US dairy giant Dean Foods plans to “accelerate” its existing cost reduction efforts in 2013 in an attempt to minimise the impact of an anticipated decline in private label milk volumes.
Earlier this year, a request for proposal (RFP) for private label milk with a customer resulted in the loss of a “meaningful portion” of the company’s private label fluid milk business to other suppliers. Dean Foods expects a low-single digit decline in volume in 2013 as a direct result of this loss.
In its recently published 2012 Annual Report, the Dallas-based dairy processor vowed to continue to “emphasize price realisation, volume performance and disciplined cost management” to meet this financial loss head-on.
The company hopes that the continuation of these efforts will help to offset the financial impact of this expected volume decline.
“….we expect total fluid milk volumes to decline in the low-single digits in 2013,” said Dean Foods in its 2012 Annual Report. “We expect to accelerate our ongoing cost reduction efforts in 2013 to minimise the impact of these lost volumes.”
Dean Foods added, however, that it is currently unable to “predict the long-term effects of this volume loss.”
"Efficiently accelerate our cost reduction"
“We have implemented a number of cost reduction initiatives that we believe are necessary to position our business for future success and growth,” said the report.
“In order to mitigate continued volume softness in our Fresh Dairy Direct segment, we expect to accelerate cost reduction activities in 2013 through, among other things, closing 10-15% of our plants.”
Dean Foods most recently announced plans to close it Oak Farm milk processing plant in Shreveport, Louisiana. Attempting to justifying its decision, Dean Foods cited the pressures of operating in a “highly competitive marketplace.”
“Our future success and earnings growth depend upon our ability to efficiently accelerate our cost reduction initiatives and execute our rationalisation plan, the scope of which is significant, on time and within budget.”
From there the company aims to “capitalise” on its cost-reduction efforts through “carefully” evaluated investments.
“If we are unable to realise the anticipated benefits from our cost cutting efforts, we could become cost disadvantaged in the marketplace, and our competitiveness and our profitability could decrease," the Dean Foods report added.