Dean Foods has insisted that investments in its “transformational” US$300m cost-cutting programme are key in differentiating the US dairy group from the rest of the market.
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Speaking to analysts during a conference call, Dean Foods CEO Gregg Engles insisted that Dean Foods was ahead of its competition in the US dairy industry in reducing costs.
This, he said, would allow the company to grow profitability, market share gains, or both.
“We do not believe that there is anybody else in the industry who is attacking their cost structure with the same level of… vigour as we are,” Engles insisted.
“We believe we are lowering our cost structure quicker than the competition. The result will be that either our profitability will go up, or we will reinvest these savings in lowering prices and our market share will go up, or both.”
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By GlobalDataPosting a 32% jump in third-quarter profits today (2 November), Dean Foods revealed that margins rose to 28.4% from 22.9% last year.
However, Engles insisted that these margin improvements were not the consequence of lower raw milk prices on the global commodities market.
“We do have a very effective course of dealing with this business, where we pass price changes through to our customers…. Our profitability as it relates to our milk cost input has been effectively baked in for several months. The impact you would expect to see in margins came in Q1 and Q2, when prices were on their way down,” Engles said.
Engles revealed that one significant contributor to its cost cutting programme was the rationalisation of its manufacturing network.
“I can continue to take costs out of my system by rationalising old or small facilities… No one else even really has the network opportunity to do that and it is a tremendous cost advantage over time.”
