Borden Dairy has filed for Chapter 11 bankruptcy, signaling continued trouble in the dairy sector. The Dallas-based company, founded in 1857, announced Jan. 6 that it and certain affiliates have initiated voluntary reorganization proceedings in the District of Delaware under Chapter 11 of the Bankruptcy Code. The announcement follows the bankruptcy of Dean Foods Co., the nation’s largest milk producer, in November.
The company said it intends to use the court process to pursue a financial restructuring designed to reduce its current debt load, maximize value and position the company for long-term success. Borden also said it plans to continue operating in the ordinary course of business, under the court's supervision, and remains focused on being a service-oriented dairy company that offers delicious and nutritious products consumers love.
"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 chief executive officer Tony Sarsam said. "These challenges have contributed to making our current level of debt unsustainable. For the last few months, we have engaged in discussions with our lenders to evaluate a range of potential strategic plans for the company. Ultimately, we determined that the best way to protect the company, for the benefit of all stakeholders, is to reorganize through this court-supervised process."
Fellow dairy giant Dean Foods Co. announced Nov. 12 that it had initiated voluntary Chapter 11 reorganization proceedings in the Southern District of Texas, just two months after deciding to conclude a strategic alternative review that began in February.
According to the 2019 Supermarket News Category Guide, Nielsen reported a 2% drop in dollar sales of dairy milk from 2018 to 2019, following a 2.6% drop from 2017 to 2018. Meanwhile, the Dairy Farmers of America (DFA) announced last year that traditional milk sales had plummeted by $1.1 billion in 2018.
Last year marked several major milestones for Borden, including the revival of Borden's “spokescow” Elsie, the brand's reintroduction in Ohio and the launch of several innovative products that earned local and national media acclaim, such as state fair-inspired milk flavors, gingerbread eggnog and Kid Builder. The company's growth last year outpaced the industry as it increased year-over-year sales.
Sarsam explained that Borden is earnings positive and growing, "but we must achieve a more viable capital structure. This reorganization will strengthen our position for future prosperity. Over the past 163 years, we have earned the distinction of being one of the most well-recognized and reputable national brands. We remain committed to 'The Borden Difference,' which is our promise to be the most service-oriented dairy company that puts people first. We will continue serving our customers, employees and other stakeholders and operating business as usual throughout this process."
Regarding "business as usual" at Borden, Sarsam noted that the company had proactively filed expected motions as part of the court-supervised process, which allow it to pursue day-to-day operations. The company will be seeking court approval for these requests during the coming days and said it intends to work closely with creditors, customers and employees to identify value-maximizing restructuring plans that will benefit all stakeholders.
"Borden Dairy is a heritage American brand that has been in business since 1857," Sarsam said. "We have a very tenured workforce of 3,300 people who live and breathe our values of teamwork and creative problem solving, and I am extremely confident and optimistic about our continued success in the future."
This piece originally appeared on Feedstuffs, a Supermarket News sister website.