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Dean Foods back on track

Perhaps the idea of “business as usual” no longer exists in today’s economy. Even so, the nation’s largest dairy processor appears to be back on track.

It was two years ago, in 2007, that Dallas-based Dean Foods Co. experienced “the most difficult year in [its] history.” The company saw its operating income drop nearly 10 percent when (1) unprecedented foreign demand for U.S. dairy products drove raw milk prices to record highs, (2) commodity market swings led to dramatic packaging and fuel cost increases and (3) an oversupply of raw organic milk pushed margins down for Dean’s WhiteWave Foods business.

Last year saw Dean raise prices while it cut costs with efforts to centralize purchasing, improve energy efficiency, reduce fuel use and change packaging materials. Likewise, it pursued several streamlining objectives (some launched in 2006). As global markets stabilized and commodity input costs subsided, Dean was able to gain ground.

In its fiscal 2008 year-end report, Dean said volume gains by the Direct Store Delivery (DSD) Dairy and WhiteWave-Morningstar businesses pushed comparable annual net sales up 5 percent to $12.5 billion during the 12 months ended December 31, 2008. Full year net income from continuing operations totaled $184.8 million, compared to $130.5 million in the previous year.

“2008 was a year of tremendous progress,” said Chairman and CEO Gregg Engles. “The business overcame a slow start to post full year adjusted operating income growth of 7 percent, making a solid rebound from 2007’s results and returning the business to its historical longer-term trend of mid to high single-digit adjusted operating income growth.”

Engles continued, “Fluid milk volumes in the DSD Dairy segment grew 1.5 percent and full-year operating profit increased 10 percent. Sales at WhiteWave-Morningstar were 10 percent higher than the prior year and segment profit was flat, but improved materially in the fourth quarter.”

This February saw Dean lay out a three- to five-year strategic plan. Officials say key objectives are to reduce costs, drive revenue and profit growth and invest in new capabilities and product/technology platforms.

Officials noted that they are targeting $300 million in cost savings moves during the next three to five years, with most of that activity involving the DSD Dairy segment. Dean said it will (1) use new system wide tools to measure and improve operational performance, (2) optimize its operations and supply chain infrastructure, which involves more than 100 facilities, (3) improve DSD efficiencies across its 5,800 company-owned routes and (4) standardize and simplify its product portfolio.

Concluded Engles, “Dean remains a well-positioned leader in numerous attractive categories. We possess multiple paths to drive growth, including executing against our cost productivity initiatives, driving revenue and profitability in our core business and the opportunity to invest in new platforms for future growth.”

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