Dairy products producer Dean Foods disappointed the markets with a sour quarterly performance last week, and though the stock dropped nearly 10% on the news, it's since bounced back as the plan for getting moving again resonates with investors.
Despite being the largest dairy products company, its share of U.S. fluid milk sales volume declined to 36.4% from 37.8% during the second quarter. Not only is it having to contend with falling consumption, but competition is heating up too. It's coming from other dairy producers like the one that beat it out earlier this year for a private-label contract with an unnamed "significant customer," as well as from its own customers, who are themselves becoming vertically integrated in a bid to produce their own dairy products.
Last year's purchase of Bareman's Dairy by grocery store chain Meijer came as a complete surprise to Dean considering it had supplied the supermarket with its store-brand milk for more than 50 years. But vertical integration by grocers is not unheard of in the grocery industry, as Kroger operates 15 dairies and two ice cream plants to supply its private-label products and Safeway owns Lucerne Foods, which makes its own-label dairy goods.
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