Tag Archives: Borden

More Borden plants close under ‘great consolidator’ Gregg Engles

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Checkoff cites ‘uncontrollable circumstances’  bringing shelf-stable milk to schools

With an uncertain future for five remaining Borden plants after five plant closures, one partial closure (Class I) and three sell-offs since April, what does the future hold for fluid milk markets in the South and the iconic Elsie? Screen capture, bordendairy.com

By Sherry Bunting, Farmshine, Aug. 12, 2022

DALLAS, Tex. — Last week, yet another round of plant closures was announced by Borden, well-timed as a factor said to be driving shelf-stable milk into schools and other venues in affected regions like the Southeast; however, an industry “innovation” shift to the convenience, “experience ” and reduced deliveries (carbon/energy cost and intensity) said to be associated with lactose-free extended shelf-life and aseptically-packaged milk has been gradually in the making for months, if not years.

The Dallas-based Borden, owned by two private equity firms, will close fluid milk plants in Dothan, Alabama and Hattiesburg, Mississippi “no later than Sept. 30, 2022, and will no longer produce in these states,” the company said.

The Aug. 3 announcement represents Borden’s fifth and sixth plant closures in as many months.

A string of sell-offs and closings since April have occurred under “the great consolidator” — former Dean Foods CEO Gregg Engles. Engles has been CEO of ‘new Borden’ since June 2020, when his Capital Peak Partners, along with Borden bankruptcy creditor KKR & Co., together purchased substantially all assets to form New Dairy OpCo, doing business as Borden Dairy.

“While the decision was difficult, the company has determined that it could no longer support continued production at those locations,” Borden said in the Aug. 3 statement that was virtually identical to the statement released April 4 announcing previous closures of its Miami, Florida and Charleston, South Carolina plants by May 31, including a stated withdrawal from the South Carolina retail market as well.

In addition to ending fluid milk processing at six of its 14 plants — four in the Southeast, two in the Midwest — Borden announced in late June its plans to sell all Texas holdings to Hiland Dairy, including three plants in Austin, Conroe and Dallas, associated branches and other assets.

Hiland Dairy, headquartered in Kansas City, Missouri, is jointly owned by the nation’s largest milk cooperative Dairy Farmers of America (DFA), headquartered in Kansas City, Kansas, and Prairie Farms Dairy, a milk cooperative headquartered in Edwardsville, Illinois that includes the former Wisconsin-based Swiss Valley co-op.

DFA already separately owns the Borden brand license for cheese.

Also in June, Borden announced an end to fluid milk operations in Illinois and Wisconsin at two former Dean plants the company purchased jointly with Select Milk Producers in June 2021 after a U.S. District Court required DFA to divest them.

Borden closed the Harvard (Chemung Township), Illinois plant in July, and local newspaper accounts note the community is hopeful a food processing company other than dairy will purchase the FDA-approved facilities. Borden also ceased bottling at De Pere, Wisconsin on July 9, but continues to make sour cream products at that location.

The combined plant closures and sales by Borden now stand at nine of the 14 plants, leaving an uncertain future for the remaining five plants in Cleveland, Ohio; London, Kentucky; Decatur, Georgia; Lafayette, Louisiana; and Winter Haven, Florida. The sales and closures, including announced withdrawals from some markets, having combined effects of funneling more market share to DFA and to some degree Prairie Farms and others against a backdrop of additional Class I milk plant closures and reorganizations during the 24 months since assets from number one Dean and number two Borden were sold in separate bankruptcy filings.

“Borden products have a distribution area which covers a wide swath of the lower Southeast, including the Gulf’s coastal tourist areas. The Dutch Chocolate is a favorite of milk connoisseurs, and their recent introductions of flavored milks have received great reviews,” an Aug. 6 Milksheds Blog post by AgriVoice stated. A number of Georgia, Tennessee, Alabama and Mississippi farms may be affected by the most recent closures.

Meanwhile, the closures are affecting milk access for schools and at retail. According to its website, Borden serves 9,000 schools in the U.S.  

A random sampling of the many Facebook-posted photos by individuals from northern Illinois to Green Bay, Wisconsin from July 15 to the present after Borden and Select closed two former Dean plants in Illinois and Wisconsin that they jointly purchased from DFA in June 2021. Screen capture, Facebook

In recent weeks, photos have been circulating of empty dairy cases in the Green Bay, Milwaukee and greater Chicago region with signs stating: “Due to milk plant closures, we are currently out of stock on one gallon and half gallons of milk.”

School milk contracts in that region are also reportedly impacted.

However, most notable is the impact on school milk contracts in the Southeast as students begin returning to classrooms.

According to the Aug. 5 online Dairy Alliance newsletter to Southeast dairy farmers, the regional checkoff organization confirmed the latest round of Borden closures are plants that “currently provide milk to 494 school districts… and use around 95 million units a school year.”

The Dairy Alliance reported it is working with schools “to keep milk the top choice for students… We do not want schools to apply for an emergency waiver that would exempt them from USDA requirements of serving milk until they find a supplier.

“These uncontrollable circumstances will lead to more aseptic milk in the region, but this is better than losing milk completely in school districts that have little or no options,” the newsletter stated.

Southeast dairy farmers report their mailed copy of a Dairy Alliance newsletter in July had already forecast more shelf-stable milk coming to schools as part of the strategic plan to protect and grow milk sales by ensuring milk accessibility and improving the school milk experience. In addition to the Borden plant closures, the report cited school milk “hurdles” such as inadequate refrigerated space requiring multiple frequent deliveries amid rising fuel and energy costs and labor shortages.

Southeast dairy farmers were informed that the Dairy Alliance School Wellness Team was already working to mitigate bidding issues with shelf-stable milk for school districts in Alabama, Georgia, South Carolina and Virginia.

Diversified Foods Inc. (DFI), headquartered in New Orleans, was identified as the main supplier of this shelf-stable milk to schools in the region, reportedly sourcing milk through Maryland-Virginia, DFA and Borden.

In addition, DFI is a main sponsor of the Feeding America conference taking place in Philadelphia this week (Aug 9-11), where it is previewing for nutrition program attendees their new lactose-free shelf-stable chocolate milk. DFI also sponsored the School Nutrition Association national conference in Orlando earlier this summer, and social media photos of the booth show the shelf-stable, aseptically packaged versions of brands like DairyPure, TruMoo, Borden and Prairie Farms, along with DFI’s own ‘Pantry Fresh’ shelf-stable milk in supermarket and school sizes.

Coinciding with the flurry of Borden closings and shelf-stable milk hookups for schools, DFA announced last week (Aug. 1) that it will acquire two extended shelf-life (ESL) plants from the Orrville, Ohio based Smith Dairy. The SmithFoods plants will operate under DFA Dairy Brands as Richmond Beverage Solutions, Richmond, Indiana and Pacific Dairy Solutions, Pacific, Missouri. A SmithFoods statement noted the transfer would not affect the farms or employees associated with these plants.

This acquisition aligns with DFA’s similar strategy to “increase investment and expand ownership in this (shelf-stable) space… and create synergies between our other extended shelf-life and aseptic facilities,” the DFA statement noted.

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Borden second major milk co. in 60 days to file Chapter 11

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‘Business as usual’ motions face lender objections over how cash reserve is accessed and used. Judge grants Jan. 7 ‘interim’ relief with authority to pay pre-petition ‘critical vendors’, including producers supplying milk. A hearing on the final order in regard to critical vendor payments and cash management is set for Jan. 23.

 By Sherry Bunting, Farmshine, Friday, January 10, 2020

WILMINGTON, Del. — Citing unsustainable debt, including pension funds, negative dairy industry trends, fluid milk category declines as well as margin pressure in a loss-leading, commodity-driven market, the Borden Dairy Company, based in Dallas, Texas, but organized in Delaware, became the second major fluid milk bottler in the past 60 days to file for Chapter 11 bankruptcy protection.

Unlike the November Dean Foods filing with intentions to sell assets, Borden states its intentions are to use the Chapter 11 process to restructure its business for the future.

The company seeks to combine the bankruptcy filings of its 12 affiliated milk plants and one transport company stretching from Texas to Florida and north to Ohio under Borden Dairy Holdings LLC, owned by Acon Investments LLC,which had recapitalized these assets as recently as 2017 when purchased from Laguna Dairy after they were spun off from Grupo Lala.

Processing 500 million gallons of fluid milk annually for customers including supermarkets and schools, Borden employs 3300 people at milk plants in Alabama, Florida, Georgia, Kentucky, Louisiana, Ohio, South Carolina, and Texas. Milk is supplied by dairy producers and milk cooperatives in these and other states.

In addition to licensed brands Borden and Poinsettia, other brands involved include Coburg, Dairy Fresh, Dairymens, Flav-O-Rich, Kid Builder, Saba Sunburst, Sallie’s Southern Tea, Sunburst, and Velda. DFA separately owns the Borden brand license for cheese.

In Delaware District Bankruptcy Court, Wilmington, Judge Christopher S. Sontchi heard Borden’s first day bankruptcy pleadings on January 7.

“Concurrent to the decline of the number of milk producers, dairy processers have seen bottling margins decline due to competitive pressures from milk suppliers and large (and sometimes vertically integrated) customers. Couple this with the fact that … consumption has steadily declined, and it is no surprise that Borden and other dairy suppliers (such as Dean Foods) have begun to feel the same negative effects that have plagued dairy farmers for the past decade,” said Borden Chief Financial Officer Jason Monaco in his declaration with the court.

While all expected motions were filed to allow Borden to continue ordinary business while restructuring under bankruptcy protection — including motions to use a cash deposit reserve to pay pre-petition critical vendors such as dairy producers — attorneys for unsecured creditors objected Tuesday.

The lenders argued that, “(Borden) should not, and cannot, be allowed to use chaos of their own making to distract from the clear facts. There is no economic justification for… sudden chapter 11 filings, and the debtors cannot use the lenders’ (cash) collateral to finance an attempt by Acon to re-trade the out-of-court transaction,” that the parties had previously been negotiating.

The unsecured lenders contend that the bankruptcy filing occurred virtually on the eve of their out-of-court terms being ready for signatures. They contend that the $30 million cash deposit reserve is collateral and that other cash collateral Borden seeks access for operations are “insufficient.”

Acknowledging the importance of Borden continuing operations to preserve equity for all parties, the objecting lenders seek various protections from the court, including a position of consent with some oversight of budgets for the use of cash reserve and payment to critical vendors, including milk producers.

A day earlier, Borden CEO Tony Sarsam cited major milestones for Borden last year, including the revival of its spokescow Elsie, the brand’s reintroduction in Ohio and the launch of several innovative products such as state-fair inspired milk flavors and a new Kid Builder flavored milk line using 2% milk and containing 50% more protein and calcium with no added sugar.

Sarsam also explained in a press release that the company “continues to be impacted by the rising cost of raw milk and market challenges facing the dairy industry” that have contributed to “making our current level of debt unsustainable. He said ultimately, reorganization through court-supervision was the only solution “for the benefit of all stakeholders.”

Court documents reveal that Borden reported 2018 consolidated net sales of $1.181 billion with gross profit of $292 million but experienced operational income loss of $2.6 million and total net income loss of $14.6 million. These losses continued into 2019, with reported operational income loss of $22.3 million and total net income loss of $42.4 million from January 2019 through December 7, 2019, according to court documents.

Borden maintains that its situation differs from the Dean Foods bankruptcy.

“We believe that, from an operational standpoint, we are in a much better position than Dean Foods. Borden is EBITDA-positive and growing, which means we have solid earnings and are healthy,” Sarsam said in a public statement. “Borden intends to continue operations and strengthen our position … whereas Dean Foods announced its intention to sell substantially all of its assets. We are confident that, once we fix our balance sheet, we will be equipped to win together in the market.”

Documents also note Borden’s “need to raise new investor capital” to “continue to innovate with new products, modernize our facilities and equipment and improve Borden’s ability to compete in today’s market.”

The bankruptcy process is still in preliminary stages with more than 45 items filed on the docket within the first 48 hours.

Stating that this bankruptcy reorganization will not affect dairy producer contracts, Borden announced on Jan. 5 that it fully expects business as usual and to move quickly and efficiently through the bankruptcy process.

However, on Jan. 6 and 7, unsecured lenders filed the objections to many of the motions that would allow business as usual – creating potential ripples in that scenario.

As of Wednesday afternoon, Jan. 8, a signed interim order from the Jan. 7 hearing authorizes Borden to maintain its cash systems and bank accounts and provides interim relief to pay certain pre-petition obligations, such as payments to ‘critical vendor,’ including milk suppliers.

A hearing on the final order in regard to critical vendor payments and cash management is set for Jan. 23.

In the meantime, dairy producers supplying milk to Borden plants, are advised they may need to file a proof of claim with the court to be eligible for payment or otherwise consult an attorney for guidance.

The company’s claims agent, Donlin Recano, can provide appropriate forms once a deadline for filing claims has been set by the court. For more information on that, dairy producers can call the Borden restructuring information center toll free at 1 (877) 295-7345 or e-mail bordeninfo@donlinrecano.com.

A special Borden restructuring website contains various documents, including one that answers questions for raw milk suppliers at https://www.bordenfinancialreorg.com/

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