Wednesday, July 29, 2020

U.S. chains squeeze dairies out of milk

Three of the largest supermarket chains - Kroger Co., Walmart Inc. and Albertsons Cos. – in the United States are bottling their own milk.

That has squeezed competitors, including some of the largest.

Dean Foods Co., which until last year was the largest U.S. milk processor by sales, and Borden Dairy Co. were sold this year after filing for bankruptcy in November and January. 

Executives of both had blamed some of their struggles on grocers’ focus on cheap milk, often used as a loss leader.

But in Canada the trend has been in the opposite direction. The Weston Group sold its Neilson’s Dairy, but continues to buy that brand for its supermarket chains such as Loblaws and Zehrs.

Sobey’s sold four of the milk processing plants it had bought in Western Canada when it picked up the Canada Safeway supermarket chain. Agropur co-operative now owns them.

They were once known as Lucerne. 

“There are retailers who prefer to have really aggressively low prices on milk because it’s a great way to get people in the stores,” said Tony Sarsam, Borden’s former chief executive. Private-equity firm KKR & Co. and Capitol Peak Partners LLC, an investment firm headed by former dairy executives, bought Borden out of bankruptcy this month.

Adding to the industry’s pressures, milk’s luster has been slowly fading for years in an increasingly crowded beverage market. Many consumers have switched to bottled water and juice, or dairy alternatives made from almonds or oats; breakfast cereal has fallen out of favor.