Dean Foods is the clear leader in U.S. dairy, with sales that analysts estimate are five times higher than its closest competitor. But that hasn't stopped the company from getting slammed by high prices and a tough economy. Rising commodity inflation, soaring gas prices, and a waning economy have taken a toll on its bottom line.
Much of Dean Foods's $1.6 billion loss in 2011 came from the $1.6 billion write-down of milk processing division Fresh Dairy Direct, due to harsh industry conditions. The largest milk processor and distributor in the country, Fresh Dairy Direct has 77 manufacturing facilities in 33 states, and saw more than $10 billion in sales last year. In an analyst note, Morningstar lauded the company's dominant position and its cost cutting plans. But it also noted that other package food companies were commanding higher margins: "supporting our belief that the firm's competitive advantages have soured."
