Iconic Borden Dairy files for bankruptcy
The U.S. dairy industry, the largest in the world, is under severe pressure as the consumption habits of Americans shift.
Borden Dairy Co. filed for bankruptcy protection, the second major U.S. dairy to do so in as many months. Headquartered in Dallas, Borden distributes nearly 500 million gallons of milk annually for grocery stores food service, hospitality and schools.
CEO Tony Sarsam said the company’s debt burden, coupled with industry head winds, left Borden with few options. “This was our final resort,” he said Monday.
From major corporations to small farmers, milk processors are seeing their margins pinched as wholesale milk costs climb and consumption falls amid the rising popularity of dairy-free options such as almond, soy and oat milk. Dean Foods, the nation’s largest milk producer, filed for bankruptcy protection Nov. 12.
U.S. refrigerators are increasingly stocked with juice, soda and milk substitutes made from soy or almonds. At the same time, protein bars, yogurts and other on-the-go breakfasts have replaced a morning bowl of cereal. That has hammered traditional milk producers such as Borden, which was founded in 1857.
The company has a storied history in U.S. dairy production. Borden was the first to patent its process for condensing milk and the first to use glass milk bottles. It’s iconic mascot, Elsie the cow, debuted in 1936. Today, Borden employs 3,300 people and operates 12 milk processing plants across the U.S.
The amount of liquid milk consumed per capita in the U.S. has tumbled more than 40 percent since 1975. Americans drank around 24 gallons a year in 1996, according to government data. That dropped to 17 in 2018.
As milk consumption has fallen, dairy farms have closed their doors. Farmer bankruptcies are on the rise, and farm debt is at record highs, crippling farmers around the country who have struggled to cover essentials such as groceries and electricity.
In court filings, Borden says 2,730 U.S. dairy farms have gone out of business in the last 18 months. The remaining farms can command higher prices, but that pinches Borden, which can’t charge consumers more because of pressure from big competitors such as Walmart. The retail giant opened its own milk processing plant in Indiana in 2018.
“Despite our numerous achievements during the past 18 months, the company continues to be impacted by the rising cost of raw milk and market challenges facing the dairy industry,” Sarsam said in a prepared statement late Sunday. “These challenges have contributed to making our current level of debt unsustainable.”
Borden tried to revive sales last year by relaunching Elsie, the smiling cow that first appeared on milk cartons in the 1930s. It also released new products such as gingerbread-flavored eggnog and Kid Builder, a children’s milk with higher levels of protein and calcium designed to compete with Fairlife, a trendy milk brand made by Coca-Cola Co. Borden said sales rose but not enough to offset broader trends in the industry.
Dean Foods, also based in Dallas, filed for bankruptcy protection to meet debt obligations as it looked to sell itself. Late last month, a federal bankruptcy court in Texas allowed Dean to access $850 million in debtor-inpossession financing, which is for companies under financial strains.
The two Texas dairy companies controlled about 13.5 percent of U.S. milk sales last year, according to Euromonitor, a consulting company. Like Dean, Borden says it will continue to operate during its restructuring.