Tough Report for Dean Foods

April 16, 2018 02:37 PM
 
Shares of Dean Foods Co., the largest U.S. bottler, fell as much as 8.9 percent to a six-year low after Goldman Sachs Group Inc. downgraded its rating on the stock.

(Bloomberg) -- The bad news keeps piling up for the milk market.

Shares of Dean Foods Co., the largest U.S. bottler, fell as much as 8.9 percent to a six-year low after Goldman Sachs Group Inc. downgraded its rating on the stock to sell from neutral. Weakening sales volume may limit the benefits of cheaper milk costs, analyst Judy Hong said Monday.

Americans are turning away from milk amid a wealth of other beverage options and as non-dairy substitutes like almond and oat milk gain popularity. In March, a gallon of whole milk fell to about $2.90 at U.S. grocery stores, the cheapest in 14 years, according to data from the Bureau of Labor Statistics. Dean Foods earlier this year unveiled a cost-cutting initiative and has planned to end supply contracts with some farmers as the processing sector gets more competitive. Retail chain Food Lion is also ending a contract with Dean.

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“Industry fundamentals remain challenging,” Hong said in the report, adding that consolidation in the retail industry and lower pricing for private-label brands are adding pressure for the company.

A Dean Foods spokesperson didn’t immediately return an email seeking comment.

 

Copyright 2018, Bloomberg

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