It's been a challenging year for the nation's largest milk processor. In February, Dean Foods reported a 30% spike for its fiscal full-year profit. But the news was spoiled by an 18% plunge in fourth-quarter profit.
"As the year came to a close, several of our businesses fell short of expectations," said CEO Gregg Engles at the time. And that was only the beginning.
As 2010 progressed, Dean Foods' bottom line continued to suffer as the sluggish economy prompted retailers to lower the price of milk. Further compounding the problem, retailers promoted lower-priced private label milk over the Dean Foods brand. The price difference drew more value-conscious customers toward private label brands and cut deeply into Dean Foods' bottom line. As the company's profits sank deeper and deeper, so did its stock.
Earlier this month, Fitch Ratings cut Dean Foods' credit one notch, putting it five levels into junk territory. "Given the market share gains by private-label milk and the industry's excess capacity, Fitch Ratings does not expect these adverse business conditions to reverse in the near term."
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