From our perspective, the competitive landscape within the milk aisle has changed considerably during the last several years. But more importantly, it now appears that the competitive advantages we once believed Dean Foods DF possessed (namely as a low-cost operator with significant scale in a highly fragmented industry) seem to have eroded away as a result of the structural shift in what is essentially a commodity market. Here, we discuss our reasoning for recently removing Dean Foods' narrow economic moat rating.
The Industry's Leading Player Must Possess Sustainable Advantages, Right?
With $5 billion in annual sales (about 5 times greater than its closest competitor), Dean Foods is the top firm in the dairy aisle, maintaining about a 38% dollar share of the United States fluid milk market (which is up from 35% in 2003). Dean's scale is particularly evident in the fact that it is the only firm in the industry with a nationwide fluid dairy processing footprint. The company operates a large refrigerated direct store delivery network with more than 5,800 routes serving in excess of 160,000 locations.
To read the rest of the story, please go to: The Toronto Star