“Nuts to you each morning!”
DALLAS, Texas; SONOMA, California––Almost simultaneously in mid-November 2019, Dean Foods declared bankruptcy, leaving 12,000 dairy farmers across the U.S. potentially up Manure Creek without a butter churn, and Miyoko’s Creamery, one of the fastest-growing makers of nut-based alternatives to cheese and butter, announced that in early 2020 it will begin looking for a dairy farm to partner with to show how to move from squeezing udders to squeezing nuts.
Miyoko’s Creamery, selling plant based dairy products since 2014, now supplies cashew and almond-derived cheese and butter alternatives to more than 12,000 retail stores in the U.S., Canada, Australia and Hong Kong.
1,000 dozen of one & 2,000 half dozen of the other
The symmetry of 12,000 dairy farmers and 12,000 stores apparently proved irresistible to writers for online vegan food media.
Within hours rumors spread that Miyoko’s might be poised to bail out or muck out the entire dairy industry in California, the leading dairy-producing U.S. state.
All 1.8 million cows currently on California dairy farms would be sent to Farm Sanctuary, which operates two sanctuaries in California and had endorsed Miyoko’s actual project.
All of that was, of course, a major exaggeration, which neither Miyoko nor Farm Sanctuary encouraged. But the rumor mill did help to amplify word that talk show host Ellen DeGeneres had joined a growing lineup of celebrity investors whose involvement Miyoko’s Creamery milks for publicity.
The farmer in the deli
As founder Miyoko Schinner spelled out her actual plan, “The company will begin the search process for a farmer in early 2020, committing financial resources to the selected farm and technical expertise, in addition to engaging in a contractual agreement to become part of the company’s research and development process.”
Added Schinner, “Farmers are struggling, farms are closing, livelihoods are threatened, and we want to help the American farmer stay true to the land. We can’t truly move to a compassionate food supply without the support and participation of the farming community. They are integral to our ability to eliminate animal agriculture and lead us to a compassionate and sustainable food supply.”
As rapidly as Miyoko’s Creamery has grown, a major limiting factor in growth has been increasing global competition from makers of many different food products to buy the nuts that are the basis of Schinner’s most popular products. With demand expanding much faster than supply, nuts are no longer a dime a dozen, even in California.
The cheese stands alone
Miyoko’s cheese alternatives are expensive relative to the dairy products they seek to displace. Therefore, as Totally Vegan Buzz Team reported, “Miyoko’s is now looking to launch a new line of cheese alternatives produced from potatoes and legumes and is seeking out interested dairy farmers for a partnership.
Meanwhile, as Totally Vegan Buzz Team also pointed out, the 126-year-old Giacomazzi Dairy, of Hanford, California, in 2013 planted almond trees on 400 acres of former cow pasture. Those trees are just beginning to produce almonds––and the early returns have persuaded Dino Giacomazzi , the current owner, to sell the dairy’s remaining 1,000 cows and 1,000 calves and transition entirely to almond growing.
Nuts drink water. Cows drink more. Soy drinks less.
Declining demand for cow’s milk amid a booming market for nut-based alternatives is only one of the economic factors motivating Giacomazzi and others to move from dairy to nut production. The biggest factor may be the perpetual and worsening water shortage in drought-parched and fire-ravaged California. While calculations differ, by any reckoning a gallon of cow’s milk takes at least twice as much water to produce as a gallon of almond milk.
A gallon of almond milk, in turn, takes about twice as much water to produce as a gallon of soy milk, but California, already producing more than 60% of the world almond supply, has a competitive edge in almond production, conferred by climate, whereas soy beans can be profitably grown almost anywhere.
Most media coverage of the Dean’s Foods bankruptcy mentioned further economic realities pointed out on April 7, 2019, well ahead of the bankruptcy, in a prescient column by Jill Ettinger, editor-in-chief of the Los Angeles-based periodical LiveKindly.
“Sales of milk continue to drop,” Ettinger wrote. “Recent data released by the Dairy Farmers of America,” a producer cooperative representing about 13,000 dairy farmers with about 30% of the total U.S. milk market share, compared to 10% for Dean Foods, “showed a $1.1 billion loss in revenue for the dairy industry in 2018 — an 8% drop over 2017.”
Meanwhile, Ettinger observed, “While milk sales drop, vegan milk sales were up 9% in 2018 and are expected to exceed $34 billion by 2024. Fluid dairy-free options dominate the vegan category, but dairy-free ice cream is on the uptick.”
Ettinger also noted the success in the cheese sector of “Brands like Miyoko’s, proving that dairy-free cheeses can be made in the same way as traditional cheesemaking — fermenting and aging milk made from nuts, seeds, or beans.”
Dean Foods dumped soy & nut milk subsidiaries
Dean Foods itself, a 94-year-old company, acknowledged in announcing bankruptcy that it has been harmed by “a challenging operating environment marked by continuing declines in consumer milk consumption.”
But “Changing consumer behavior is only part of Dean’s problem,” assessed Allen Root, senior special writer for the financial news periodical Barron’s.
“Investors interested in understanding the rest of the story,” Root suggested, “should ask why people are drinking less bovine-based milk—because solving that question might help companies and investors face similar situations in the future.
“Dean’s 2013 decision to spin off its soy and nut milk franchise [looks] like a major misstep,” Root wrote.
“No matter what the cause,” Root added, “Dean’s fall from grace is breathtaking. Its bonds are trading at pennies on the dollar and the stock is at about 12¢ per share, giving the company—with more than $7 billion in sales—a total market value of less than $300 million. Dean Foods was valued at more than $7 billion as recently as 2010.
“Refrigeration assets” worth more than the milk business?
Dean Foods, summarized Bay Area News Group writer Rex Crum, “has filed for Chapter 11 bankruptcy protection, and has entered talks with the Dairy Farmers of America cooperative that could result in Dean Foods selling all of its assets to DFA. Dean Foods said that the Chapter 11 proceedings would allow it ‘to protect and support its ongoing business operations, and address debt and unfunded pension obligations, while it works toward an orderly and efficient sale of the company.”
Dean Foods currently employs 16,000 people at 60 milk product processing facilities, operating a nationwide motor pool of 8,000 refrigerated delivery trucks.
“Wells Fargo analysts led by John Baumgartner wrote in a note to clients,” offered Amelia Lucas of CNBC, that they see value in the ‘company-owned refrigerated distribution assets and margin optionality from full-fat dairy products.’”
Translation: while what remains of Dean Foods’ milk business may not be worth much, compared to what it was, the infrastructure might be useful to other branches of the food industry, perhaps including makers of milk alternatives as they expand.
Elaborated Jordan Valinsky of CNN Business, “The global market for milk alternatives is expected to top $18 billion this year, up 3.5% from 2018, according to Euromonitor. That’s still a fraction of the traditional milk market, which will come in at just under $120 billion globally this year. Sales for cow’s milk has been declining for the past four years. In contrast, and while still much smaller, sales of oat milk has jumped 636% to $53 million over the past year.”
“Dean is already a product of consolidation. It was bought by Suiza Foods Corporation in 2001,” recounted Associated Press business writers Michelle Chapman and Dee-Ann Durbin.
“The new, larger company assumed the Dean name and bought several other milk producers,
which “left Dean with a large number of aging facilities. At the same time, it sold off some non-dairy brands, like TofuTown, becoming less diversified.”
“Farms in Berkeley?”
Among the oldest Dean brands, Crum of the Bay Area News Group recounted, is “Berkeley Farms, founded in 1910 by John Sabatte, who originally established the business in Berkeley as the South Berkeley Creamery. For decades, the company had one of the most-identifiable ad campaigns in the Bay Area, with the tagline, ‘Farms in Berkeley?’ accompanied by a cow replying, “Moooo!”
Other Dean dairy brands include Alta Dena, Broughton, Caribou, Country Fresh, Creamland, Dairy Pure, Friendly’s, Fruit Rush, Gandy’s, Garelick Farms, Hygeia, Organic Valley, Land O’Lakes, Lehigh Valley, Mayfield, McArthur Dairy, Meadow Gold, Model Dairy, Oak Farms, PET, Price’s, Purity, Swiss, T.G. Lee, TruMoo, and Tuscan.
Dean formerly supplied milk to the Walmart and Food Lion grocery chains, but lost those contracts in 2017 and 2018, respectively. Dean quit buying milk from more than 100 dairy farmers in eight states after Walmart began to process milk for itself.
“America’s Dairyland” becomes “Debt Land”
Stiff as is the growing competition from producers of alternatives to cow’s milk products, Republican economic policies may have dealt the coup d’grace to much of the dairy industry, observed Mark Hoffman of the Milwaukee Journal Sentinel in August 2019.
Beginning by recounting how Wisconsin became “America’s Dairyland,” as proclaimed by the state motto printed on license plates, Hoffman mentioned that “By the turn of the 20th century, 90% of Wisconsin farms had dairy cows, and by World War I the state led the nation in butter and cheese production. It held the milk production title until 1993 when that recognition went to California.”
Tariffs & stockpiles
Currently, however, “Foreign markets for American dairy products have shrunk in response to tariffs that President Donald Trump placed on foreign steel and aluminum. Cheese shipments to China have fallen almost 65%, according to industry figures, and exports to Mexico are down more than 10%.”
Meanwhile, “U.S. commercial and government cheese stockpiles are at about 1 billion pounds — the highest level in a century.”
Earlier, oblivious to the already growing trend away from consumption of dairy products, former Wisconsin governor Scott Walker, like Trump a conservative Republican favoring traditional industries, “announced an incentive program to produce, as a state, 30 billion pounds of milk a year by 2020 — a 15% increase. The state offered farmers grants for business planning, facility engineering, and animal nutrition. The program required [farmers] to put up their own money as well,” which required most farmers to take out longterm loans.
“Despite record production every year since 2002, Walker urged farmers to step it up even more,” Hoffman wrote. “Dairy farmers not only met the challenge, they reached 30 billion pounds in 2016 — four years ahead of schedule. By then, however, the market had turned and many dairy farmers were having trouble breaking even on their new investments. The price farmers receive for their milk has fallen nearly 40%.
700 dairy farms failed in 2018
“Wisconsin lost almost 700 dairy farms in 2018, an unprecedented rate of nearly two a day,” Hoffman reported. “Remaining dairy farmers have burned through their farm equity and credit to remain in business. Often, at least one family member works an off-farm job to put groceries on the table or pay for health insurance. Some work double shifts, farming during the day, then heading to a local factory for the night.
“Much of Wisconsin’s $88 billion farm economy hangs in the balance,” Hoffman finished. “Hundreds of towns across the state depend on the money that dairy farmers spend at equipment dealerships, feed mills, hardware stores, cafes and scores of other businesses.”
Wisconsin dairy farmers do not have the climate to turn to growing almonds and cashews. But Wisconsin is a top soy-producing state, meaning that more consumption of soy-based alternatives to dairy and meat products could provide benefits offsetting the loss of an industry which has over the past 150 years saturated the state in more cow manure per acre than any other.