Dean Foods (DF) Comments on Wal-mart's (WMT) Dairy Plant Plans; Sees Potential Loss of Business

Dean Foods (NYSE: DF) disclosed the following on Tuesday:

Item 7.01 Regulation FD Disclosure

Walmart recently announced that it plans to build a dairy processing plant in Indiana. We currently estimate that the impact of this decision may result in the loss of approximately 100 million gallons of very low-margin private-label fluid milk volume beginning in late 2017. Given the ample lead time we have to respond to this development, we do not expect this will have a material impact on our financial results. We do not believe that Walmart’s announcement will impact our sales to the potentially affected stores of our national brands, DairyPure® and TruMoo®, or sales of our other non-fluid milk products.

We’ve been talking for the last several quarters about our increased focus on building and buying brands. We have been actively working to change the mix of our business to increase the focus on branded products, and will continue with those efforts. We are very confident in the strength of our brands and their ability to compete on a national scale.

“It’s disappointing to learn of any potential loss of business, but we remain confident in our future and the strategic plan we recently put in place. We understand the fresh dairy space better than anyone and have proven that we can manage change and will navigate this development with the same determination as we have in the past. With more than a year advance notice and the low-margin nature of the potential lost private-label milk volume, we expect to govern our business such that this will result in very little impact to our financials” said Gregg Tanner, Chief Executive Officer.

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