DALLAS — A series of one-time charges pushed the Dean Foods Co. to a loss during the first quarter of fiscal 2017. The charges related to such issues as closing the acquisition of Friendly’s Ice Cream; facility closure, reorganization and realignment; and the conclusion of litigation.
The loss for the quarter ended March 31 was $9,759,000 and compared unfavorably with net income of $39,201,000, equal to 43c per share on the common stock, during the same period of the previous year.
Sales for the quarter rose to $1,995,686,000 from $1,878,828,000 a year ago.
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| Ralph Scozzafava, c.e.o. of Dean Foods |
“In the first quarter, total Dean Foods volume of 633 million gallons across all products represents a 1.3% year-over-year decline, and was in line with our expectations,” said Ralph P. Scozzafava, chief executive officer, during a May 9 conference call with financial analysts. “Our branded white milk volume in all channels was down 4.3% year-over-year. The decline is predominantly driven by one region, mostly in the food and drug channels. In non-measured channels, our branded white milk volume is flat to prior year, and we continue to see growth in our flavored milk volume, up 4% year-on-year. In addition, we experienced an increase in ice cream volume of 19%, driven primarily by volumes associated with our Friendly's acquisition.”
Mr. Scozzafava added that the overall milk category during the quarter was soft. Referring to U.S.D.A. fluid milk sales data through February, he said there was a sales decline of 3.4%.
Dean Foods has several projects under way to reenergize earnings throughout the rest of the year. The company recently introduced DairyPure sour cream. Mr. Scozzafava estimated the size of the sour cream category to be $1.2 billion with a household penetration of 72%.
“…many current offerings are of average quality,” he said. “Some feel outdated, and with real little marketing, have failed to truly engage the consumer.
“…we believe DairyPure sour cream is a product that delivers on consumer needs, provides multiple points of differentiation versus other offerings on the shelf and can help boost our existing share in the sour cream category.”
Dean Foods also has begun working with the broker Acosta, Inc.
“For Dean Foods, this is a go-to-market strategy that’s focused on both effectiveness and efficiency to supplement our existing selling organization,” Mr. Scozzafava said. “In particular, we’re leveraging Acosta’s strong selling capability and expertise to help us grow our portfolio products going through customer warehouses.
“Enhancing this route to market is a critical step in gaining incremental distribution beyond our D.S.D. footprint, particularly with vertically integrated retailers. Our innovation launches to include Caribou Iced Coffee and TruMoo Protein are currently being handled by Acosta, and we expect to leverage Acosta on future innovation…”
During the fourth quarter of fiscal 2016, Dean Foods introduced an efficiency program it is calling OpEx 2020, which is targeting $80 million to $100 million per year in savings.
“…We’ve recently completed our total supply chain network design work,” Mr. Scozzafava said. “This is a comprehensive end-to-end study across our entire D.S.D. system. We’re assessing next steps right now, and believe the opportunity to further streamline our network and the efficiency that goes with that is robust.
“…We’re assessing our overall organizational structure to identify opportunities to be more capable, more efficient and cost-effective. We’ve recently implemented changes to our commercial structure, combining the expertise of Acosta, with a flatter internal D.S.D. selling organization. We expect to complete similar work across our supply chain before year-end.”
