Borden Dairy Co. filed for bankruptcy, becoming the second major milk producer in as many months to seek Chapter 11 protection.
Chief executive Tony Sarsam said the company’s debt burden, coupled with industry head winds, left Borden with few options. “This was our final resort,” he told The Washington Post on 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 in November.
The 163-year-old company has a storied history in American 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.
Headquartered in Dallas, Borden operates 12 milk processing plants and distributes nearly 500 million gallons of milk annually for grocery stores, mass market, food service, hospitality and schools.
Decades ago, Borden looked beyond dairy and went on an acquisition tear; in 1987 alone, it acquired 23 companies for $442.6 million, CNN reported. But the splurge led to its own share of financial struggles, and Borden was bought by the private equity firm Kohlberg Kravis Roberts & Co. for $2 billion in 1995. Many of Borden’s nondairy businesses were eventually sold off.
Borden had $1.2 billion in net sales in 2018, but its losses topped $14.6 million. From Jan. 1, 2019 through Dec. 7, Borden reported a net loss of $42.4 million.
Dean Foods announced on Nov. 12 that it would file for Chapter 11 protection to meet debt obligations as it looked to sell the company. NBC News reported at the time that Dean Foods had secured commitments for $850 million in debtor-in-possession financing, which is for companies under financial strains.
Milk consumption in the U.S. has dropped 6 percent since 2015. Farmer bankruptcies are on the rise and farm debt is at record highs, crippling farmers around the country who have struggled to cover essentials like groceries and electricity.
Still, Sarsam pointed to categories that are still seeing an uptick, including whole milk, flavored milk and eggnog. The company has also seen growing popularity with cottage cheese, sour cream and dips.
“Companies that have had similar circumstances have gotten in and out of the filing in about six months,” Sarsam said. “We expect that or faster.”