Dean Foods: this is not good

by PlanMaestro

Strange things happening in the milk category,

Yes, I’ll give you what is an anecdote. But it is one of the things frankly, that I am somewhat worried about. And that is if you go back and you look at our fluid milk volumes several quarters ago, and you track them on a weekly basis, we used to see, as you would expect, was a truly stable category with complete household penetration. You used to see very flat volumes week to week, right? So very little change in average daily sales.

We’re now seeing a different pattern. And that pattern is at the beginning of the month, we’re seeing sales rise above the trend line. And by the time that you get to the end of the month, sales are down in what are meaningful percentages for a category like this, that’s flat, it has been for 30 years. So you’re seeing inter-month volume volatility, or a volume pattern emerging. And the only conclusion, I think, you can draw from that is there are people who are big consumers in this category, they’re just running out of money, starting at the end of the month.

And you’ll recall, during the month of June and in part of July, the Congress stalemated over extending unemployment benefits for a large number of people. We saw that in our business in soft volumes. So that’s really my concern about the category is that there are still a very large number of households in the U.S. who are very constrained in terms of disposable income, and they’re cutting back wherever they can. And they’re not cutting back just one category, they’re trimming around the edges everywhere. And we see soft category volumes. – CEO Gregg Engles

Conference Call 2nd Quarter 2010

This strange pattern in a basic good that only just recently started being deeply discounted by retailers to drive traffic does not speak very well of the  consumer’s economic prospects. Consumers constrained, businesses hoarding cash, banks not lending yet, government tied up … The only glimmer of hope from this conference call:

And I think as Gregg mentioned in his prepared comments, we do see, to some degree, bifurcation of our categories. Our more premium categories are growing. Our more value-oriented categories seem to be flat. And so I think, we’re going to continue to see that as we move forward. I think the recession has affected different classes of folks in different waysCOO Joseph Scalzo

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