A new report shows that Dean Foods Company is struggling amid slowing milk sales and rising costs. The news comes as Dean’s largest customer, Wal-Mart Stores, is preparing to open its own milk processing plant, reducing its reliance on Dean. The Texas-based milk supplier this week cut its per-share profit expectations nearly in half. Shares of Dean Foods are down 45% this year, and the company’s CEO has pledged to reduce annual expenses by up to $50 million by 2018.
The Wall Street Journal said Dean’s recent struggles, however, raised broader questions among some analysts on payoffs from the milk company’s long-term strategy to focus investment on branded milk products. Meanwhile, retailers have added to the price pressure by aggressively pushing for cheaper milk for their own store brands. Wal-Mart’s soon-to-open milk plant in Indiana will cost Dean about 90 million to 95 million gallons’ worth of sales annually. Though Dean has been preparing for the shift.
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