US dairy giant Dean Foods said today (28 July) that it wants to focus on the parts of its business that give “the greatest return” to investors after agreeing to sell UK organic business Rachel’s.
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Dean Foods is to sell Rachel’s to French dairy processor Lactalis for an undisclosed sum six years after acquiring the business.
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By GlobalDataRachel’s became part of Dean Foods in 2004 when the US group bought the firm’s parent Horizon Organic Dairy.
Dean Foods said Rachel’s was the second-largest organic dairy brand in the UK and had “a rich history and strong brand equity”.
However, it added: “This transaction allows Dean Foods to grow the core elements of its portfolio that will yield the greatest return for shareholders.”
Erin Swanson, an analyst at Morningstar in the US, said the deal suggested Dean Foods wanted to focus on improving its core assets.
“Competitive pressures within the dairy category have obviously intensified, and as a result, Dean is working to offset some of the strain by improving its cost structure by eliminating redundancies, closing facilities, and streamlining distribution and production,” Swanson told just-food.
“While we do not believe that the recently announced sale of Rachel’s will move the needle on Dean’s financial results, this transaction indicates to us that the dairy processor is focused on improving core categories and brands within its existing portfolio.”
In May, Dean Foods announced plans to cut up to 400 jobs from its largest division, Fresh Dairy Direct-Morningstar.
The same day, Dean Foods booked a 43% slump in first-quarter profits as costs linked to acquisitions made last year and to restructuring throughout the business hit the bottom line.
Officials at Lactalis, which looks set to add Rachel’s to a brand portfolio that includes President, Galbani and Lactel, could not be reached for immediate comment.
