QUOTE AND NEWS
newratings.com  Aug 22  Comment 
DF Deutsche Forfait AG: Auditor expresses adverse opinion on the separate and the consolidated financial statements for the 2013 financial year DF Deutsche Forfait AG / Key word(s): Statement 22.08.2014 19:31 Dissemination of an Ad hoc...
SeekingAlpha  Aug 20  Comment 
By Marshall Hargrave: Dean Foods (NYSE:DF) posted 2Q earnings that were a $0.14/share loss (above the $0.06/share loss consensus), but revenues did marginally beat consensus, coming in at $2.39 billion. Shares are down 9% over the last month....
newratings.com  Aug 18  Comment 
DF Deutsche Forfait AG: Release according to Article 26, Section 1 of the WpHG [the German Securities Trading Act] with the objective of Europe-wide distribution DF Deutsche Forfait AG 18.08.2014 16:34 Dissemination of a Voting Rights...
SeekingAlpha  Aug 15  Comment 
By Andy Batts: Dean Foods' (NYSE:DF) second quarter 2014 net sales came in at $2.4 billion, compared to $2.2 billion of net sales in the second quarter of 2013. Non-GAAP net loss in the second quarter of 2014 was $13 million, compared to $24...
TheStreet.com  Aug 12  Comment 
NEW YORK (TheStreet) -- Credit Suisse upgraded Dean Foods  to "outperform" from "neutral" and set an $18 price target. The firm said the company should benefit from lower dairy prices. The stock was up 3.16% to $15.68 in pre-market trading on...
TheStreet.com  Aug 12  Comment 
NEW YORK (TheStreet) -- RATINGS CHANGES Abercrombie & Fitch was upgraded at Stifel Nicolaus to buy from hold. Twelve-month price target is $50. Company has an improved merchandise offering and is cutting costs, Stifel Nicolaus said. Sotheby's ...
SeekingAlpha  Aug 12  Comment 
By Andrew Sachais: Dean Foods (NYSE:DF), the nation's largest milk processor and distributor, reported a wider than expected quarterly loss on Monday, saying, "the balance of the year appears rocky." In the second quarter, Dean Foods lost $0.14...
Benzinga  Aug 11  Comment 
Dean Foods (NYSE: DF) reported disappointing second quarter results Monday morning due to declining milk sales and headwinds in the dairy sector. Dean Foods lost $0.14 per share, more than the $0.06 loss per share analysts were expecting....
SeekingAlpha  Aug 11  Comment 
By The Value Investor: Investors in Dean Foods (NYSE:DF) were not happy with the company's second quarter results. Continued high and volatile fluid milk costs squeeze margins and pressure volumes. Despite the impressive cost cutting efforts,...
Benzinga  Aug 11  Comment 
Midway through trading Monday, the Dow traded up 0.35 percent to 16,610.99 while the NASDAQ surged 0.93 percent to 4,411.47. The S&P also rose, gaining 0.60 percent to 1,943.12. Leading and Lagging Sectors On Monday, the energy sector proved...




 
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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