DALLAS — Despite ample raw material supplies driven by the increased production of fluid milk, Dean Foods Co. was not able to generate a profit in the year ended Dec. 31, 2015. For the year, the company recorded a loss of $8,508,000, which compared favorably to the loss of $20,296,000 the company recorded a year earlier.
Company sales also fell in fiscal 2015 to $8,121,661,000 from $9,503,196,000 in fiscal 2014.
Despite the results, company management expressed optimism about the market for fluid milk products and dairy products in fiscal 2016 in a Feb. 22 conference call with financial analysts. For example, the company is benefiting from dramatic raw material price declines. During the fourth quarter of fiscal 2015, ended Dec. 31, Dean Foods paid an average of $16.34 per cwt, a 31% decline from the fourth quarter of fiscal 2014. On a year-over-year basis, the cost of raw milk declined 30% for the company. Management projected the cost of raw milk will decline 11% during the first quarter of fiscal 2016 compared to the same period of the previous fiscal year.
Throughout 2015, the company said it worked diligently to manage brands at retail. Within the grocery channel, Dean Foods fluid milk brands averaged $3.60 per gallon.
Dean Foods also remains challenged as it attempts to compete with a range of new and established products in the beverage category.
|Gregg Tanner, c.e.o. of Dean Foods|
“The declines in our fluid milk products were largely due to private label losses from a few large-format customers and represent a 3.6% year-over-year decline,” said Gregg Tanner, chief executive officer, during the conference call. “Specifically, within large-format private label white milk, volume in Q4 declined 9% year-over-year. Across our other non-fluid milk product categories, year-over-year volume declines were largely offset by a more than 11% increase in our ice cream volume performance. On a full year basis, total volumes for all products declined approximately 3% to 2.6 billion gallons.”
On the volume front, Mr. Tanner said there is reason for optimism, noting that data from Information Resources Inc. show fourth-quarter fluid milk sales experiencing a 1% decline year-over-year.
“This marks the best category performance at retail going back through at least 2011,” he said.
New product introductions will play a key role for the company as it attempts to gain momentum heading into fiscal 2016. In addition to extending its Dairy Pure and TruMoo brands into the lactose free and calcium plus segments, respectively, the company has a relatively long list of new product introductions on tap.
“…We’ll continue to drive new distribution of our DairyPure products, including fluid milk, half-and-half, and whipping cream,” Mr. Tanner said. “While product line extensions are important, entering growth categories is equally important. Through a long-term partnership with the Caribou Coffee Co., starting in March, we will launch Caribou iced coffee in a ready-to-drink coffee space.
“Building off our strong ice cream performance this year, we have made significant formulation upgrades to our ice cream brands and made investments in our ice cream innovation pipeline to meet evolving consumer needs. Our commercial organization has a sharp focus on volume growth through innovation and increasing distribution points in customers and channels with products of attractive margin profiles.”
Continuing to reduce logistics costs also will be a focus for the company.
“ … The things we’re really focused on are filling up the trucks and, secondly, frequency,” Mr. Tanner said. “We have to continue to drive frequency as we de-lever with the volumes we have to change our frequency of delivery to our customers.”
In addition, Mr. Tanner said the company is evaluating the number and placement of its “distribution points” to ensure they are located in optimal locations to service customers.
During the fourth quarter of fiscal 2015, Dean Foods earned $18,480,000, equal to 20c per share, an improvement when compared with the same period of the previous year when the company earned $5,277,000, or 6c per share.
Fourth-quarter company sales fell to $2,022,500,000, which compared with the previous year when sales totaled $2,395,007,000.