Dean Food Company Analysis Assignment Sample

Table of Contents

Company Overview..

Leadership Analysis.

Company’s current position.

Competitive analysis.

SWOT Analysis.

Financial analysis.

Dean food strategy and future actions.

Reference list

Dean Food Company Overview

Dean Food is the largest processor and store distributor of fresh milk and dairy product in the United States. It has 60 manufacturing facilities with more than 5000 truck fleet. The company is headquartered in Dallas Texas (Dean Food Company, 2020).

Leadership Analysis

Dean food leadership with the board of directors has reviewed strategic alternatives. The company’s future looks bleak with alternatives for the sale of the company. CEO Eric Beringause has decided on building long term shareholder value (Dean Food Company, 2019). The company has appointed the CEO on July 29 will use transformational leadership for the operating plan for improving business performance 

The company will leverage for private label capabilities and expansion for quality, safety, and service. The company is determined for agile and cost efficiency in the market place. The company it’s forward looking statement in SEC filing has stated its sole firm handling operations for business continuity

Company’s Current Position

The company in 2019 has improved low-cost access to capital for the operating plan. It has used a $450m account receivable for securitization facility. Dean’ s business is largely based on fluid milk and ice cream as the category that has resulted in major loss due to reliance on these products. The fluid milk per capita presence has reduced to 146 pounds (Dean Food Company, 2020). The company has filed for bankruptcy in the US Code (Chapter 11), for future development and performance. The leadership intends the consolidation of brines through the sale of assets. The management intends to sell debt and unfunded obligations with the sale of division Dairy Farmers of America (DFA). The company has released a press release with forward-looking statements for events and development that may happen with the Private Securities Litigation Reform Act 1995 (Dean food company, 2019).

Competitive Analysis

Competitors in dairy processing are determined on shelf space and price, quality. Dairy products compete with integrated retail labels and nutritional products for sale. The company in processing and fluid milk and dairy products are Borden Inc., The Kroger Company, and Prairie Farms Dairy

Borden Dairy Co one of the oldest daily companies has filed for bankruptcy. The impact of tumbling milk consumption has a drastic impact on the milk producer facing issues with the rising price of milk (Forbes, 2020). The company in January filed for bankruptcy. The wholesale cost of milk has risen with raw material' prices rise. Kroger has used food production facility a milk production plant as an investment that has allowed it’s in offering cheaper reduced shelf life and branded milk across different retailers. Prairie farms are into the manufacturing of dairy products and offer dessert, milk products, and frozen products. The company is a result of a 100 + merger, the current company is the result of more than mergers, acquisitions, and joint ventures as well as internal growth (Prairie farms, 2019). Prairie Farms integrate EDI through support from cloud services and seamless migration through B2B integration. It is one of the top milk and Food Company in the US

SWOT Analysis

Strength -

• Strong brand presence in the market. Deal food has built its expertise in the milk product category. The company has a diverse product in food processing with category management
• Extensive distribution and dealer network-The Company has a reliable supplier network and skilled workforce for distribution and facility management. It has direct to store delivery service.
• Automation of activities- Dean Food Company has automation in business that has allowed consistency for business scale through EDI.
• The company has a strong brand image and resource power with over 1200 contract management in US market.

Opportunities

• Diversification and differential in product portfolio management – The Company can move its fleet from fluid milk to desserts and package products due to growing demand.
• Potential for the online channel- The Company can leverage its sale through e-commerce. This will help it to reach a wider audience.
• Local cost optimization- This will ensure cost optimization through local farmers for distribution and operating pattern diversification. Green environment drive provides an opportunity for Dean for federal and state contracts (CNBC, 2019).

Threats

• Decline in demand for fluid milk and shift to alternatives- The decent I the consumption is related to preference for almond, coconut and yogurt-based product for nutritious value (Dean Food Company, 2020).
• Promotion of private labels in the retail segment - The private label with their products have created challenges for dean as milk consumption direct demand is at the lowest.
• Internal competitiveness of local distribution - The labor union and farmer have their own co-work that hinders business operation as per quantity on the farmland (Bloomberg Quint, 2020).
• The level of debt due to a decline in mil demand and price sales have resulted in the aggregated loss. The growing presence of dairy product yogurt has decreased the demand for Dean’s product. Milk's alternative presence such as soy and vegan option has led to a steep fall in price.

Weakness

• There is a lack of financial planning and cash flow management in the organization. The company has increased its fleet size in products in which the demand is weak.
• Existing competitor- The rivalry among existing competitors due to the price and distribution network in the private and regional labels. The farmer can sell their supply through refrigerator and advancement inroads.
• Changing consumer preference - US milk consumption over the year has changed drastically with sales of the non-dairy product has increased with milk composition as a 9 % share. Dean has taken debt for milk production infrastructure as against predatory retailers. Dean food had expanded production in commodity CPG, the demand for the product drop causing significant loss to the company.

Financial Analysis

Dean food has lost margin due to cost inflation with a fall in EBITDA margin. Dean Food's tangible net worth has gone down over the year with a 50% decline in the past 6 years Dean Food Company, 2020). The impairment charges and goodwill has written down which shows define in the company’s profitability and measure reason to file bankruptcy.

Projection financial statement

The company has resulted in variable investment and its debt has increased over the period with low sales. The projective model here is on the assumption of a sales increase over the year. The assumptive values are mentioned below. An assumption of 5% growth is taken on taking into account the company's forward-looking statement

INCOME STATEMENT
For the Fiscal Period Ending	2017	2018				12 months upcoming	31-Dec-20	31-Dec-21
Currency	USD	USD				USD
Revenue	7,795	7,755	7,755
Other Revenue	-
Total Revenue	7,795	7,755				7,755	8,065	8,408
Cost Of Goods Sold	5,696	6,100	-
Gross Profit	2,099	1,655				1655
Selling General & Admin Exp.	1,346	1,403	1,403
Other expenses	383	565	2,995	807	816
Other Operating Expense/(Income)	-	-
Other Operating Exp., Total	1,729	1,968				1,968
Operating Income	370	(313)	313

 

Profitability ratios
Sales growth (%)	-0.5%
Gross profit margins (%)	26.9%	21.3%
EBITDA margins (%)	9.7%	3.2%		-81.4%
EBIT margins (%)	4.7%	-4.0%	-4.0%

The basis for calculating model

The company has acknowledged the sales fall due to industry-wide softness. The gross profit has decreased over 2 years by 20% due to the invariable input cost.

Peer firm comparison

Kroger has expend in plant and Walmart retail operations in 2018 resulting I revenue of 11.1 million (Kroger, 2018). The upstream is favorable for Kroger.

Dean product mix

Dean food can reduce its plant size for financial consolidation to op with distribution cost and vertical integration of business.

The company has strategically focused on fluid business with a 35% fall in sales volume due to private label demand in the US market

Dean Foods currently has 65 plants whist the Dairy Farmers of America owns 42 and has a revenue level approximately 1.7 times that of Dean Foods (Dean food Company, 2020). The production facility has considerably impacted the debt level at the firm. This has resulted in debt in the past 6 years.

Dean Food Strategy and Future Actions

Dean food will focus on cost-saving and will have a crippling effect on the workforce with focus automation and plant closure that will result in staff layoffs. Dean will explore its advancement in others for a category such as sour cream and juices as the milk market is weak. 

Human resource impact will be cost cutting in farmer contact and freeze on plant operations in Northern US owning to chapter 11 provisions.

Dean in the future should negotiate labor unions and reduce debt load through sale off for focusing on brand buoyancy in the market. Dean food has to cut costs that can be through a decline in investment in further plant development as raw material costs are external.

Dean has a heavy reliance on diesel-powered delivery trucks that have led to operational risk for the company due to high energy prices, it has to outsource its operational movement for cost-saving reducing the turnaround time.

Operational the company can reduce its fixed asset class business. The bankruptcy code chapter 11 will refinance negotiation that can be used for creditor's negotiation to refinance secured investment (Dean Food Company, 2020).

Financial investment in Dean Food Company

The company will operate in standalone business that will help in raising profitability to 12% YOY as per the chapter 11 provision under discussion by company and US Reforms (Dean Food Company, 2019). The company performance and projection depict investment as stable outlook due to divesture of loss making business on deal structuring in year 2020 as per forward looking statement

Reference List for Dean Food Company Analysis

Bloomberg Quint. (2020). Dairy farmers worldwide on the brink of crisis. Retrieved from https://www.bloombergquint.com/global-economics/dairy-farmers-dumping-milk-worldwide-are-on-the-brink-of-crisis

CNBC. 2019. Dean foods America‘s biggest producer files for bankruptcy. Retrieved from https://www.cnbc.com/2019/11/12/dean-foods-americas-biggest-milk-producer-files-for-bankruptcy.html

Dean Food Company. 2020. About us. Retrieved from https://www.deanfoods.com/

Dean Food Company. 2020. Annual report Dean Company. Retrieved from http://www.annualreports.com/Company/dean-foods-company

Dean Food. (2019). Voluntary Reorganization with New Financial Support from Existing Lenders. Retrieved from https://deanfoods.com/newsroom/news/dean-foods-company-initiates-voluntary-reorganization-with-new-financial-support-from-existing-lenders/

Kroger. (2018). Annual report Summary. Retrieved from http://ir.kroger.com/

Forbes. (2020). Why Borden Dairy’s bankruptcy filing might be a glass-half-full scenario. Retrieved from https://www.forbes.com/sites/louisbiscotti/2020/01/08/borden-heads-into-bankruptcy-charts-new-course/#68c46b981778

Prairie farms. 2020. Company information. Retrieved from https://www.prairiefarms.com/

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