Dairy: Dean Foods

MATTHEW ENIS

DAIRY COMMODITY prices fell to historic lows in 2009, which presented many retailers with an opportunity to pass along savings to shoppers in a staple category during a down economy. Of course, when lots of major chains adopt this strategy, competition can heat up quickly, and processors must adapt, Gregg Engles, chairman and chief executive officer of Dean Foods, explained in an earnings call in February.

“Initially … margin compression was largely absorbed by the retailers,” Engles said. “As the year progressed, however, and particularly in the fourth quarter, an increasingly consolidated and more powerful retail base began to seek and obtain price concessions from processors.”

As the leading dairy processor in the United States, Dean Foods can take the heat. The company last year responded to farm-gate price volatility and with ongoing cost-reduction initiatives that saved the company's dairy business $60 million in 2009. And, despite increasing pressure on margins as the year went on, the company enjoyed record operating profits in 2009. Engles said later during the call that Dean was expecting to realize more than $90 million in incremental cost savings in 2010.

Finding ways to save has helped their retailer customers. One voter this year praised Dean for being “an important ally in coming up with ways to compete price-wise with the larger ‘big box’ stores.”

And, smaller divisions of the company have continued to drive growth with innovation. For example, the company's Silk Soymilk brand — part of the company's WhiteWave Foods division — last spring launched PureAlmond almondmilk, a dairy-, soy- and cholesterol-free milk alternative.

COMPANY TO WATCH

KRAFT FOODS: Kraft, Philadelphia Cream Cheese, Oscar Mayer and Lunchables have long been some of the most familiar brands in supermarket dairy and packaged deli aisles. But, Kraft Foods never rests on past success. This year, Kraft Singles renewed its buy-one, get-one-free Tuesday ticket offer with minor league baseball for a second season. And, Lunchables continued getting healthier with the addition this August of new lines that include mandarin oranges, fruit juice and whole grain breads. Ongoing changes to make Lunchables healthier have led to a 24% reduction in sodium, a 22% reduction in fat and a 21% decrease in calories across the portfolio.