Dean Foods Company

views updated Jun 27 2018

Dean Foods Company

3600 North River Road
Franklin Park, Illinois 60131
U.S.A.
(312) 625-6200
(708) 678-1680
Fax: (708) 671-8744

Public Company
Incorporated: 1925 as Dean Evaporated Milk Company
Sales: $2.29 billion
Employees: 10,100
Stock Exchanges: New York
SICs: 2026 Fluid Milk; 2024 Ice Cream & Frozen Desserts; 2033 Canned Fruits & Vegetables; 2035 Pickles, Sauces, & Salad Dressings

Through thoughtful acquisitions and balanced diversification, Dean Foods Company has grown from a small regional dairy into a food company with sales of more than $2 billion. Dean’s trademark has been acquiring private companies, then boosting their profits by modernizing operations and increasing productivity. Absorbing regional dairy operations and providing those private labels as well as Dean’s own to grocery chains, retail stores, and food service outlets has positioned Dean just behind dairy industry leader Borden, Inc. Dean is also the second-largest pickle business in the United States, and the third-largest vegetable processor. Success in these areas has helped Dean to counteract the fluctuations in the fluid milk market.

Sam Dean, Sr., was working with a brokerage firm in Chicago when he decided to start his own company. As he had been brokering evaporated milk, it seemed logical to enter that business. When he founded the Dean Evaporated Milk Company in 1925, it consisted of one plant in Pecatonica, Illinois. Soon, two more plants were added. Dean entered the fresh milk industry in the mid-1930s, and until 1947 Dean’s market was mostly fluid milk in Northern Illinois. In 1947 Dean also entered the ice cream business.

The company’s strategy of growth through careful acquisition began with its founder. In order to expand geographically, Dean began acquiring solid performers in other regions. Until World War II, Dean had been strictly a Midwestern dairy. After the war, it spread further, going as far as Kentucky. A research and development lab was established as early as 1943. One of the lab’s first innovations was a powdered non-dairy coffee creamer. This marked the origin of another company strength: more than half of Dean’s later growth came from expanded markets and new products.

A major milestone for the company came in 1961, with the purchase of Green Bay Food Company. This acquisition marked Dean’s entry into the pickle business, and Green Bay continues to lead this profitable Dean division. Four years later, Howard M. Dean, grandson of the founder and at the time a supply officer for the navy, was tapped by his uncle, who was then chairman, to join the company. Howard Dean became company president in 1970, along with some other changes in management that signalled a new era for Dean Foods. Included in that new era was an acquisition strategy—perfected by Kenneth J. Douglas—that set the stage for the company’s next decade. Most often, Dean absorbed well-known regional brands and companies that were small and healthy. Dean provided them with infusions of capital—especially to upgrade facilities—as well as access to marketing and managing expertise.

Dean was remarkable for its decentralized management structure, allowing acquired companies relative autonomy. In nearly all cases, acquired companies saw increased earnings within a year or two of joining the Dean family. All but one acquisition through 1992 were privately held companies, often family-owned. Where other industry giants relied on brand-name, premium-priced products, Dean made its reputation through low-margin markets, providing regionally labeled goods to leading grocery chains and restaurants. For this reason, the Dean name was often not as recognized as some of its regional product lines. The company built itself on the success of well-known local favorites.

Dean acquired a few more Midwestern dairy concerns in the 1960s, including Wisconsin’s Fieldcrest Sales, purchased in 1966. Changes in the dairy industry, where competition necessitated economies of scale, caused many smaller companies to look to Dean for survival. Seven out of the 12 companies Dean acquired up to 1991 had approached Dean. Gandy’s Dairies, Inc. of Texas was acquired in 1976, followed by Bell Dairy Products and Price’s Creameries in 1978. Creamland Dairy of Albuquerque, New Mexico, also joined the family that year. In 1980, Florida companies Me Arthur Dairy Inc. and T.G. Lee Foods, Inc. were purchased, granting Dean a solid entry into that region. Later, Hart’s Dairy of Florida was added to that state’s holdings. Moving out of the largely Midwestern markets proved profitable for Dean as early as 1985, when its Southern and Southwestern regions became the company’s strongest performers.

Dean began serving the Pennsylvania and eastern Ohio regions with its 1984 purchase of a Sharpsville, Pennsylvania, dairy. A Kentucky-based dairy specialty company brought Dean into that area through a 1985 acquisition. Dean’s sales hit the $1 billion mark, after 13 consecutive years of record earnings, in 1985. In spring of that year, Jewel Food Stores was forced to close its own dairy operations after an outbreak of salmonella. The Chicago-area Jewel stores at that time accounted for nearly one-third of retail grocery business there. Dean stepped in to assist Jewel, providing the stores’ fluid milk supply within 48 hours of the onset of the crisis. While this one market accounted for nearly 90 percent of Dean’s sales growth that year, the growth wasn’t immediately reflected in profits because of the costs of expansion and start-up services.

Meanwhile, Dean’s dairy division was also benefiting from the explosion of public awareness of the health benefits of calcium. Fluid milk consumption, after 20 years of stagnation, increased in 1984 and 1985. Research linking osteoporosis, or bone deterioration, to calcium-deficient diets not only gave a boost to milk sales, but generated a new product line: Dean Foods quickly introduced Nature’s Calcium Plus and other calcium-added items.

Dairy products accounted for nearly 70 percent of Dean’s total sales in 1984. Fluid milk was the largest dairy category at that time, but Dean’s ice cream business was also thriving. Dean was area franchiser and exclusive supplier to more than 400 Baskin-Robbins stores in the West and Midwest. Ice cream sales nearly doubled when Dean began supplying Jewel in 1986. Several more healthy dairy companies were added to the fold about this time, including Reiter Dairy, Inc. of Akron, Ohio, in 1986. Representing $100 million in annual sales in that state, with excellent brand identity and growth records, Reiter’s product line included fluid milk, cottage cheese, and ice cream. Ryan Milk Company of Kentucky, also acquired in 1986, brought with it a line of aseptic products and a distribution network that reached 40 states. Ryan brought Dean solidly into the ultra-high temperature (UHT) processed products market. UHT products have longer shelf lives and include such things as flavored milks, half-and-half, whipping creams, and non-dairy coffee creamers, of which Dean is the nation’s largest producer. With the purchase of Elgin Blenders, Inc. in 1986, Dean began supplying stabilizers and other products to McDonald’s Corporation.

While best known for its dairy products, Dean’s fastest growing area was its specialty segment. Specialty foods included such things as pickles, dips, sauces, and relishes. Another watershed event for Dean in 1986 was when it merged with Larsen Company and entered the vegetable business. Considered the creator of canned mixed vegetables, Larsen was a cornerstone in the canned and frozen vegetables industry as the processor of successful retail brands such as Veg-All and Freshlike. Larsen’s annuals sales were $170 million. This acquisition was one of Dean’s largest and represented a notable diversification. It also reflected a revised corporate strategy regarding acquisitions—one that targeted companies with larger sales and different markets. At the time, more than three-quarters of Dean’s volume was in dairy operations. The expense of this merger, combined with a bountiful crop at that time which lowered selling prices, hurt Dean initially, but the company recovered. With increased public attention to diet and health concerns, sales of frozen vegetables especially soared in the 1980s. By 1987, Dean ranked third in frozen and canned vegetables sales, after Pillsbury’s Green Giant and Nabisco’s Del Monte. Dean also began to service international vegetable markets. However, the vegetable glut combined with higher raw-milk prices in 1987 to slow Dean’s net income that year. Profits for the company were flat. Whereas the government stabilized prices in the milk industry by buying surpluses, a surplus of vegetables meant only waste and depressed margins.

Dean purchased Verifine Dairy Products Corp. at the end of 1987. The $25 million Wisconsin dairy was quickly computerized and its automated systems updated. Fairmont Products, Inc. of Belleville, Pennsylvania, came on board that year as well. In large part because of these two purchases, Dean’s fluid milk sales grew 14 percent in 1988. In this same year, Dean spent $9 million to settle a price-fixing case brought by school boards based in Florida. The charge was that two of Dean’s subsidiaries—acquired in 1980—were among ten dairies and distributors who allegedly conspired to rig bids for school milk-supply contracts in Florida, between 1965 and 1987.

Dean greatly strengthened its position in the frozen vegetable market by purchasing Richard A. Shaw, Inc. in 1988. Shaw’s annual sales in 1989 were $55 million. The California-based company supplied major grocery chains and food service accounts and was Dean’s entry into the West Coast vegetable market. Shaw also helped round out Dean’s Midwestern produce line with crops grown mostly in the West. Dean then expanded its canned vegetable business in 1989 with the acquisition of Big Stone Inc. This Minnesota-based vegetable processor had sales of $24 million and two processing plants located near thriving sources of corn, peas, and green beans. Still more prime growing areas were accessed with the 1990 purchase of Bellingham Frozen Foods, Inc., whose plants in Washington and Michigan garnered annual sales of $30 million. A 1988 drought brought prices back up after they had been depressed by the earlier crop surplus, though this same drought depressed milk production.

Dean also made some internal changes in 1989: Howard Dean became chairman; William Fischer became president; and Kenneth Douglas became vice-chairman. The cost of acquisitions and the anti-trust settlement combined with the drought-related fall-off in milk production caused a dip in earnings leading into 1989. Another drain was the company’s unprofitable transportation unit, which operated in a highly competitive market, providing a wide range of transportation and distribution services. Only 20 percent of the division’s business was transporting Dean’s products.

Dean sold its retail Baskin-Robbins ice cream business in 1989, though it continued to be the stores’ sole supplier for two of their major distribution areas. Shortly after that sale, Dean acquired Charles F. Cates & Sons, Inc., a pickle processor based in North Carolina with annual sales of $84 million. This boosted Dean’s presence in the East and Southeast, regions in which it was not strong. Meanwhile, the company was the target of takeover talk and updated its poison-pill measure late in 1989. Dean also continued its product innovations, introducing a very successful non-fat yogurt with artificial sweetener and Extra Light sour creams and dips. A frozen yogurt, which Dean had introduced 14 years earlier with no success, suddenly began performing well in the climate of nutritional and health awareness.

Dean launched 1990 with the purchase of Mayfield Dairy Farms, Inc. As one of the largest remaining family-owned dairy farms, Mayfield was a force in the Southeast—primarily Tennessee and Georgia—with annual sales near $110 million. Another new product was introduced in 1990: a low-fat milk with reduced lactose, a sugar that caused digestion problems for some milk drinkers. Dean also acquired Ready Food Products, Inc. of Philadelphia, a specialty dairy processor representing sales of $28 million. Expanding its specialty food segment helped Dean to balance the shortfall in dairy profits caused by further increases in raw-milk prices in 1989 and 1990. The operating earnings in specialty foods exceeded Dean’s dairy products segment for the first time in fiscal 1990.

Three more dairies acquired in early 1991 brought with them $150 million of annual revenues. At the same time, Dean sold its McCadam Cheese Company unit, a private-label, New York supplier of natural cheeses. As raw-milk prices returned to pre-drought levels by summer 1991, the company refocused upon its acquisition program. Dean purchased Cream o’Weber Dairy, Inc. of Utah in April 1991. It also acquired Frio Foods, Inc., a Texas-based vegetable processor, and Meadow Brook Dairy Company of Pennsylvania. The Cream o’Weber purchase typified Dean’s strategy: even before the acquisition was completed, Cream o’Weber’s plants were being consolidated and updated. Another advantage of being part of the Dean team was the sharing between divisions. An example of this came during the frozen yogurt boom in 1990, when Dean’s T.G. Lee and McArthur affiliates wanted to enter this market. Starting a new product from scratch might have taken more than six months. Instead, these dairies were able to take advantage of the expertise of a fellow Dean division, Mayfield Dairy Farms, which produced one of Dean’s best frozen yogurts. In just about five weeks, these companies had a new product on the market under their own names. Sharing between companies and a decentralized management style are part of what makes Dean so successful.

Dean passed the $2 billion mark for the first time in 1991. However, an excess of crops in fiscal 1992 put a squeeze on Dean’s profits in the vegetable segment. At this time, the vegetable line was 55 percent frozen and 45 percent canned, with roughly two-thirds of its output for private label. Dairy remained Dean’s primary business, with more than 21 milk-processing plants and nearly 6 percent of the total market, making Dean a very close second to Borden, the industry leader. Dean was well positioned to continue its dairy operation acquisitions, and diversified enough to balance out market fluctuations. These factors should contribute to its continued success in the future.

Principal Subsidiaries

McArthur Dairy, Inc.; T. G. Lee Foods, Inc.; Hart’s Dairy Inc.; Dean Milk Company, Inc.; Ryan Milk Company, Inc.; Liberty Dairy; Creamland Dairies, Inc.; Reiter Dairy Inc.; Gilt Edge Farms, Inc.; Dean Dairy Products Co.; Fairmont Products Inc.; Meadow Brook Dairy Company; Ready Food Products Inc.; Mayfield Dairy Farms, Inc.; Price’s Creameries; Bell Dairy Products, Inc.; Candy’s Dairies, Inc.; Cream o’Weber Dairy Inc.; St. Thomas Dairies; Fieldcrest Sales; Verifine Dairy Products; Atkins Pickle Co.; Western Food Products; Pilgrim Farms, Inc.; Green Bay Food Company; Aunt Jane Foods; Charles F. Cates & Sons, Inc.; Amboy Specialty Foods; Elgin Blenders, Inc.; E.B.I. Foods Ltd.; Richard A. Shaw, Inc.; Big Stone; Bellingham Frozen Foods, Inc.; The Larsen Company; DFC Transportation Company.

Dean Foods Company

views updated May 14 2018

Dean Foods Company

3600 North River Road
Franklin Park, Illinois 60131
U.S.A.
(847) 678-1680
Fax: (708) 671-8744

Public Company
Incorporated: 1925 as Dean Evaporated Milk Company
Sales: $3.02 billion (1996)
Employees: 12,100
Stock Exchanges: New York
SICs: 2026 Fluid Milk; 2024 Ice Cream & Frozen Desserts; 2033 Canned Fruits & Vegetables; 2035 Pickles, Sauces, & Salad Dressings

Through thoughtful acquisitions and careful financial management, Dean Foods Company has grown from a small regional dairy into a diversified food company with sales of more than $3 billion. Dean’s steady growth has been achieved by acquiring strong regional brands, then boosting their profits by modernizing operations and increasing productivity. The company is the leading fluid milk, frozen vegetable, and pickle processor in the United States. Its brands, which include Dean’s, Birds Eye, Freshlike, and Veg-All, in addition to many regional brand names, are supplied to grocery chains, retail stores, and food service outlets. Dean’s product line includes ice cream, frozen desserts, canned vegetables, relishes, salad dressings, dips, and non-dairy creamers.

Early 20th-century Beginnings

Sam Dean, Sr., was working with a brokerage firm in Chicago when he decided to start his own company. As he had been brokering evaporated milk, it seemed logical to enter that business. When he founded the Dean Evaporated Milk Company in 1925, it consisted of one plant in Pecatonica, Illinois. Soon, two more plants were added. Dean entered the fresh milk industry in the mid-1930s, and until 1947 Dean’s market was mostly fluid milk in Northern Illinois. In 1947 Dean also entered the ice cream business.

The company’s strategy of growth through careful acquisition began with its founder. In order to expand geographically, Dean began acquiring solid performers in other regions. Until World War II, Dean had been strictly a Midwestern dairy. After the war, it spread further, going as far as Kentucky. A research and development lab was established as early as 1943. One of the lab’s first innovations was a powdered non-dairy coffee creamer. This marked the origin of another company strength: more than half of Dean’s later growth came from expanded markets and new products.

A major milestone for the company came in 1961 with the purchase of Green Bay Food Company. This acquisition marked Dean’s entry into the pickle business and Green Bay continues to lead this profitable Dean division. Four years later, Howard M. Dean, grandson of the founder and at the time a supply officer for the U.S. Navy, was tapped by his uncle, who was then chairman, to join the company. Howard Dean became company president in 1970, along with some other changes in management that signaled a new era for Dean Foods. Included in that new era was an acquisition strategy—perfected by Kenneth J. Douglas—that set the stage for the company’s next decade. Most often, Dean absorbed well-known regional brands and companies that were small and healthy. Dean provided them with infusions of capital—especially to upgrade facilities—and access to marketing and management expertise.

Dean was remarkable for its decentralized management structure, allowing acquired companies relative autonomy. In nearly all cases, acquired companies saw increased earnings within a year or two of joining the Dean family. With one exception, all acquisitions through 1992 were privately held companies, often family owned. While other industry giants relied on brand-name, premium-priced products, Dean made its reputation through low-margin markets, providing regionally labeled goods to leading grocery chains and restaurants. For this reason, the Dean name was often not as recognized as some of its regional product lines. The company built its success on local favorites.

Expansion in the 1960s and Beyond

Dean acquired a few more Midwestern dairy concerns in the 1960s, including Wisconsin’s Fieldcrest Sales, purchased in 1966. Changes in the dairy industry, where competition necessitated economies of scale, caused many smaller companies to look to Dean for survival. Seven out of the 12 companies Dean acquired up to 1991 had approached Dean. Candy’s Dairies, Inc., of Texas was acquired in 1976, followed by Bell Dairy Products and Price’s Creameries in 1978. Creamland Dairy of Albuquerque, New Mexico, also joined the family that year. In 1980 Florida companies McArthur Dairy Inc. and T.G. Lee Foods, Inc., were purchased, granting Dean a solid entry into that region. Later, Hart’s Dairy of Florida was added to that state’s holdings. Moving out of the largely Midwestern markets proved profitable for Dean as early as 1985, when its Southern and Southwestern regions became the company’s strongest performers.

Dean began serving Pennsylvania and eastern Ohio with its 1984 purchase of a Sharpsville, Pennsylvania, dairy. A Kentucky-based dairy specialty company brought Dean into that area through a 1985 acquisition. Dean’s sales hit the $1 billion mark in 1985, after 13 consecutive years of record earnings. Early that year, Jewel Food Stores was forced to close its own dairy operations after an outbreak of salmonella. The Chicago-area Jewel stores at that time accounted for nearly one-third of retail grocery business there. Dean stepped in to assist Jewel, providing the stores’ fluid milk supply within 48 hours of the onset of the crisis. That single market accounted for nearly 90 percent of Dean’s sales growth that year; however, the growth wasn’t immediately reflected in profits because of the costs of expansion and start-up services.

Meanwhile, Dean’s dairy division was also benefiting from increased public awareness of the health benefits of calcium. Fluid milk consumption, after 20 years of stagnation, increased in 1984 and 1985. Research linking osteoporosis, or bone deterioration, to calcium-deficient diets not only gave a boost to milk sales, but generated a new product line, as Dean Foods quickly introduced Nature’s Calcium Plus and other calcium-added items.

Dairy products accounted for nearly 70 percent of Dean’s total sales in 1984. Fluid milk was the largest dairy category at that time, but Dean’s ice cream business was also thriving. Dean was area franchiser and exclusive supplier to more than 400 Baskin-Robbins stores in the West and Midwest. Ice cream sales nearly doubled when Dean began supplying Jewel in 1986. Several more healthy dairy companies were added to the fold about this time, including Reiter Dairy, Inc., of Akron, Ohio in 1986. Representing $100 million in annual sales in that state, with excellent brand identity and growth records, Reiter’s product line included fluid milk, cottage cheese, and ice cream. Ryan Milk Company of Kentucky, also acquired in 1986, brought with it a line of aseptic products and a distribution network that reached 40 states. Ryan brought Dean solidly into the ultra-high-temperature (UHT) processed products market. UHT products have longer shelf lives and include such things as flavored milks, half-and-half, whipping creams, and non-dairy coffee creamers, of which Dean is the nation’s largest producer. With the purchase of Elgin Blenders, Inc., in 1986, Dean began supplying stabilizers and other products to McDonald’s Corporation.

While best known for its dairy products, Dean’s fastest-growing area was its specialty segment. Specialty foods included such things as pickles, dips, sauces, and relishes. In 1986 Dean merged with Larsen Company to enter the vegetable business. Considered the creator of canned mixed vegetables, Larsen was a cornerstone in the canned and frozen vegetables industry as the processor of such successful retail brands as Veg-All and Freshlike. Larsen’s annual sales were $170 million. This acquisition was one of Dean’s largest and represented a notable diversification. It also reflected a revised corporate strategy regarding acquisitions—one that targeted companies with larger sales and different markets. At the time, more than three-quarters of Dean’s volume was in dairy operations. The expense of this merger, combined with a bountiful crop at that time which lowered prices, hurt Dean initially, but the company recovered. With increased public attention to diet and health concerns, sales of frozen vegetables especially soared in the 1980s. By 1987 Dean ranked third in frozen and canned vegetable sales, after Pillsbury’s Green Giant and Nabisco’s Del Monte. Dean also began to service international vegetable markets. However, the vegetable glut combined with higher raw-milk prices in 1987 to slow Dean’s net income that year. Profits for the company were flat. Whereas the government stabilized prices in the milk industry by buying surpluses, a surplus of vegetables meant only waste and depressed margins.

Dean purchased Verifine Dairy Products Corp. at the end of 1987. The $25 million Wisconsin dairy was quickly computerized and its automated systems updated. Fairmont Products, Inc., of Belleville, Pennsylvania, came on board that year as well. In large part because of these two purchases, Dean’s fluid milk sales grew 14 percent in 1988. That same year, Dean spent $9 million to settle a price-fixing case brought by Florida school boards. The charge was that two of Dean’s subsidiaries were among ten dairies and distributors that conspired to rig bids for school milk supply contracts in Florida between 1965 and 1987.

Dean greatly strengthened its position in the frozen vegetable market by purchasing Richard A. Shaw, Inc., in 1988. Shaw’s annual sales in 1989 were $55 million. The California-based company supplied major grocery chains and food service accounts and was Dean’s entry into the West Coast vegetable market. Shaw also helped round out Dean’s Midwestern produce line with crops grown mostly in the West. Dean then expanded its canned vegetable business in 1989 with the acquisition of Big Stone Inc. This Minnesota-based vegetable processor had sales of $24 million and two processing plants located near thriving sources of corn, peas, and green beans. Still more prime growing areas were accessed with the 1990 purchase of Bellingham Frozen Foods, Inc., whose plants in Washington and Michigan garnered annual sales of $30 million. A 1988 drought brought prices back up after they had been depressed by the earlier crop surplus, though this same drought depressed milk production.

Dean also made some internal changes in 1989: Howard Dean became chairman; William Fischer became president; and Kenneth Douglas became vice-chairman. The cost of acquisitions and the anti-trust settlement, combined with a drought-related fall-off in milk production, caused a dip in earnings going into 1989. Another drain was the company’s unprofitable transportation unit, which operated in a highly competitive market, providing a wide range of transportation and distribution services. Only 20 percent of the division’s business was transporting Dean’s products.

Dean sold its retail Baskin-Robbins ice cream business in 1989, but continued to be the stores’ sole supplier for two of their major distribution areas. Shortly after that sale, Dean acquired Charles F. Cates & Sons, Inc., a pickle processor based in North Carolina with annual sales of $84 million. This boosted Dean’s presence in the East and Southeast. Meanwhile, the company was the target of takeover talk and updated its poison-pill strategy late in 1989. Dean also continued its product innovations, introducing a very successful non-fat yogurt with artificial sweetener and Extra Light sour creams and dips. A frozen yogurt, which Dean had introduced 14 years earlier with no success, suddenly began performing well with the trend toward nutritional and health awareness.

The 1990s

Dean launched 1990 with the purchase of May field Dairy Farms, Inc. As one of the largest remaining family-owned dairy farms, Mayfield was a force in the Southeast—primarily Tennessee and Georgia—with annual sales near $110 million. Another new product was introduced in 1990: a low-fat milk with reduced lactose, a sugar that causes digestion problems for some milk drinkers. Dean also acquired Ready Food Products, Inc., of Philadelphia, a specialty dairy processor representing sales of $28 million. Expanding its specialty food segment helped Dean to balance the shortfall in dairy profits caused by further increases in raw-milk prices in 1989 and 1990. The operating earnings in specialty foods exceeded Dean’s dairy products segment for the first time in fiscal 1990.

Three more dairies acquired in early 1991 brought with them $150 million in annual revenues. At the same time, Dean sold its McCadam Cheese Company unit, a private-label, New York supplier of natural cheeses. As raw-milk prices returned to pre-drought levels by summer 1991, the company refocused on its acquisition program. Dean purchased Cream o’Weber Dairy, Inc., of Utah in April 1991. It also acquired Frio Foods, Inc., a Texas-based vegetable processor, and Meadow Brook Dairy Company of Pennsylvania. The Cream o’Weber purchase typified Dean’s strategy: even before the acquisition was completed, Cream o’Weber’s plants were being consolidated and updated. Another advantage of being part of the Dean team was the sharing between divisions. An example of this came during the frozen yogurt boom in 1990, when Dean’s T.G. Lee and Me Arthur affiliates wanted to enter this market. Starting a new product from scratch might have taken more than six months. Instead, these dairies were able to take advantage of the expertise of a fellow Dean division, Mayfield Dairy Farms, which produced one of Dean’s best frozen yogurts. In just about five weeks, these companies had a new product on the market under their own names. Sharing between companies and a decentralized management style are part of what makes Dean so successful.

Dean passed the $2 billion mark for the first time in 1991. However, an excess of crops in fiscal 1992 put a squeeze on Dean’s profits in the vegetable segment. While revenues increased to $2.3 billion, net income dropped to $62 million, down from $72.5 million the previous year. At this time, Dean’s vegetable line was 55 percent frozen and 45 percent canned, with roughly two-thirds of its output for private labels. Dairy remained Dean’s primary business, with more than 21 milk processing plants and nearly six percent of the total market, making Dean a very close second to Borden, the industry leader.

In early 1993 Dean acquired W.B. Roddenbery Co. Inc., a processor of pickles, peanut butter, and syrup that generated approximately $57 million in annual sales. Based in Georgia, the company’s brands had widespread regional name recognition and were expected to help strengthen Dean’s existing Specialty Foods segment. Relentless rain in the summer of 1993 seemed to promise relief from the oversupply and resulting low prices that had plagued the vegetable business in recent years; however, Dean found that the weather raised its processing costs without providing immediate price increases, as the company was locked into low-priced contracts with its retail customers.

In January 1994, Dean Foods completed negotiations with Yarnell Ice Cream Co. to manufacture and distribute a line of low-fat and non-fat dairy products under Yarnell’s Guilt Free brand, and two months later Dean purchased Birds Eye frozen foods from Kraft General Foods for $140 million. Noting the strength of the Birds Eye brand name, Howard Dean called the purchase “a strategic acquisition” that “positions Dean for volume and profit growth.” Dean also announced plans to purchase Curtice-Burns Foods for approximately $173 million; however, the companies were unable to resolve obstacles to the acquisition, and the deal fell through. In early 1995 Dean’s CFO, Tim Bondy, resigned abruptly, and Dean’s stock dropped eight percent on this news: according to observers, Bondy was the mastermind behind Dean’s growth-by-acquisition strategy, and his departure raised eyebrows on Wall Street. Within a week, the company announced that earnings for its third quarter (ending in February) would be substantially lower than previously estimated, and its stock dropped an additional six percent. According to the company, interest costs and tax rates contributed to the earnings decline.

Throughout 1995 Dean continued its shopping spree, purchasing Rio Grande Foods, a $40 million frozen vegetable processor based in Texas; Noral Crosetti Foods, a $45 million frozen vegetable processor based in California; and the salad dressing and dairy operations of Merico Inc., worth about $70 million annually. Whenever possible Dean worked to consolidate operations of its new acquisitions, seeking to effect efficiencies and move production closer to retail markets to reduce transportation costs.

The following year, Dean invested heavily to update the brand image of its dairy line, redesigning its packaging in bright colors with eye-catching graphics. Seeking to strengthen the Dean brand identity in a commodity market, the company began advertising milk’s rich calcium content on its cartons and to approach marketing in general with the mindset of a large beverage producer. In this vein, Mayfield Dairy Farms, a Dean division based in Tennessee, developed a highly successful plastic, single-serving milk bottle. A hit with consumers, the plastic bottles were convenient, portable, and saleable in vending machines. Industry consultant Jerry Dryer noted the potential of such packaging for expanding the portability and popularity of milk, observing: “A square carton doesn’t fit in the cup holder of your minivan.”

By 1996 Dean’s rapid expansion into the vegetable business was taking a severe toll on earnings, as excess production, stagnant prices, and weak demand hurt vegetable processors throughout the country. Dean announced that it would undergo a wholesale restructuring, closing 13 plants—including seven vegetable plants—eliminating 840 jobs, and hiring a consultant to examine every other aspect of its business. Its recent acquisitions had made Dean the third-largest vegetable processor in the United States, with vegetables accounting for 20 percent of its revenues. Dean expected the restructuring to eliminate $50 million in costs annually. The restructuring also entailed a shift in focus, with Dean reemphasizing dairy and pickles at the expense of vegetables, particularly canned vegetables.

In January 1997 the company announced the selection of Phil Marineau, the former head of Quaker Oats’ Gatorade unit, as president and COO. Marineau replaced Thomas L. Rose, who retired from those positions but maintained a position as vice-chairman of the board. Analysts applauded the selection of Marineau for his extensive experience in packaged foods marketing, an area in which Dean was not traditionally strong. Said analyst John McMillin of Prudential Securities, “As a Dean Foods stockholder, I am thrilled that Dean could find such a qualified person.”

Dean soon announced the purchase of Meadows Distributing Company (a $70 million distributor of ice cream in the Chicago metropolitan area) and the $35 million Marie’s line of salad dressings, dips, salsas, and fruit glazes. In addition, Dean entered into a joint venture with River Ranch, of Salinas, California, to produce a line of branded fresh vegetables under the Birds Eye name. Fresh produce in U.S. supermarkets was an $18 billion a year business; with the increasing popularity of branded fresh vegetable lines, Marineau speculated that the new venture could soon generate $100 million annually. At the same time, Dean announced that it was investing $10 million to promote its new line of Birds Eye frozen baby gourmet vegetables.

For the 1997 fiscal year, Dean generated earnings of $86.7 million, up from a loss of $49.7 million in 1996. Revenues rose seven percent to $3.02 billion.

Principal Subsidiaries

Bell Dairy Products, Inc.; Cream o’Weber Dairy, Inc.; Cream-land Dairies, Inc.; Dean Pickle & Specialty Products Company; Dean Foods Vegetable Company; Dean Dairy Products Company; Dean Foods Company; Dean Foods Amboy; DFC Transportation Company; Fairmont Products; Liberty Dairy Company; Long Life Dairy Products; Mayfield Dairy, Inc.; McArthur Dairy, Inc.; Meadow Brook Dairy Company; Price’s Creameries; Reiter Dairy, Inc.; Rod’s Food Products; Ryan Milk Company, Inc.; T.G. Lee Foods, Inc.; Verifine Dairy Products Corporation.

Dean Foods Company

views updated May 23 2018

Dean Foods Company

2515 McKinney Avenue, Suite 1200
Dallas, Texas 75201-1978
U.S.A.
Telephone: (214) 303-3400
Fax: (214) 303-3499
Web site: http://www.deanfoods.com

Public Company
Incorporated: 1988 as Kaminski/Engles Capital Corp.
Employees: 26,000
Sales: $10.82 billion (2004)
Stock Exchanges: New York
Ticker Symbol: DF
NAIC: 311511 Fluid Milk Manufacturing; 311520 Ice Cream and Frozen Dessert Manufacturing; 311999 All Other Miscellaneous Food Manufacturing; 311421 Fruit and Vegetable Canning

Dean Foods Company, the largest processor and distributor of milk and other dairy products in the United States, is the product of Suiza Foods Corporation's December 2001 acquisition of the "old" Dean Foods Company, after which Suiza adopted the acquiree's name. Prior to the takeover, Suiza and the old Dean had been leading consolidators of the highly fragmented U.S. dairy industry, buying up dozens of mainly family-owned operations that were ripe for acquisition. By the time of the merger the two firms had grown into the two largest U.S. dairy companies. The "new" Dean Foods was a dairy giant, its Dairy Group generating nearly $9 billion in sales by 2004. Of this total, 55 percent was generated by more than 30 well-established local and regional dairy brands—including Broughton, Dairy Fresh, Dean's, Melody Farms, Nature's Pride, and Shenandoah's Pride—with the remainder coming from a variety of private label brands. National in scope if not in brands, Dean Foods' Dairy Group operates more than 110 plants from coast to coast, producing milk, whipping cream, coffee creamers, ice cream, yogurt, cottage cheese, sour cream, and other dairy products, as well as fruit juice, fruit-flavored drinks, and water. Dean's WhiteWave Foods Company subsidiary, meanwhile, produces and sells a range of soy, dairy, and dairy-related products under national brand names, including Silk soymilk and cultured soy products; Horizon Organic dairy products, juices, and other products; International Delight coffee creamers; Marie's refrigerated dips and dressings; Land O'Lakes fluid dairy and cultured products; and Hershey's milks and milkshakes (the latter two under license from Land O'Lakes, Inc. and Hershey Foods Corporation, respectively). Outside the United States, Dean's Leche Celta division is the fourth largest dairy processor in Spain and operates in Portugal as well. Dean Foods also owns a 27 percent stake in based Consolidated Container Company L.L.C., a leading producer of rigid plastic containers. In June 2005 Dean Foods spun off its former Specialty Foods Group, maker of pickles, non-dairy creamer, sauces, and salad dressings, into an independent, publicly traded firm called TreeHouse Foods, Inc.

Early-20th-Century Beginnings of "Old" Dean Foods

Samuel E. Dean, Sr., was working with a brokerage firm in Chicago when he decided to start his own company. As he had been brokering evaporated milk, it seemed logical to enter that business. In 1925 he bought the Pecatonica Marketing Company, which ran an evaporated milk processing facility in Pecatonica, located in northwestern Illinois. Dean changed the company name to Dean Evaporated Milk Company in 1927 and soon added two more Illinois dairy plants. The firm was renamed Dean Milk Company in 1929. Dean entered the fresh milk industry in the mid-1930s, and until 1947 Dean's market was mostly fluid milk in northern Illinois. In 1947 Dean also entered the ice cream business.

The company's strategy of growth through careful acquisition began with its founder. In order to expand geographically, Dean began acquiring solid performers in other regions. Until World War II, Dean had been strictly a Midwestern dairy. After the war, it spread further, going as far as Kentucky. A research and development lab was established as early as 1943. One of the lab's first innovations was a powdered nondairy coffee creamer. This marked the origin of another company strength: more than half of Dean's later growth came from expanded markets and new products. In 1951 the company established new headquarters in Franklin Park, Illinois, in suburban Chicago.

A number of milestones occurred in the 1960s. Dean Milk Company completed its first public offering of stock in 1961. The following year Dean acquired Green Bay Food Company, a maker of pickles, marking Dean's entry into the specialty food business. Reflecting this expansion, the company changed its name to Dean Foods Company in 1963. Two years later, Howard M. Dean, grandson of the founder and at the time a supply officer for the U.S. Navy, was tapped by his uncle, who was then chairman, to join the company. Howard Dean became company president in 1970, along with some other changes in management that signaled a new era for Dean Foods. Included in that new era was an acquisition strategy—perfected by Kenneth J. Douglas—that set the stage for the company's next decade. Most often, Dean absorbed well-known regional brands and companies that were small and healthy. Dean provided them with infusions of capital—especially to upgrade facilities—and access to marketing and management expertise.

Dean was remarkable for its decentralized management structure, allowing acquired companies relative autonomy. In nearly all cases, acquired companies saw increased earnings within a year or two of joining the Dean family. With one exception, all acquisitions through 1992 were privately held companies, often family owned. While other industry giants relied on brand-name, premium-priced products, Dean made its reputation through low-margin markets, providing regionally labeled goods to leading grocery chains and restaurants. For this reason, the Dean name was often not as recognized as some of its regional product lines. The company built its success on local favorites.

Expansion in the 1960s Through 1980s

Dean acquired a few more Midwestern dairy concerns in the 1960s, including Wisconsin's Fieldcrest Sales, purchased in 1966. Changes in the dairy industry, where competition necessitated economies of scale, caused many smaller companies to look to Dean for survival. Seven out of the 12 companies Dean acquired up to 1991 had approached Dean. Gandy's Dairies, Inc., of Texas was acquired in 1976, followed by Bell Dairy Products and Price's Creameries in 1978. Creamland Dairy of Albuquerque, New Mexico, also joined the family that year. In 1980 Florida companies McArthur Dairy Inc. and T.G. Lee Foods, Inc. were purchased, granting Dean a solid entry into that region. Later, Hart's Dairy of Florida was added to that state's holdings. Moving out of the largely Midwestern markets proved profitable for Dean as early as 1985, when its Southern and Southwestern regions became the company's strongest performers.

Dean began serving Pennsylvania and eastern Ohio with its 1984 purchase of a Sharpsville, Pennsylvania, dairy. A Kentucky-based dairy specialty company brought Dean into that area through a 1985 acquisition. Dean's sales hit the $1 billion mark in 1985, after 13 consecutive years of record earnings. Early that year, Jewel Food Stores was forced to close its own dairy operations after an outbreak of salmonella. The Chicago-area Jewel stores at that time accounted for nearly onethird of retail grocery business there. Dean stepped in to assist Jewel, providing the stores' fluid milk supply within 48 hours of the onset of the crisis. That single market accounted for nearly 90 percent of Dean's sales growth that year; the growth, however, was not immediately reflected in profits because of the costs of expansion and start-up services.

Meanwhile, Dean's dairy division was also benefiting from increased public awareness of the health benefits of calcium. Fluid milk consumption, after 20 years of stagnation, increased in 1984 and 1985. Research linking osteoporosis, or bone deterioration, to calcium-deficient diets not only gave a boost to milk sales, it also generated a new product line, as Dean Foods quickly introduced Nature's Calcium Plus and other calciumadded items.

Dairy products accounted for nearly 70 percent of Dean's total sales in 1984. Fluid milk was the largest dairy category at that time, but Dean's ice cream business was also thriving. Dean was area franchiser and exclusive supplier to more than 400 Baskin-Robbins stores in the West and Midwest. Ice cream sales nearly doubled when Dean began supplying Jewel in 1986. Several more healthy dairy companies were added to the fold about this time, including Reiter Dairy, Inc., of Akron, Ohio, in 1986. Representing $100 million in annual sales in that state, with excellent brand identity and growth records, Reiter's product line included fluid milk, cottage cheese, and ice cream. Ryan Milk Company of Kentucky, also acquired in 1986, brought with it a line of aseptic products and a distribution network that reached 40 states. Ryan brought Dean solidly into the ultra-high-temperature (UHT) processed products market. UHT products have longer shelf lives and include such things as flavored milks, half-and-half, whipping creams, and nondairy coffee creamers, of which Dean eventually became the nation's largest producer. With the purchase of Elgin Blenders, Inc., in 1986, Dean began supplying stabilizers and other products to McDonald's Corporation.

Company Perspectives:

At Dean Foods, we are proud to be in the business of enhancing and enriching the lives of consumers. Our brands are known for freshness, purity, delicious taste and impeccable quality. We sell fresh, nutritious dairy products under an array of local brands that have been staples in their communities for generations. Meadow Gold, Alta Dena, Dean's, Country Fresh, Oak Farms, Mayfield, and Garelick Farms are just a few. Which one is on your table? We also are proud to be the nation's leading organic foods company. Through our Silk and Horizon Organic brands, we are bringing healthy, delicious alternatives to tables across the country. From nutritious foods and beverages for people on the go—like single-serve milks, soymilks, juices and yogurts—to the creamy goodness of International Delight coffee creamers, we make the products consumers rely on to enhance and enrich their lives.

While best known for its dairy products, Dean's fastestgrowing area was its specialty segment. Specialty foods included such things as pickles, dips, sauces, and relishes. In 1986 Dean merged with Larsen Company to enter the vegetable business. Considered the creator of canned mixed vegetables, Larsen was a cornerstone in the canned and frozen vegetables industry as the processor of such successful retail brands as Veg-All and Freshlike. Larsen's annual sales were $170 million. This acquisition was one of Dean's largest and represented a notable diversification. It also reflected a revised corporate strategy regarding acquisitions—one that targeted companies with larger sales and different markets. At the time, more than three-quarters of Dean's volume was in dairy operations. The expense of this merger, combined with a bountiful crop at that time which lowered prices, hurt Dean initially, but the company recovered. With increased public attention to diet and health concerns, sales of frozen vegetables especially soared in the 1980s. By 1987 Dean ranked third in frozen and canned vegetable sales, after Pillsbury's Green Giant and Nabisco's Del Monte. Dean also began to service international vegetable markets. However, the vegetable glut combined with higher rawmilk prices in 1987 to slow Dean's net income that year. Profits for the company were flat. Whereas the government stabilized prices in the milk industry by buying surpluses, a surplus of vegetables meant only waste and depressed margins.

Dean purchased Verifine Dairy Products Corp. at the end of 1987. The $25 million Wisconsin dairy was quickly computerized and its automated systems updated. Fairmont Products, Inc., of Belleville, Pennsylvania, came onboard that year as well. In large part because of these two purchases, Dean's fluid milk sales grew 14 percent in 1988. That same year, Dean spent $9 million to settle a price-fixing case brought by Florida school boards. The charge was that two of Dean's subsidiaries were among ten dairies and distributors that conspired to rig bids for school milk supply contracts in Florida between 1965 and 1987.

Dean greatly strengthened its position in the frozen vegetable market by purchasing Richard A. Shaw, Inc., in 1988. Shaw's annual sales in 1989 were $55 million. The California-based company supplied major grocery chains and foodservice accounts and was Dean's entry into the West Coast vegetable market. Shaw also helped round out Dean's Midwestern produce line with crops grown mostly in the West. Dean then expanded its canned vegetable business in 1989 with the acquisition of Big Stone Inc. This Minnesota-based vegetable processor had sales of $24 million and two processing plants located near thriving sources of corn, peas, and green beans. Still more prime growing areas were accessed with the 1990 purchase of Bellingham Frozen Foods, Inc., whose plants in Washington and Michigan garnered annual sales of $30 million. A 1988 drought brought prices back up after they had been depressed by the earlier crop surplus, though this same drought depressed milk production.

Dean also made some internal changes in 1989: Howard Dean became chairman; William Fischer became president; and Kenneth Douglas became vice-chairman. The cost of acquisitions and the antitrust settlement, combined with a droughtrelated fall-off in milk production, caused a dip in earnings going into 1989. Another drain was the company's unprofitable transportation unit, which operated in a highly competitive market, providing a wide range of transportation and distribution services. Only 20 percent of the division's business was transporting Dean's products.

Key Dates:

1925:: Samuel E. Dean, Sr., enters the dairy industry through the purchase of Pecatonica Marketing Company in northwestern Illinois.
1927:: Company changes its name to Dean Evaporated Milk Company.
1929:: The company's name is changed to Dean Milk Company.
Mid-1930s:: Dean enters the fresh milk industry.
1961:: Dean Milk goes public.
1962:: Dean expands into specialty foods with the purchase of pickle maker Green Bay Food Company.
1963:: Reflecting expansion, company is renamed Dean Foods Company.
1985:: Following numerous acquisitions, Dean's revenues surpass $1 billion.
1988:: Gregg L. Engles and Robert Kaminski form Kaminski/Engles Capital Corp. to purchase the Reddy Ice packaged ice business from The Southland Corporation.
1993:: Engles and partners enter the dairy sector, purchasing Suiza-Puerto Rico, owner of the largest dairy company on that island.
1994:: Engles incorporates Suiza Foods Corporation as a Dallas-based holding company for his dairy and ice operations.
1996:: Suiza Foods goes public through an initial public offering.
1997:: Dean's plastic, single-serving milk bottles called "Milk Chugs" become a consumer hit; Suiza enters the branded dairy and nondairy food sector through merger with Morningstar Group, Inc.
1998:: Suiza sells off its packaged ice business and acquires a 12 percent interest in Horizon Organic Dairy, Inc.
1999:: In this year and the next, Dean acquires a 36 percent stake in soymilk maker WhiteWave, Inc.
2000:: Suiza and Southern Foods Group, L.P. combine their milk operations, enabling Suiza to overtake Dean as the leading U.S. milk processor.
2001:: Suiza acquires Dean in a $1.7 billion deal and adopts the Dean Foods Company name, but remains based in Dallas.
2002:: Dean purchases full control of WhiteWave.
2004:: Dean increases interest in Horizon Organic to 100 percent; most of the company's branded businesses, including WhiteWave, Horizon Organic, and Dean Branded Products Group, are consolidated within a unit called WhiteWave Foods Company.
2005:: The Dean Specialty Foods Group is spun off as TreeHouse Foods, Inc.

Dean sold its retail Baskin-Robbins ice cream business in 1989, but continued to be the stores' sole supplier for two of their major distribution areas. Shortly after that sale, Dean acquired Charles F. Cates & Sons, Inc., a pickle processor based in North Carolina with annual sales of $84 million. This boosted Dean's presence in the East and Southeast. Meanwhile, the company was the target of takeover talk and updated its poisonpill strategy late in 1989. Dean also continued its product innovations, introducing a very successful nonfat yogurt with artificial sweetener and Extra Light sour creams and dips. A frozen yogurt, which Dean had introduced 14 years earlier with little success, suddenly began performing well with the trend toward nutritional and health awareness.

Continuing Acquisition Spree in the Early to Mid-1990s

Dean launched 1990 with the purchase of Mayfield Dairy Farms, Inc. As one of the largest remaining family-owned dairy farms, Mayfield was a force in the Southeast—primarily Tennessee and Georgia—with annual sales near $110 million. Another new product was introduced in 1990: a low-fat milk with reduced lactose, a sugar that causes digestion problems for some milk drinkers. Dean also acquired Ready Food Products, Inc., of Philadelphia, a specialty dairy processor representing sales of $28 million. Expanding its specialty food segment helped Dean to balance the shortfall in dairy profits caused by further increases in raw-milk prices in 1989 and 1990. The operating earnings in specialty foods exceeded Dean's dairy products segment for the first time in 1990.

Three more dairies acquired in early 1991 brought with them $150 million in annual revenues. At the same time, Dean sold its McCadam Cheese Company unit, a private-label, New York supplier of natural cheeses. As raw-milk prices returned to predrought levels by the summer of 1991, the company refocused on its acquisition program. Dean purchased Cream o'Weber Dairy, Inc., of Utah in April 1991. It also acquired Frio Foods, Inc., a Texas-based vegetable processor, and Meadow Brook Dairy Company of Pennsylvania. The Cream o'Weber purchase typified Dean's strategy: even before the acquisition was completed, Cream o'Weber's plants were being consolidated and updated. Another advantage of being part of the Dean team was the sharing between divisions. An example of this came during the frozen yogurt boom in 1990, when Dean's T.G. Lee and McArthur affiliates wanted to enter this market. Starting a new product from scratch might have taken more than six months. Instead, these dairies were able to take advantage of the expertise of a fellow Dean division, Mayfield Dairy Farms, which produced one of Dean's best frozen yogurts. In just about five weeks, these companies had a new product on the market under their own names. Sharing between companies and a decentralized management style were part of what made Dean so successful.

Dean passed the $2 billion mark for the first time in 1991. An excess of crops in 1992, however, put a squeeze on Dean's profits in the vegetable segment. While revenues increased to $2.3 billion, net income dropped to $62 million, down from $72.5 million the previous year. At this time, Dean's vegetable line was 55 percent frozen and 45 percent canned, with roughly two-thirds of its output for private labels. Dairy remained Dean's primary business, with more than 21 milk processing plants and nearly 6 percent of the total market, making Dean a very close second to Borden, the industry leader.

In early 1993 Dean acquired W.B. Roddenbery Co. Inc., a processor of pickles, peanut butter, and syrup that generated approximately $57 million in annual sales. Based in Georgia, the company's brands had widespread regional name recognition and were expected to help strengthen Dean's existing Specialty Foods segment. Relentless rain in the summer of 1993 seemed to promise relief from the oversupply and resulting low prices that had plagued the vegetable business in recent years; Dean found, however, that the weather raised its processing costs without providing immediate price increases, as the company was locked into low-priced contracts with its retail customers.

In January 1994 Dean Foods completed negotiations with Yarnell Ice Cream Co. to manufacture and distribute a line of low-fat and nonfat dairy products under Yarnell's Guilt Free brand, and two months later Dean purchased Birds Eye frozen foods from Kraft General Foods for $140 million. Noting the strength of the Birds Eye brand name, Howard Dean called the purchase "a strategic acquisition" that "positions Dean for volume and profit growth." Dean also announced plans to purchase Curtice-Burns Foods for approximately $173 million; the companies, however, were unable to resolve obstacles to the acquisition, and the deal fell through. In early 1995 Dean's CFO, Tim Bondy, resigned abruptly, and Dean's stock dropped 8 percent on this news: according to observers, Bondy was the mastermind behind Dean's growth-by-acquisition strategy, and his departure raised eyebrows on Wall Street. Within a week, the company announced that earnings for its third quarter (ending in February) would be substantially lower than previously estimated, and its stock dropped an additional 6 percent. According to the company, interest costs and tax rates contributed to the earnings decline.

Throughout 1995 Dean continued its shopping spree, purchasing Rio Grande Foods, a $40 million frozen vegetable processor based in Texas; Noral Crosetti Foods, a $45 million frozen vegetable processor based in California; and the salad dressing and dairy operations of Merico Inc., worth about $70 million annually. Whenever possible Dean worked to consolidate operations of its new acquisitions, seeking to effect efficiencies and move production closer to retail markets to reduce transportation costs.

The following year, Dean invested heavily to update the brand image of its dairy line, redesigning its packaging in bright colors with eye-catching graphics. Seeking to strengthen the Dean brand identity in a commodity market, the company began advertising milk's rich calcium content on its cartons and to approach marketing in general with the mind-set of a large beverage producer. In this vein, Mayfield Dairy Farms, a Dean division based in Tennessee, developed a highly successful plastic, single-serving, resealable milk bottle with a twist-off cap. A hit with consumers following its introduction in 1997, the plastic bottles—called "Milk Chugs"—were convenient, portable, and saleable in vending machines. Industry consultant Jerry Dryer noted the potential of such packaging for expanding the portability and popularity of milk, observing: "A square carton doesn't fit in the cup holder of your minivan." Dean subsequently introduced the Milk Chug at other dairies it owned, always sold under the local or regional brand of the specific dairy.

Late 1990s: Divestment of Vegetable Operations, Battling to Become Number One in Dairy

By 1996 Dean's rapid expansion into the vegetable business was taking a severe toll on earnings, as excess production, stagnant prices, and weak demand hurt vegetable processors throughout the country. Dean announced that it would undergo a wholesale restructuring, closing 13 plants—including seven vegetable plants—eliminating 840 jobs, and hiring a consultant to examine every other aspect of its business. Its recent acquisitions had made Dean the third largest vegetable processor in the United States, with vegetables accounting for 20 percent of its revenues. Dean expected the restructuring to eliminate $50 million in costs annually. The restructuring also entailed a shift in focus, with Dean reemphasizing dairy and pickles at the expense of vegetables, particularly canned vegetables.

In January 1997 the company announced the selection of Phil Marineau, the former head of Quaker Oats' Gatorade unit, as president and COO. Marineau replaced Thomas L. Rose, who retired from those positions but maintained a position as vice-chairman of the board. Analysts applauded the selection of Marineau for his extensive experience in packaged foods marketing, an area in which Dean was not traditionally strong. Said analyst John McMillin of Prudential Securities, "As a Dean Foods stockholder, I am thrilled that Dean could find such a qualified person."

Dean soon announced the purchase of Meadows Distributing Company (a $70 million distributor of ice cream in the Chicago metropolitan area) and the $35 million Marie's line of salad dressings, dips, salsas, and fruit glazes. In addition, Dean entered into a joint venture with River Ranch, of Salinas, California, to produce a line of branded fresh vegetables under the Birds Eye name. Fresh produce in U.S. supermarkets was an $18 billion a year business; with the increasing popularity of branded fresh vegetable lines, Marineau speculated that the new venture could soon generate $100 million annually. At the same time, Dean announced that it was investing $10 million to promote its new line of Birds Eye frozen baby gourmet vegetables.

Dean Foods completed several more dairy acquisitions in 1998, pushing its share of the U.S. milk market past the 10 percent mark and solidifying its position as the leading U.S. milk processor. Among the largest of these purchases was that of Nashville, Tennessee-based Purity Dairies, completed in May. The family-owned Purity, with annual sales of $100 million, produced and sold milk, ice cream, and other dairy products in central Tennessee, southwestern Kentucky, and northern Alabama. Other 1998 acquisitions included the California dairy operations of Lucky Stores, Inc., a subsidiary of Salt Lake City-based food and drug retailer American Stores Company, which added a business with $250 million in annual sales. The Alabama-based Barber Dairies Inc. was also acquired, although Dean was forced to divest Barber's Huntsville plant to gain regulatory approval. Revenues for the acquired operations of Barber totaled $200 million in 1997. To fund these and future acquisitions, Dean elected to sell off its underperforming vegetable business. It was sold in 1998 to Agrilink Foods Inc., a unit of Pro-Fac Cooperative, Inc., for $400 million in cash.

During the second half of the fiscal year ending in May 1999, Dean bolstered its California dairy operations, buying the San Francisco Bay area firm Berkeley Farms, Inc. in November 1998 and Alta-Dena Certified Dairy, Inc., operating in Southern California, in May 1999. For the fiscal year, sales in Dean's dairy business jumped 45 percent, reaching $2.9 billion. Such apparently strong growth, however, was not enough to keep Dean number one. In early 2000 the company was surpassed by the even-more-rapidly expanding Suiza Foods, which had completed more than 40 dairy acquisitions since 1996, coming seemingly out of nowhere to grab 20 percent of the milk market, while Dean's operations now claimed 14 percent. In the meantime, to improve its profit margins, Dean spent more than $15 million in fiscal 1999 to consolidate its burgeoning operations, closing ten dairy plants and centralizing engineering processes for the remaining 56 plants.

Dipping its toe into the burgeoning market for soy-based food products, Dean spent $15 million in 1999 and 2000 for a 36 percent stake in Boulder, Colorado-based WhiteWave, Inc. Founded by Steve Demos in 1977 to sell tofu in the Boulder area, WhiteWave was the U.S. pioneer in refrigerated soymilk, launching the top-selling Silk soymilk brand in 1996. At the time of Dean's investment, WhiteWave was generating annual sales of approximately $21 million. Also in 2000, Dean purchased the Upper Midwest fluid milk operations of Land O'Lakes, Inc., a business with $310 million in 1999 sales. Concurrently, Dean and Land O'Lakes entered into a 50–50 joint venture through which Dean would begin marketing sour cream, half and half, and cream nationwide under the Land O'Lakes brand. For the 2000 fiscal year, Dean Foods reported net income of $106.1 million on $4.07 billion in revenues. In April 2001 Dean Foods, after more than three-quarters of a century in the milk business, agreed to be acquired by the industry's upstart but now clear number one player, Suiza Foods.

Suiza Foods' Packaged Ice Beginnings

Suiza Foods Corporation had its start in 1988 when an investment firm, Kaminski/Engles Capital Corp., formed by Gregg L. Engles and Robert Kaminski, purchased the Reddy Ice packaged ice business from The Southland Corporation, owner of the 7-Eleven convenience store chain, for $26 million. It was ironic that Reddy Ice would be the company that Suiza Foods was founded upon, since Southland also traced its beginnings to Reddy Ice, which was launched in 1927 by 7-Eleven founder Joe C. Thompson. By the late 1980s, Southland had fallen on hard times, and the selling of its ice business was part of a divestiture program. Later in 1988 Kaminski/Engles bought Sparkle Ice from The Circle K Company, another convenience store chain, and combined it into Reddy Ice. Over the next several years, more than a dozen additional ice making and distribution operations were purchased and melded into Reddy Ice, creating abundant opportunities for consolidating facilities and achieving economies of scale. This pattern would be followed to an even larger extent by Engles in the dairy sector.

Engles's background was in investment banking, but he specialized in mergers and acquisitions, which was quickly apparent. In late 1993 Engles and a group of partners in Suiza Holdings L.P. acquired Suiza-Puerto Rico for $99.4 million, including $85 million in cash. Suiza-Puerto Rico's operations included Suiza Dairy Corp., the largest dairy company in Puerto Rico. Suiza Dairy ("Suiza" is Spanish for "Swiss") had been founded in 1942 by Héctor Nevares, Sr., and was owned by the Nevares family until the purchase by the Engles-led partnership. The company held 58 percent of the milk market on the island, had 850 employees, and generated annual revenues of $185 million. Suiza-Puerto Rico was also involved in the manufacture of fruit drinks and the distribution of third-party brandname ice cream and other dairy products.

The dairy sector quickly became Engles's industry of choice. He had been searching for an area ripe for consolidation. In 1998, in explaining to Dairy Foods why he chose dairy, he said: "In large measure, because that's the opportunity that presented itself. I don't know of a bigger industry consolidation going on today. But I like dairy. Its dynamics are good. This industry is one in which there are real economic benefits in size and scale, but no one really has it, no one has capitalized on that." The U.S. dairy industry of the 1990s was highly fragmented, with numerous family-owned operations that were ideal acquisition candidates.

Engles's formula for growth was evident right from his first foray into dairy (and actually was earlier applied to ice packaging). His plan was to purchase the leading dairy in a region, then fill in with additional acquisitions in that region. By consolidating operations, closing plants, and cutting jobs, the first dairy acquired would gain market share, increase its efficiency, and become more profitable. In Puerto Rico, Engles followed his purchase of Suiza Dairy with the June 1994 $7 million acquisition of Mayaguez Dairy, Inc., the island's number three dairy. Mayaguez was subsequently consolidated into Suiza Dairy, whose market share increased to 66 percent, and the plan was put into practice.

In April 1994 Engles, through his Dallas-based investment banking firm Engles Management Corp., spent $48 million to acquire Lakeland, Florida-based Velda Farms, Inc., providing a regional base for the state of Florida. Velda Farms, which was founded in 1955, manufactured and distributed fresh milk, ice cream, and related products under its own brand names to about 9,500 foodservice accounts, convenience stores, club stores, and schools.

October 1994 Formation of Suiza Foods

Engles incorporated Suiza Foods Corporation in October 1994 as a holding company for Suiza-Puerto Rico, Velda Farms, and Reddy Ice. Engles was named chairman and CEO, while Cletes O. "Tex" Beshears—Engles's right-hand man—was named president and chief operating officer as well as a director. Beshears had been a vice-president at Southland and COO of its dairy group from 1980 to 1988. From 1965 to 1980 Beshears was division manager for a number of Southland's regional dairy operations, including Velda Farms. The headquarters for Suiza Foods was established in Dallas.

Suiza Foods was set up as a holding company, with a thoroughly decentralized management style. As with its previous acquisitions, the Suiza plan was to seek out companies with strong management teams that could be left in place for a smooth transition and the retention of local market experience, relationships, and knowledge. By and large, the company had no plans for creating national brands, concluding that the continuation of longstanding local and regional brands was critical for success in the dairy industry.

The newly formed corporation immediately set out on the acquisition trail. In November 1994 Velda Farms added to its dairy operations the Florida division of Flav-O-Rich Inc., which was purchased from Mid-America Dairymen, Inc. for $3.6 million. Similarly, Velda bought Skinner's Dairy Inc. of Jacksonville, Florida, in January 1996.

To help fund additional acquisitions and pay down debt, Suiza Foods went public in April 1996 through an initial public offering—priced at $14 per share—that raised about $48.6 million. Company stock was traded on the NASDAQ under the symbol SWZA. An additional $10 million was secured in August 1996 through a private placement of common stock to the T. Rowe Price Small Cap Value Fund. Then in January of the following year Suiza raised another $89 million through a secondary public offering, priced at $22 per share. Proceeds were again used to reduce debt. In March 1997 Suiza Foods began trading on the New York Stock Exchange under the symbol SZA. Company stock ended 1997 trading at $59.56 per share, after reaching a high of $62.50.

Meanwhile, in July 1996 Suiza acquired Garrido y Compania, Inc., the second largest coffee processor in Puerto Rico and operator of the island's largest office and hotel coffee service. The company paid $35.8 million for Garrido, which became part of Suiza-Puerto Rico. In September 1996 Suiza gained a regional milk producer in southern California through the $55.1 million acquisition of Swiss Dairy Corp., based in Riverside. The family owned and operated dairy was founded in the 1940s and had sales of about $126 million in 1995. Suiza Foods added another western dairy to its growing stable in December 1996 when it paid $27 million for Model Dairy, also family owned and operated since opening in 1906. Reno, Nevada-based Model Dairy was the largest milk distributor in northern Nevada. These acquisitions helped increase Suiza Foods' revenues from $431 million in 1995 to $521 million in 1996.

An Accelerating Acquisition Pace Starting in 1997

In July 1997 Beshears was named vice-chairman of Suiza and William P. "Bill" Brick added the post of president to his title as COO (which he had assumed from Beshears in October 1996). Brick, like Beshears, had experience in the dairy industry prior to joining Suiza in July 1996 as an executive vice-president.

During the later months of 1997 and all of 1998 Suiza Foods grabbed headlines with its ever-more acquisitive methods. In the second half of 1997 alone, the company acquired Dairy Fresh L.P. (renamed Dairy Fresh, Inc.) for $106.3 million (in July); Garelick Farms, Inc. for $299.6 million (also in July); the Nashville, Tennessee, dairy division of Fleming Companies, Inc. (in August); Country Fresh, Inc. for $135 million in stock and debt (in October); and The Morningstar Group, Inc. for $960 million in stock and debt (in November). Winston-Salem, North Carolina-based Dairy Fresh generated about $125 million in annual revenues through the processing of milk and ice cream products. The Fleming dairy division, which Suiza renamed Country Delite Farms, Inc., had revenues of $76 million. In February 1998 Suiza paid $248 million for Land-O-Sun Dairies, L.L.C., a Johnson City, Tennessee, processor of fluid milk and ice cream with revenues of $464 million. Dairy Fresh, Country Delite, and Land-O-Sun together formed the largest dairy manufacturing and distribution network in the Southeast.

Garelick Farms included three dairy companies in the Northeast—Franklin, Massachusetts-based Garelick, Fairdale Farms, Inc. in Bennington, Vermont, and Grant's Dairy, Inc. of Bangor, Maine—in addition to Mendon, Massachusetts-based bottled water firm Miscoe Springs, Inc. Garelick's operations also included 17 plastic bottle manufacturing operations located from Maine to Texas, which Suiza consolidated within a new subsidiary, Franklin Plastics, Inc. Collectively, the Garelick operations generated more than $370 million in revenues and provided Suiza a solid base for growth in the Northeast.

The acquisition of Country Fresh provided Suiza its first penetration of the Midwestern market. Based in Grand Rapids, Michigan, Country Fresh was a processor of milk, juice, and ice cream products, which it distributed in Michigan, Ohio, and Indiana. The company had annual revenues of $353 million. In early 1998 Suiza expanded its presence in the Midwest through the February acquisition of Oberlin Farms Dairy, Inc. of Cleveland, Ohio, and the March purchase of Louis Trauth Dairy, Inc., of Newport, Kentucky. Oberlin had revenues of $76 million, while Louis Trauth had sales of $67 million.

The merger—through a stock swap—with Morningstar was different in that it diversified Suiza's operations. Morningstar's history paralleled that of Suiza Foods. It, too, was born in 1988 through a Southland divestment. Since being sold that year to private investors, Morningstar had grown through acquisitions and become a publicly traded company (just as Suiza had). It had revenues of about $528 million through its manufacturing and distribution of branded and long-shelf-life dairy and non-dairy specialty foods. Morningstar's array of brands included International Delight gourmet coffee creamers, Second Nature no-cholesterol egg substitute, Naturally Yours sour cream, Mocha Mix nondairy creamer, and Jon Donaire cheesecakes and desserts. The company also licensed the Lactaid brand for a line of lactose-free and lactose-reduced dairy products, as well as supplied its customers with private-label creamers, cottage cheese, prewhipped toppings, sour cream, and yogurt.

As a result of its aggressive acquisition strategy, Suiza Foods more than tripled its revenues for 1997, posting net sales of $1.8 billion. The company reported net income of $28.8 million. It now laid claim to the top position in the U.S. milk industry, although Dean Foods also boasted that it was number one.

Following the merger with Morningstar, Suiza shuffled its top management. Brick shifted over to become executive vice-president and president of the dairy group, making room for L. Hollis Jones to become president and COO, the position he had held at Morningstar. Jones, however, left Suiza in February 1998, becoming an exclusive consultant for Suiza, with a focus on acquisitions and strategic developments. Taking over as president and COO was G. Irwin Gordon, who had been a Suiza executive vice-president.

1998–2000: Shuffling of Plastic Assets, Divesting Ice, Acquiring More Dairies

Suiza Foods' acquisition of Garelick Farms—more specifically Franklin Plastics—had presented the company with another opportunity. Up until that purchase, Suiza was involved in the plastic packaging industry only through those dairies it had acquired that made their own containers (such as Neva Plastics, which was acquired along with Suiza-Puerto Rico). Franklin Plastics, however, served outside customers as well. Suiza decided to build upon the expertise of Franklin by applying its consolidation strategy to plastic packaging. In an acquisition announced in January 1998 and consummated in June of that year, Suiza acquired Continental Can Company, Inc. for about $345 million. Norwalk, Connecticut-based Continental Can had revenues of $546 million and 15 plastic packaging plants in the United States, which when added to those of Franklin provided Suiza with a nationwide packaging network. Continental Can also had nine European plants that manufactured food cans and plastic packaging; these operations were almost immediately identified as likely candidates for divestment, and they were in fact sold off in 2000.

In March 1998 the company's board of directors adopted a shareholders' rights plan aimed at making a hostile takeover of Suiza more difficult. Two months later Suiza completed the sale of Reddy Ice—the business upon which the company was founded—to privately held Packaged Ice, Inc. of Houston, Texas, for $172 million. The move was intended to allow the company to focus on its core dairy and plastic packaging operations, with the proceeds slated for additional acquisitions in those sectors. In a somewhat similar move, Suiza in July 1998 exchanged its Jon Donaire desserts business for the retail refrigerated and frozen creamer business of Rich Products Corporation of Buffalo, New York. While desserts were outside Suiza's core food areas, the Coffee Rich, Farm Rich, Poly Rich, and Rich Whip brands acquired fit in perfectly with the other brands Suiza had acquired through Morningstar.

Suiza Foods added two more dairies to its northeastern region in 1998 by way of the June purchase of West Lynn Creamery, Inc., which had revenues of $215 million; and the August acquisition of the fluid dairy division of Cumberland Farms, Inc. of Canton, Massachusetts, which generated sales of about $200 million. In July 1998 Suiza spent about $12 million for a 12 percent stake in Boulder, Colorado-based Horizon Organic Dairy Inc., holder of 65 percent of the U.S. organic dairy product market. The transaction was made in concurrence with Horizon's initial public offering. Horizon also entered into dairy processing and distribution agreements with Suiza subsidiaries Model Dairy and Garelick Farms. Suiza Foods topped off 1998 with two more deals. In December Suiza agreed to purchase Broughton Foods Corporation for $123 million. Based in Marietta, Ohio, Broughton was a leading manufacturer and distributor of milk, ice cream, and other dairy products in Michigan, Ohio, West Virginia, Kentucky, Tennessee, and sections of the eastern United States. The company had revenues of about $200 million in 1997. Suiza planned to integrate Broughton facilities into its regional operations in the Midwest and Southeast. Also in December, Suiza and Dairy Farmers of America, Inc. (DFA), the nation's largest dairy cooperative, agreed to combine their northeastern dairy operations into a joint venture 75 percent owned by Suiza and 25 percent by DFA. With its various 1998 acquisitions, Suiza posted 1998 revenues of $3.32 billion, nearly double that of the preceding year. It now held more than 10 percent of the $25 billion fluid milk market in the United States, and Engles set a goal of increasing that figure to 30 percent by 2003.

The Broughton deal ran into a snag when the U.S. Department of Justice filed an antitrust suit to block the purchase because of concerns about how the combination would affect the pricing of milk contracts in certain Kentucky school districts. Suiza settled the suit by agreeing to sell one of Broughton's Kentucky dairies, and the deal closed in June 1999 at a reduced price of $86 million plus the assumption of $20 million in debt. In July 1999 Suiza exchanged its domestic plastic packaging operations for a 43 percent stake in the newly formed Consolidated Container Company L.L.C. (CCC), plus $502 million in cash and assumed debt. CCC was created by Vestar Capital Partners, a private equity firm, which contributed its Reid Plastics operations to the venture. The sale helped Suiza pay down some of its $900 million debt load and provided funding for further dairy acquisitions.

Of the dozen or so deals completed in 1999 and 2000, the most significant involved Southern Foods Group, L.P., the third largest dairy processor in the nation. In January 2000 Suiza merged its milk processing and distribution assets with those of Southern Foods in a deal valued at $435.6 million. Southern, whose annual sales totaled about $1.25 billion, operated in Texas, the Midwest, and the Rocky Mountains, marketing its milk under such names as Oak Farms, Schepps, Foremost, Borden, Elsie, and Meadow Gold. Southern had been half owned by DFA, so upon completion of the deal the newly created Suiza Dairy Group operated as a joint venture between Suiza and DFA, with Suiza owning 66.2 percent and DFA 33.8 percent. DFA would act as one of Suiza Dairy Group's prime milk suppliers. The addition of the Southern Foods' dairies to the fold made Suiza the clear leader of the U.S. fluid milk sector, with a market share of about 20 percent compared to Dean Foods' 14 percent. Following completion of the merger, Gordon resigned and his position as president and COO was not filled. Instead, Suiza began operating with two presidents of its two main units. Pete Schenkel, who had been CEO of Southern Foods, was named president of Suiza Dairy Group and vice-chairman of Suiza Foods. Bing Graffunder continued to serve as president of the Morningstar branded dairy product subsidiary. Also in 2000, Suiza entered the international dairy market by acquiring a 75 percent stake in Leche Celta, one of the largest dairy processors in Spain. Suiza was mainly interested in gaining access to Leche's pasteurization technology that prolonged the shelf life of dairy products. In August 2001 Suiza acquired the remaining 25 percent interest. Suiza revenues for 2000, meanwhile, totaled $5.76 billion, more than triple the total of just three years earlier.

2001 and Beyond: The New Dean Foods, a Creation of Suiza's Takeover of the Old Dean

In a move that some in the industry called unthinkable and some inevitable, Suiza Foods in April 2001 reached an agreement to acquire Dean Foods. When completed in December of that year, the deal was valued at $1.7 billion in cash and stock, with Suiza also assuming about $1 billion in Dean debt, pushing its total debt load to more than $3 billion. The company kept its headquarters in Dallas but elected to adopt the better-known Dean Foods Company name. Engles remained CEO and also served as vice-chairman, while Howard Dean assumed the chairmanship; in April of the following year, however, Dean retired and Engles became chairman once again. Concurrent with completion of the takeover, the newly enlarged company purchased DFA's 33.8 percent stake in the Dairy Group unit, gaining full control of its milk operations once again. Dean conveyed to DFA $145.4 million in cash plus the operations of 11 milk plants (seven of Suiza's and four of old Dean's) located in nine states where the two predecessor firms had overlapping operations. The plant divestments were necessary to gain Justice Department approval of the transaction. Schenkel remained president of the Dairy Group, which now claimed 30 percent of the U.S. fluid milk market, achieving Engles's goal two years early. Dean Foods also ranked as the third largest maker of ice cream in the country. With operations in 39 states, and a total of 129 plants, the company was better positioned to serve the increasingly national operations of the major supermarket chains. Engles expected to achieve $120 million in cost savings through merger synergies by 2003. In 2002, its first full year of operation, the new Dean posted revenues just shy of $9 billion.

Integration activities were the main priority in 2002, and a few plants were shut down and three noncore businesses in the old Dean's Specialty Foods division were divested. Dean in December of that year sold its Puerto Rico operations to Grupo Gloria, a Peruvian conglomerate, for $119.4 million. The divested properties included the first dairy operation that Suiza had purchased. In May 2002 Dean spent $192.8 million for the 64 percent of WhiteWave it did not already own. Demos remained in charge of WhiteWave, whose annual sales had reached $125 million. Also acquired that year was the Marie's line of refrigerated dips and dressings, which were sold in the western United States and became part of the Morningstar Foods portfolio. In addition, Dean entered into an expanded alliance with Land O'Lakes giving Dean the right to use the Land O'Lakes name nationally on a range of value-added fluid milk and cultured dairy products.

Restructuring continued in 2003 as several more milk plants were closed and Morningstar Foods was transformed into the Dean Branded Products Group. Responsibility for private-label dairy products was shifted from Morningstar to the Dean Dairy Group, and the newly named Dean Branded Products Group refocused exclusively on national brand-name products, such as International Delight coffee creamers, Hershey's milks and milkshakes, Land O'Lakes value-added dairy products, and Marie's dips and dressings. In a move important more for its marketing potential than for the potential sales, WhiteWave entered into an agreement with Starbucks Corporation for Silk to become the exclusive soymilk used at the numerous Starbucks outlets located throughout North America, starting in the summer of 2003. On the acquisition front, Dean spent $158.6 million for Kohler Mix Specialties, Inc., maker of private-label, ultra-pasteurized ice cream mixes, creamers, and creams, mainly for the foodservice channel. The deal greatly expanded the Dairy Group's ultra-high-temperature manufacturing capacity. In June 2003 the Dairy Group bolstered its Michigan operations by acquiring Melody Farms, LLC, a producer of fluid dairy and ice cream products from two facilities with annual revenues of $116 million. Continuing to seek this type of fill-in acquisition, the Dairy Group in January 2004 acquired Ross Swiss Dairies, a Los Angeles dairy distributor with 2003 net sales of $120 million. Late in 2003 Dean's Specialty Foods Group bought the Cremora brand of nondairy powdered creamer from Eagle Family Foods, Inc.

Dean further bolstered its brand-name operations through the January 2004 purchase of the 87 percent of Horizon Organic it did not already own. The purchase price was approximately $287 million. Horizon had achieved $187 million in sales by 2002, and its flagship brand dominated the U.S. organic milk market, with a 67 percent share. In addition to milk, Horizon's product line included butter, yogurt, cheese, juices, puddings, fruit jells, and eggs. Horizon also had an operation in the United Kingdom, marketing and selling organic milk, yogurt, and butter under the Rachel's Organic brand. The Rachel's Organic business was shifted into Dean's International division at the beginning of 2005. In August 2004, meanwhile, Dean launched a plan to consolidate by the end of 2005 its Branded Products Group, WhiteWave, and Horizon into a single, standalone operating unit called WhiteWave Foods Company, to be based in Broomfield, Colorado. These operations, boasting an impressive array of brands—Horizon Organic, Silk, Sun Soy, WhiteWave, Hershey's, Land O'Lakes, Dean, Marie's, and International Delight—produced $1.19 billion in revenues in 2004 and were growing at a clip in excess of 20 percent per year. Demos was initially placed in charge of WhiteWave, but he resigned in March 2005, apparently after Dean concluded that it needed someone at WhiteWave with more consumer packaged goods experience. Engles assumed leadership over the unit on an interim basis, while a search for a new leader commenced.

Revenues at Dean Foods surpassed $10 billion for the first time in 2004, but net income fell thanks to highly volatile raw milk prices, pressures stemming from a difficult environment in the retail grocery sector, and record costs for fuel, resin, and other commodities. Only $676.8 million of the $10.82 billion in revenues was attributable to the underperforming Specialty Foods Group, so Dean in January 2005 announced a plan to spin the operation off to shareholders in order to further focus on its core Dairy Group and WhiteWave units. Dean shifted its Second Nature egg substitute, Mocha Mix nondairy creamer, and foodservice salad businesses into the Specialty group before completing the spinoff in June 2005, which created the new, publicly traded TreeHouse Foods, Inc. In the wake of this important divestiture, Dean Foods was faced with the immediate tasks of successfully consolidating the WhiteWave Foods operations and finding a new leader for it, and taking further steps to cut costs and improve profitability at the Dairy Group.

Principal Subsidiaries

Alta-Dena Certified Dairy, Inc.; Barber Ice Cream, LLC; Barber Milk, Inc.; Berkeley Farms, Inc.; Broughton Foods, LLC; Country Delite Farms, LLC; Country Fresh, LLC; Dairy Fresh, LLC; Dean Dairy Products Company; Dean Foods Company of California, Inc.; Dean Foods Foundation; Dean Foods North Central, Inc.; Dean Milk Company, Inc.; Dean Puerto Rico Holdings, LLC; Dean Transportation, Inc.; Fairmont Dairy, LLC; Franklin Plastics, Inc. (88%); Gandy's Dairies, Inc.; International Milk Sales, Inc.; Land-O-Sun Dairies, LLC; Liberty Dairy Company; Louis Trauth Dairy, LLC; Maplehurst Farms, LLC; Mayfield Dairy Farms, Inc.; McArthur Dairy, Inc.; Meadow Brook Dairy Company; The Meadows Distributing Company; Midwest Ice Cream Company; Model Dairy, LLC; Morningstar Foods Inc.; New England Dairies, LLC; Old G & Co., Inc.; Pet O'Fallon, LLC; Purity Dairies, Incorporated; Reiter Akron, Inc.; Reiter Springfield, LLC; Robinson Dairy, LLC; Schenkel's All-Star Dairy, LLC; Schenkel's All-Star Delivery, LLC; Shenandoah's Pride, LLC; Southern Foods Group, L.P.; Suiza Dairy Group, Inc.; Sulphur Springs Cultured Specialties, LLC; T.G. Lee Foods, Inc.; Tuscan/Lehigh Dairies, L.P.; Verifine Dairy Products Corporation of Sheboygan, Inc.; Wengert's Dairy, Inc.; WhiteWave, Inc.; Tenedora Dean Foods Internacional, S.A. de C.V. (Mexico); Dean Netherlands, B.V.; Carnival Ice Cream, N.V. (Netherlands Antilles); Leche Celta, S.L. (Spain).

Principal Divisions

Dairy Group; WhiteWave Foods Company; International.

Principal Competitors

The Kroger Co.; National Dairy Holdings L.P.; Prairie Farms Dairy, Inc.; Dreyer's Grand Ice Cream Holdings, Inc.; Parmalat Canada Limited; Dairy Farmers of America, Inc.

Dean Foods Company

Dean Foods Company

Principal Subsidiaries

Further Reading

Dean Foods Company

Dean Foods Company

Early 20th-century Beginnings

Expansion in the 1960s and Beyond

The 1990s

Principal Subsidiaries

Further Reading

Dean Foods Company

Dean Foods Company

Early-20th-Century Beginnings of "Old" Dean Foods

Expansion in the 1960s Through 1980s

Company Perspectives:

Key Dates:

Continuing Acquisition Spree in the Early to Mid-1990s

Late 1990s: Divestment of Vegetable Operations, Battling to Become Number One in Dairy

Suiza Foods' Packaged Ice Beginnings

October 1994 Formation of Suiza Foods

An Accelerating Acquisition Pace Starting in 1997

1998–2000: Shuffling of Plastic Assets, Divesting Ice, Acquiring More Dairies

2001 and Beyond: The New Dean Foods, a Creation of Suiza's Takeover of the Old Dean

Principal Subsidiaries

Principal Divisions

Principal Competitors

Further Reading

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Dean Foods Company

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