Stockholm (NordSIP) – On November 12th, Dean Foods, the largest dairy producer in the USA, filed for bankruptcy. “Dean Foods (…) announced that it and substantially all of its subsidiaries have initiated voluntary Chapter 11 reorganization proceedings in the Southern District of Texas,” the company announced in a press release. “The Company intends to use this process to protect and support its ongoing business operations and address debt and unfunded pension obligations while it works toward an orderly and efficient sale of the Company.”
Substitutes Decrease Demand for Dairy
The announcement was seen as a sign of changing times for the food industry by researchers at the FAIRR initiative, a collaborative investor network that raises awareness of material ESG risks and opportunities in global animal protein supply chains.
“Perhaps the most significant [factor behind Dean Foods’ bankruptcy] for forward-looking investors is the declining consumption of dairy milk,” researchers at FAIRR commented. According to FAIRR, per capita milk consumption in the US has decreased by over 40% over the four decades. Between 2012 and 2017 alone, dairy milk sales fell by 15%, while non-dairy milk sales increased by 61% since 2014. The FAIRR researchers blame this shift in market structure on increased demand for substitutes such as soy and almond mild.
“Plant-based milk alternatives now account for 13% of retail milk sales in the US,” the researchers at the investor network continued. “This figure is expected to grow as consumers increasingly factor climate considerations into their consumption choices.”
Dean foods had tried to get on board with the new market trends by purchasing companies such as Silk, Horizon Organic, Good Karma Foods and Uncle Matt’s Organic but the commitment was too little too late and it appears that Silk and Horizon Organic have been sold to Danone.
A Herald of Troubles Ahead
FAIRR quote data from the UN’s Food and Agriculture Organisation (FAO) according to which 4% of global anthropogenic GHG emissions are produced by the dairy sector, while the livestock industry as a whole is responsible for more than 14%.
Research from FAIRR suggests that “over 70% of major publicly-listed dairy companies have not set targets to reduce non-mechanical emissions, which make up 78-99% of dairy emissions.” Moreover, over 80% of companies are not addressing deforestation risks linked to soy used as feed, while 86% of dairy companies are not adequately addressing or managing water scarcity risks in animal farming.
As FAIRR concludes, the lessons we learn “for diversification of product ranges – or investment portfolios – to be successful, it must occur at a sufficient scale to outweigh the growing risks of exposure to meat and dairy.”