Dean Foods halts functional beverage production
the nutritional beverage business operated by its specialty foods
group segment.
The business includes weight loss and sports beverages.
The company explained in a securities filing that its decision was the result of "significant declines in nutritional beverage volumes during 2004," which it believes cannot be replaced.
Production of the beverages will cease on or around 7 November 2004, when the company will close its Michigan production plant - the sole producer of these drinks lines.
Dean estimates that its departure from the nutritional beverage industry will cost approximately $10.2 million, of which an estimated $8.7 million will be incurred in the third quarter.
Last Tuesday, Dean cut its 2004 profit forecast to between $2 and $2.05 per share from between $2.21 and $2.26, citing "unprecedented volatility in raw milk prices, a difficult retail grocery environment, and record-high fuel, resin and other commodity costs".
During this announcement, the company had also drawn attention to the weak demand for its nutritional drinks business products, in particular low-carb beverages.
In June 2003 Dean Foods bought its remaining 87 percent share in the organic milk firm Horizon Organic for around $216 million.
Horizon markets the leading organic milk brand in the United Kingdom (Rachel's Organic) and launched the US' first organic infant formula.
The CEO of Dean Gregg Engles said the acquisition showed the firm's commitment to the growth of "healthy, better-for-you products". Last year the firm bought soyfoods maker White Wave, revealing its desire to move into added-value 'healthy' products.
Engles remarked recently that the company's branded products group, which includes Horizon Organic, remains a "bright spot". However, Dean has still reduced its expectations for this group. It now estimates that White Wave sales will grow at 36 percent year over year as opposed to 40 percent, and has lowered its profit expectations accordingly.
