Borden Dairy Co has filed bankruptcy, blaming the ‘rising cost of raw milk and market challenges facing the dairy industry’, as American refrigerators are increasingly being stocked with milk substitutes amid a surge in veganism.
The amount of liquid milk consumed per capita in the US has tumbled more than 40 percent since 1975. Americans drank around 24 gallons a year in 1996, according to government data but that dropped to 17 gallons in 2018.
Borden recorded net sales of $1.2billion and a net loss of $14.6million in 2018 and last year a net loss of $42.4million, according to a court filing.
Borden Dairy Co announced it had filed for bankruptcy on Monday, due to ‘market challenges facing the dairy industry’ as veganism rises and customers seek lactose-free alternatives
The heritage brand produces nearly 500 million gallons of milk each year for groceries, schools and others but the alternative dairy market has surged recently, and was worth $7.37billion in 2016.
About 65 percent of people cannot drink cow’s milk without getting an upset stomach due to lactose intolerance and many more have dietary restrictions that keep them from the drink.
With the rise of veganism, the grocery store sections for ‘mylks’ are ever-expanding which has hammered traditional milk producers like Borden – founded in 1857.
The Global Market Insights reported the plant milk market was worth over $8billion in 2016 and predicted it would be worth $21billion by 2024.
In America the number of vegans grew from once percent to six percent from 2014 to 2017, according to GlobalData. Plant-based alternatives to animal products, including milk, rose 17 percent in a year from the end of 2017 to 2018, Neilsen reported.
Borden, a 163-year-old American dairy company which employs 3,300 people and runs 12 plants across the US, said Monday that the ‘market challenges facing the dairy industry’ have ‘contributed to making our current level of debt unsustainable’.
The heritage American brand has been in business since 1857 and employs 3,300 people. Borden recorded net sales of $1.2billion and a net loss of $14.6million in 2018 and last year a net loss of $42.4million, according to a court filing
Remaining dairy farms can command higher prices, but that pinches Borden, which can’t charge consumers more because of pressure from big competitors like Walmart. Walmart opened its own milk processing plant in Indiana in 2018.
In 2019, Borden introduced Gingerbread Eggnog, reintroduced the brand in Ohio and launched State Fair-inspired milk flavors.
The company recently revived its beloved spokescow Elsie, and launched a higher protein and calcium level children’s milk named Kid Builder – designed to compete with trendy Coca-Cola Co milk brand Fairlife.
Borden – which calls itself ‘one of America’s favorite dairy companies’ – said the struggle was despite its growth last year outpacing the industry as it increased year-over-year sales.
‘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,’ Borden CEO Tony Sarsam explained in a statement.
‘These challenges have contributed to making our current level of debt unsustainable.’
Borden is the second in major US dairy to file bankruptcy in as many months.
Dean Foods, the nation’s largest milk producer, filed for bankruptcy protection in November. Both dairies are based in Dallas. The two companies controlled about 13.5 percent of US milk sales last year, according to consulting firm Euromonitor.
Late last month, a Texas federal bankruptcy court allowed Dean to access $850million in debtor-in-possession financing.
In 2019, the company revived its beloved spokescow Elsie, reintroduced the brand in Ohio and launched State Fair-inspired milk flavors but cannot compete with providers of dairy alternatives
Like Dean, Borden says it will continue to operate during its restructuring.
Borden intends to reduce its current debt load, maximize value and position the company for long-term success, a statement read.
Following discussions with lenders over the past few months, the company plans to continue operating in the ordinary course of business, under the court’s supervision, calling it ‘the best way to protect the company’.
The company also said it couldn’t afford its pension obligations.
About 22 percent of the ‘tenured’ workforce who the CEO said ‘live and breathe our values of teamwork and creative problem solving’ are covered by a collective bargaining agreement.
Sarsam said he is ‘extremely confident and optimistic about our continued success in the future’.
However her didn’t touch on plans for the brand after the bankruptcy process.
Borden can’t charge consumers more because of pressure from big competitors like Walmart. Walmart opened its own milk processing plant in Indiana in 2018 (pictured)
”We remain committed to ‘The Borden Difference,’ which is our promise to be the most service-oriented dairy Company that puts people first, Sarsam added. ‘We will continue serving our customers, employees and other stakeholders and operating business as usual throughout this process.
‘Borden is EBITDA-positive and growing, but we must achieve a more viable capital structure. This reorganization will strengthen our position for future prosperity.’
Borden was founded in 1857 by Gail Borden, Jr. and was the first company to develop a patent for the process of condensing milk, as well as the first to use glass milk bottles.
Kohlberg Kravis Roberts & Co. bought Borden for $2billion in 1996 after the company ran into financial problems following a rapid expansion into other industries.
Today it produces more than 35 products consumed by millions of people and the CEO says it has ‘earned the distinction of being one of the most well-recognized and reputable national brands’.
Forbes ranked it no.16 on their list of America’s Most Reputable Companies.