities pursuant to section 15a of the WpHG Directors' Dealings notification transmitted by DGAP - a company of EQS...
Forbes  Jul 11  Comment 
Looking at units outstanding versus one week prior within the universe of ETFs covered at ETF Channel, the biggest outflow was seen in the First Trust Consumer Staples AlphaDEX Fund (FXG), where 9,200,000 units were destroyed, or a 20.6% decrease...
SeekingAlpha  Jul 11  Comment 
By SA Editor Miriam Metzinger: Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday July 10. Dean Foods (DF) Will Do Your Portfolio Good. Other stock mentioned: WhiteWave Foods (WWAV) Cramer thinks the...
TheStreet.com  Jul 11  Comment 
Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener. NEW YORK (TheStreet) -- Here are some of the hot stocks Jim Cramer talked about on Thursday's Mad Money on CNBC: Here are some of the hot...
TheStreet.com  Jun 24  Comment 
NEW YORK (TheStreet) -- Dean Foods Co. has been subpoenaed by the U.S. attorney office in Manhattan for documents relating to the food and beverage company's spin-off of its White Wave Food subsidiary in August of 2012, the New York Times...
Benzinga  Jun 24  Comment 
Walgreen Co (NYSE: WAG) fell 2.35% to $72.00 in pre-market trading after the company reported weaker-than-expected fiscal third-quarter earnings. Shire plc (NASDAQ: SHPG) shares declined 2.04% to $222.76 in pre-market trading following New York...
New York Times  Jun 24  Comment 
The food company has been asked to supply documents to the investigation involving the golfer Phil Mickelson and the gambler William T. Walters, according to people briefed on the matter.
Clusterstock  Jun 23  Comment 
The Wall Street Journal, citing a person familiar with the matter, is reporting that Dean Foods was subpoenaed in recent weeks by authorities seeking information in connection with the insider-trading investigation of Carl Icahn, Phil Mickelson,...




 
TOP CONTRIBUTORS

Dean Foods (NYSE:DF) is the largest processor and distributor of milk and other dairy products in the U.S., with products sold under more than 50 familiar local and regional brands and a wide array of private labels.[1] As such, the company is highly dependent on milk prices, which have nearly doubled since 2002, when the Cooperatives Working Together (CWT) dairy farm group put initiatives in place to control dairy prices. Prior to 2002, the price of raw milk had been regulated by the government at around $9.90 per hundred pounds. In 2008, however, the USDA predicts raw milk will be between $18 and $19 per CWT. As a result, Dean Foods' gross and net margins may recede.

One trend that has helped boost the company's fortunes in the face of increased dairy prices has been its WhiteWave Foods group, which focuses on organic dairy and soy products. With the Natural & Organic Foods Consumption on the rise, this segment has been performing strongly for the company.

Company Overview

Dean Foods manufactures and distributes dairy food products to retailers, distributors, foodservice outlets, schools and governmental entities across the United States. Both the Dairy Group and WhiteWave Foods are heavily dependent on its main customer, Wal-Mart Stores (WMT), which accounted for 21% of the Dairy Group’s 2009 net sales.[2]

Both the Dairy Group and WhiteWave Foods use Dean’s extensive direct store delivery system, or DSD, which transports products from processing facility to customers’ stores via refrigerated trucks. Dean’s ownership of such an expansive DSD system has made it the only national dairy beverage company in the U.S.

Business Financials

In 2009, DF earned a total of $11.2 billion in total revenues. This was a decline from its 2008 total revenues of $12.5 billion. Despite the decrease in revenues, DF was able to improve upon its net income. Between 2008 and 2009, DF's net income increased from $184 million in 2008 to $228 million in 2009.

Business Segments

DF breaks its operations into two segments: i) Dairy Group, and ii) WhiteWave Foods.

Dairy Group (76% of 2009 total revenues)[2]

The Dairy Group manufactures, markets and distributes a wide variety of branded and private label dairy case products, including milk, creamers, ice cream, cultured dairy products, juices and teas to retailers, distributors, foodservice outlets, educational institutions and governmental entities across the United States. In 2009, this segment earned a total of $8.5 billion in total sales.[3]

WhiteWave Foods (24% of 2009 total revenues)[2]

The WhiteWave operation (“WhiteWave”) manufactures, develops, markets and sells a variety of nationally branded soy, dairy and dairy-related products, such as Silk soymilk and cultured soy products, Horizon Organic milk and other dairy products, and The Organic Cow organic dairy products, among others. In 2009, total sales for this segment were $2.7 billion.[3]

Key Trends and Forces

Heavy dependence on Dairy Prices (US)

The minimum price of raw milk is regulated in most parts of the country by the government at $9.90, but ever since Cooperatives Working Together (CWT), a dairy farmers group, put into place initiatives in 2002 to control milk supply by retiring herds, milk price have shot up.[4] Since raw milk is the primary raw material used by Dean’s Dairy Group, this increase in prices has hurt the company's profitability, especially since per capita demand for milk products in the U.S. has decreased and total demand for milk products has stayed constant. Increasing milk prices increases Dean’s cost of sale and cuts into their total operating income. The Dairy Group generally increases or decreases the prices of its fluid dairy products on a monthly basis in correlation to fluctuations in the costs of raw materials.

The rise of Natural & Organic Foods Consumption

Because of the increasing popularity of natural and organic foods, WhiteWave Foods has been Dean's source of growth the past few years. Especially in the organic milk market, demand rose dramatically due to a large increase in the supply of organic milk, which is a double-edged sword for Dean.

  • On one hand, limited organic milk availability in the past had resulted in WhiteWave's inability to meet consumer demand since cows take three years to be converted from regular to organic cows. Lowering organic milk prices will also cause prices to converge with higher regular milk prices, increasing demand for organic milk products.
  • However, the Department of Agricultures’s organic policy changed for one year in 2007, allowing cows fed on 80% organic feed and 20% conventional to be deemed organic (differing from its usual requirement of 100% organic feed), which increased the organic milk supply by as much as 70% (compared to its typical 20% growth).[5] This has led Dean to revise its earnings forecast downwards as it must lower prices due to the over-supply of organic milk in order to keep its leading market share.

Rising petroleum prices

Dean delivers most of its products through its extensive Direct Store Delivery system, and higher diesel fuel prices increases delivery costs. In addition, the Dairy Group's secondary raw material after milk is resin, a petroleum-based product used to produce plastic bottles, and an increases in petroleum prices will affect resin prices as well.

Competition

Although Dean Foods is the largest producer and distributor of dairy products in the United States, it face main competition from larger companies like Kraft Foods (KFT), Nestle (NSRGY), Dairy Farmer of America(DFA) and Groupe Danone (DA), many of which produce a variety of food and beverage products.

Kraft Foods (KFT) only derives 55% of its sales from dairy and 27% from beverages, and Nestle competes with Dean only in the coffee creamer and milkshake businesses in addition to having a small market share in the U.S.

Organic Dairy Market Share

Deans' products had a dominant shares of the milk and soy drink markets as of 2006; Silk brand had captured 70% of the soy milk market and Horizon Organic had 60% market share in the organic milk sector. As more beverage companies with bigger budgets move in to compete, Dean must formulate new marketing and product development strategies to counteract the competition.

References

  1. DF 10-K 2009 Item 1 Pg. 1
  2. 2.0 2.1 2.2 DF 10-K 2009 Item 1 Pg. 2
  3. 3.0 3.1 DF 10-K 2009 Item 1 Pg. 3
  4. "What is CWT?"
  5. Cox, Jeff. "Organic milk price war." CNN Money, Jun 25, 2007 <www.cnnmoney.com>.
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