We are one of the leading food and beverage companies in the United States. Fresh Dairy Direct, previously referred to as DSD Dairy, is the largest processor and distributor of milk and other dairy products in the country, with products sold under more than 50 familiar local and regional brands and a wide array of private labels. WhiteWave-Morningstar markets and sells a variety of nationally branded dairy and dairy-related products, such as Silk® soymilk and cultured soy products, Horizon Organic® milk and other dairy products, The Organic Cow®, International Delight® coffee creamers, LAND O LAKES® creamers and fluid dairy products and Rachel’s Organic® dairy products. With the addition of our recently acquired Alpro business in Europe, WhiteWave-Morningstar now offers branded soy-based beverages and food products in Europe, marketing its products under the Alpro® and Provamel® brands. Additionally, WhiteWave-Morningstar markets and sells private label cultured and extended shelf life dairy products.
Our principal executive offices are located at 2515 McKinney Avenue, Suite 1200, Dallas, Texas 75201. Our telephone number is (214) 303-3400. We maintain a worldwide web site at www.deanfoods.com. We were incorporated in Delaware in 1994.
Our Reportable Segments
We have two reportable segments, Fresh Dairy Direct and WhiteWave-Morningstar.
Fresh Dairy Direct
Fresh Dairy Direct manufactures, markets and distributes a wide variety of branded and private label dairy case products, including milk, creamers, ice cream, cultured dairy products, juices and teas to retailers, distributors, foodservice outlets, educational institutions and governmental entities across the United States.
Fresh Dairy Direct’s net sales totaled $8.5 billion in 2009, or approximately 76% of our consolidated net sales. The following charts graphically depict Fresh Dairy Direct’s 2009 net sales by product and customer and the volume mix of company branded versus private label products.
(1) Includes half-and-half, whipping cream, dairy coffee creamers, and ice cream mix.
(2) Includes ice cream and ice cream novelties.
(3) Includes yogurt, cottage cheese, sour cream and dairy-based dips.
(4) Includes fruit juice, fruit-flavored drinks, iced tea and water.
(5) Includes items for resale such as butter, cheese, eggs and milk shakes.
(6) Includes restaurants, hotels and other foodservice outlets.
Fresh Dairy Direct sells the majority of its products under local and regional proprietary or licensed brands. Products not sold under these brands are sold as private label. Fresh Dairy Direct sells its products primarily on a local or regional basis through its local and regional sales forces, although some national customer relationships are coordinated by Fresh Dairy Direct’s corporate sales department. Fresh Dairy Direct’s largest customer is Wal-Mart, which includes its subsidiaries such as Sam’s Club, accounting for approximately 21% of Fresh Dairy Direct’s net sales in 2009.
As of December 31, 2009, Fresh Dairy Direct’s local and regional proprietary and licensed brands include the following:
Borden® (licensed brand)
Bud’s Ice Cream™
Foremost® (licensed brand)
Hershey’s® (licensed brand)
Knudsen® (licensed brand)
LAND O LAKES® (licensed brand)
Land-O-Sun & design®
Lehigh Valley Dairy Farms®
Mile High Ice Cream™
Over the Moon®
Pet® (licensed brand)
Pog® (licensed brand)
WhiteWave-Morningstar consists of three aggregated operations including WhiteWave, Morningstar and Alpro, as well as a joint venture entered into in 2008 between WhiteWave and Hero Group (“Hero”). These operations have a higher concentration of branded products and rely more extensively on warehouse distribution. In 2008, we aligned these operations under a single leadership team to better leverage investments in people, tools and processes in various areas including marketing, supply chain, distribution, information technology and research and development.
Our WhiteWave operation (“WhiteWave”) manufactures, develops, markets and sells a variety of nationally branded soy, dairy and dairy-related products, such as Silk soymilk and cultured soy products, Horizon Organic milk and other dairy products, The Organic Cow organic dairy products, International Delight coffee creamers, LAND O LAKES creamer and fluid dairy products and Rachel’s Organic dairy products. With the recent acquisition of Alpro, WhiteWave-Morningstar now offers branded soy-based beverages and food products in Europe, marketing its products under the Alpro and Provamel brands. Our Morningstar operation (“Morningstar”) is one of the leading U.S. manufacturers of private label cultured and extended shelf life dairy products such as ice cream mix, sour and whipped cream, yogurt and cottage cheese. Additionally, with our Hero/WhiteWave joint venture we have expanded the WhiteWave product footprint beyond the dairy case to capitalize on the chilled fruit-based beverage opportunity with the introduction of Fruit2Day®.
WhiteWave-Morningstar’s net sales totaled $2.7 billion in 2009, or approximately 24% of our consolidated net sales. WhiteWave-Morningstar sells its products to a variety of customers, including grocery stores, club stores, natural foods stores, mass merchandisers, convenience stores, drug stores and foodservice outlets. WhiteWave-Morningstar sells its products through a combination of internal and external sales forces. WhiteWave-Morningstar’s largest customer is Wal-Mart, which includes its subsidiaries such as Sam’s Club, accounting for approximately 14% of WhiteWave-Morningstar’s net sales in 2009.
(1) Includes Horizon Organic and The Organic Cow organic dairy products.
(2) Includes cultured and extended shelf life dairy products such as ice cream mix, sour and whipped cream, yogurt and cottage cheese, as well as organic and soy products.
(3) Includes both Alpro and Provamel brands in Europe since July 2, 2009.
WhiteWave-Morningstar currently operates 19 domestic and 5 international manufacturing facilities. For more information about facilities in WhiteWave-Morningstar, see “Item 2. Properties.” The remaining products are manufactured by third-party manufacturers under processing agreements. The majority of WhiteWave-Morningstar’s products are delivered through warehouse delivery systems.
The primary raw materials used in our soy-based products include both organic soybeans and non-genetically modified (“non-GMO”) soybeans. Both organic soybeans and non-GMO soybeans are generally available from several suppliers and we are not dependent on any single supplier for these raw materials.
The primary raw material used in our organic milk-based products is organic raw milk. We currently purchase approximately 85% of our organic raw milk from a network of over 500 dairy farmers across the United States. The balance of our organic raw milk is sourced from two farms that we own and operate and a third farm that we lease and have contracted with a third party to manage and operate. We generally enter into supply agreements with organic dairy farmers with typical terms of two to three years, which obligate us to purchase certain minimum quantities of organic raw milk.
The primary raw material used in our private label cultured and extended shelf life dairy products, as well as LAND O LAKES and other non-organic dairy products, is conventional raw milk. WhiteWave-Morningstar also uses significant quantities of butterfat which is acquired through the purchase of raw milk and bulk cream. Bulk cream is typically purchased based on a multiple of the AA butter price on the Chicago Mercantile Exchange (“CME”). Other raw materials used in WhiteWave-Morningstar’s products include palm oil, flavorings and organic sugar. Certain of these raw materials are purchased under long-term contracts in order to better manage the supply and costs of our inputs.
WhiteWave-Morningstar has several competitors in each of its product markets. Competition to obtain shelf-space with retailers for a particular product is based primarily on the expected or historical sales performance of the product compared to its competitors. In some cases, WhiteWave-Morningstar pays fees to retailers to obtain shelf-space for a particular product. Competition for consumer sales is based on many factors, including brand recognition, price, taste preferences and quality. Consumer demand for soy and organic foods has grown in recent years due to growing consumer confidence in the health benefits of soy and organic foods, and we believe WhiteWave-Morningstar has a leading position in the soy and organic foods category.