Spectacular Failures - A dairy giant gets milked (Transcript)

Enjoy a transcript of our episode “A dairy giant gets milked.”

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COLD OPEN

Milk is not a sexy drink. I think we can all agree on that. 

But by god did advertising execs Rich Silverstein and Jeff Goodby try to make it so. In 1993, the pair created one of the most memorable ad campaigns in history. All about milk.

CLIP [Got Milk Ad]: Hello, for $10k, who...AARON BURR...

But it wasn’t an easy task. When the California Milk Processing Board first approached them about marketing this decidedly wholesome beverage, they were at a loss. 

Rich Silverstein: This is a very strange thing to ask to market milk. I mean, it's like air and water like, we were never asked to do something like this.

Jeff Goodby: Well the thing about milk is everybody knows everything there is to know about it — it's good for you, it's got calcium in it, it's got vitamin D, there was nothing to tell anyone.

In the 1980’s, milk had been sold as a drink that would make you big and strong. Remember those commercials — “Milk, it does a body good”? Like this one, where a skinny kid in swim trunks hits on a much older woman in a one-piece bathing suit. While drinking a pint of milk. 

CLIP [Does A Body Good Ad]: I’d like to meet you. But I bet you’re hoping for a hunk. And all I’ve got to offer is sensitivity, intelligence and charm. Milk’s about the best thing I can drink right now to help me build strong arms, powerful legs and a broad chest. And when all my work is done, will you love me just for my body? I can live with that. Milk, it does a body good. 

Rich and Jeff were not impressed by that kind of milk messaging. 

Jeff Goodby: It just wasn't the way people use milk in the real world. 

They knew they could do better. So they put together a milk focus group. Jeff remembers one of the participants saying...

Jeff Goodby: You know, the only time I notice milk is if I run out of it.

That was the pair’s a-ha moment. And they built a whole campaign around it. 

Jeff Goodby: We called it the deprivation strategy. It was like, show how bad it is not to have milk.

Rich Silverstein: But you have to understand we we entered this not thinking this was going to be an amazing campaign. This was not going to change advertising. You know, as Jeff said, we found a logical reason how to market it, but we never thought it would catch on.

So with this deprivation strategy in mind, Rich and Jeff’s creative team started brainstorming.

Jeff Goodby: One of my planners said, you know, what should I put on this foamcore board? And I said, Why don't you put ‘Got Milk question mark’ on it? And she said, why don’t-- let's put ‘Got enough milk?’ And I said, No, I think I like ‘Got Milk?’ It's kind of short and stupid.

Rich Silverstein: I thought it was the stupidest line in the world.

Stupid or not, what Rich and Jeff created was one of the most durable ad campaigns of the 20th century. Any American who was sentient in the 90s knows the phrase ‘Got Milk?’ It was ripped off a million times — Got Teeth?, Got Jesus?, inexplicably Got Death? And it was the tagline of many campy and grotesque TV commercials.

[Got Milk Ad montage]

But despite the clever ads and the catchy slogan, milk was still just a boring staple that people only really thought about when they were out of it.

For decades now, the fluid milk business has been on the decline. Americans drink 40% less milk than they did in the 1970s. We love our cheese and our butter and we ain’t givin’ those up for nothin’. But milk? Maybe on our cereal. Possibly in some coffee. Definitely not as a drink to go with dinner. Unless you’re a kid. 

And this decline spelled bad news for America’s biggest milk processor, Dean Foods. When it filed for bankruptcy in 2019, the company blamed its failure on outside forces — or in CEO-speak, “a challenging operating environment.”

But to say that’s the full picture of Dean Foods’ collapse would be udder nonsense. Get it? Udder? 

I’m Lauren Ober and from American Public Media, this is Spectacular Failures, the show that never lets failure cry over spilled milk. 

PART ONE

We’re going to do a little exercise right now. We’ll call it a milk moo-ditation. 

I want you to close your eyes (unless you’re driving) and think about where milk comes from. 

Maybe you’re picturing rolling green pastures, dotted with black and white Holsteins happily chewing their cud. Maybe you see a little calf prance over to her mama and feed from her generous udder. Depending on how vivid your imagination is, maybe those cows are all being tended to by a Swiss miss named Heidi with milkmaid braids. Who knows? This is your imagination. 

All those images are great...if we’re talking about the 1800s. 

Andrew Novakovic: The supply chain was pretty close to the farmer-consumer model, probably a general store in between but not much in the way of processing. 

That’s Andrew Novakovic. He’s a professor of Agricultural Economics at Cornell. And the time he’s describing, that bucolic notion of dairying from our moo-ditation was pretty accurate. The cows roamed the pastures and ruminated on clover, alfalfa and Timothy grass. The farmers hand-milked the herd and sold the milk right off the farm. No processing, no grocery stores. 

But as life became more industrialized at the turn of the century, the milk market changed. Processors that collected the milk, bottled it and sold it in retail stores began to grow in prominence. That development made dairying more efficient. But the rise of milk processors meant that many dairy farmers were no longer connected to their customers. And were at serious risk of getting screwed over.

Andrew Novakovic: Farmers kind of felt like they were losing control of their own destiny, and that it was really the processing sector that was kind of dictating what price they were going to get whether or not they were going to have a market and so on. 

And that led farmers to get together and form co-ops.

Andrew Novakovic: They would work with a cooperative structure to market their milk and to bargain with processors for prices and, you know, who gets what sale and how much and so on.  

These dairy co-ops seemed like a win-win. They allowed farmers to collectively bargain for fair prices and allowed the processors access to all the milk they needed. But then in the FDR Great Depression years, the government began to regulate more and more of the economy. And it started to act as a sort of umpire between the farmers and the processors. 

Today, less than two percent of Americans farm for a living. But back then, more than half of the U.S. population lived in rural areas. And more than half of those people lived on farms. 

Andrew Novakovic: So if you're the president of the United States, at a time of economic disaster, and you say I was elected to help the people, farmers were not a special interest group. Farmers were a huge percentage of the population. And oh, by the way, for those who weren't working on farms, eating was actually still kind of a thing they wanted to keep on doing. And so it felt like you're not just doing something for farmers. You're doing something for everybody.

But the government wasn’t just interested in helping Farmer Bob and his little herd. Americans were literally standing in breadlines and they needed to eat. And...

Kirk Kardashian: Milk is a staple of the American diet.   

That’s Kirk Kardashian. He’s the author of “Milk Money: Cash, Cows and the Death of the American Dairy Farm.” 

Kirk Kardashian: So the government, you know, is getting behind that and they're saying, Okay, well, we're going to do everything we can to make sure that milk is on the shelf when you want it and that it's affordable. 

So Uncle Sam was like, how can we help Farmer Bob get a fair price for his milk but also not break Shopper Sally’s budget? Solution: the first Farm Bill. It was signed into law in 1933 and included many protections for dairy.

Still though, the capitalist arc always bends towards whoever can make things the cheapest. 

Andrew Novakovic: If that's the name of the game, the incentive is very strongly to be larger, probably more specialized, be like really, really good at you know, a small number of things and be the one who can flourish, even with fairly low prices. And this completely kicks the stool out from underneath, you know, our idyllic vision of the small scale diversified family farm.

So much for Heidi and her rolling hills. But as farms became more industrialized and economies of scale came to bear, the old ways of doing things didn’t really make sense. And milk processors — the link between the farmer and the consumer — had ever more power.

The Dean Milk Company was one of those processors. In 1925, Samuel Dean bought   an evaporated milk company in northwestern Illinois. At the time, evaporated milk was a smart play because the product was shelf-stable and not every family had access to refrigeration. So people could get delicious, nutritious milk without having to worry about spoilage or explosive dairy belly. 

After World War II, the business took off and later changed its name to Dean Foods — a more accurate descriptor since by that point the company sold all kinds of things.  

Andrew Novakovic: They bought a potato business, they bought a pickle business, they got into salsa. 

Dean Foods’ basic strategy was to slowly expand by buying up a variety of companies — Reiter Dairy of Ohio, Ryan Milk Company of Kentucky and Verifine Dairy Products of Wisconsin, to name a few. They increased their footprint in the market and made a tidy profit for investors. After decades of this, the company’s size and market position made them ripe for a takeover. 

In 2001, it happened at the hands of a dairy company called Suiza. Suiza was made up of former execs from the bagged ice industry and it had been making plays for a decade, scooping up smaller dairy processors around the U.S. It was gunning to become the biggest dairy processor in the country. 

Andrew Novakovic: And their strategy was we're just going to buy, buy, buy, buy, buy, and we're going to grow fast and we're going to make a lot of money doing this.

For Suiza, Dean Foods was the ultimate prize. And when they finally merged in 2001, their unholy union changed the industry forever. So much for little regional milk operations. Dairy had gone national!

Andrew Novakovic: The concept was that if you would be a fluid milk company with a national footprint, the total would be greater than the sum of the parts. That there was going to be some kind of, oh my god, powerhouse, amazing thing happening. 

With 129 plants nationwide, the operation was unlike anything the industry had seen before. After the merger, this new behemoth kept the name Dean Foods and set its course for dairy do-moo-nation. Soon the company’s brands like Dean’s and Meadow Gold and TruMoo were in nearly every dairy case in America. Consolidation seemed like it was a pretty great decision. 

Except for this one teensy little problem: Americans were drinking way less milk.

In 1975, the average American consumed 29 gallons of milk a year. By 2018, that number had plunged to 17 gallons. Butter and cheese sales in the U.S. have held strong over that period of time. And yogurt was on the upswing thanks to the Greeks, and of course Jamie Lee Curtis. But in the last five years, even yogurt sales have dropped off. 

And I can’t even talk to you about ice cream, my favorite food group. Americans are eating 33% less ice cream than they were 45 years ago. And that fact is truly devastating. 

Marion Nestle is an emeritus professor of nutrition, food studies and public health at NYU. She’s long studied Americans’ eating habits and says it used to be that dairy was considered essential for a balanced diet. 

Marion Nestle: For a long time, it was very, very important politically, and the dairy educational groups produced an extraordinary amount of information which they made freely available to schools and to institutions that put dairy products at the top of the food charts, and marketed dairy products as the perfect food.

Now for anyone with lactose intolerance, their colon knows that statement is pure propaganda. 

But the dairy lobby has historically been very powerful and positioned milk as a critical component of the American diet. Nestle says it’s easy to see how this happened — there are dairy producers in every state in the union. And a whole coterie of lobbyists willing to make their case to lawmakers. 

But here’s the real scoop — dairy isn’t essential. 

Marion Nestle: You can always make up the nutrients that are in dairy foods from other foods. They are a convenient way to get a few grams of protein and get some vitamins and minerals. And if you're doing 100 or 150 calories worth a day, they're just a food like any other.

When word got out that milk wasn’t some end all, be all, wonder-food it began to get overshadowed by teas and sodas and sports drinks that were all heavily marketed. Plus, milk seemed like it was just for kids. No self-respecting adult would order milk at a restaurant. 

But it wasn’t just the availability of other beverages that made consumers sour on milk. Americans are increasingly concerned about environmental sustainability and animal welfare. And as a result, milk from cows treated with a million hormones made to live in confined stalls isn’t really all that appetizing to a lot of folks. Particularly, Nestle notes, upper income, educated consumers with a lot of purchasing power. 

And so we see the rise of plant-based alternatives. If it can be milked, it’s on the shelves. And consumers are buying them.

Marion Nestle: I think there are two things going on. One is that plant foods are viewed as healthier. The word is out that if you want to consume a healthy diet, then you want to consume a diet that's largely although not necessarily exclusively, based on plants of one kind or another. The other has to do with the increasing evidence of maltreatment of animals, the effects of animals on the environment. There's just been an enormous amount of publicity about that.

In 2018, the dairy alternatives market was a $13 billion industry. By 2026, that number is expected to more than double. 

One place I’ve seen a huge uptick in plant-based milk is my local coffee shop here in D.C., Big Bear Cafe. Their dairy alternative of choice is oat milk — they go through many quarts of it a day. And as barista Kayla Gaines told me, people are all about their non-dairy coffee drinks these days. 

Kayla Gaines: I think it caters to the needs of a wider audience. So if you're lactose intolerant, oat milk is a great option. If you have a nut allergy, it’s a great option. If you want to be more environmentally friendly is a great option. You know, it's a vegan product. So I think that the appeal of oat milk, it just works better towards the consumer base. 

Historically, dairy milk was a quintessential part of many coffee beverages — foamed milk for a cappuccino, steamed milk for a flat white, scalded milk for a cafe con leche. Now all of them can be made with a variety of plant-based alternatives. And oat milk is hands down the most popular with baristas. 

Kayla Gaines: A lot of people describe oat milk as very neutral. So it's great because you can use it for like a lot of different things. I can use coffee, you can use a latte you can put it in a smoothie, but I think personally for me, I feel like dairy milk is like, creamier for me. Although it does have a great creamy consistency. 

Gaines says the properties of oat milk make it easy to steam and foam. And for a lot of customers, there’s no huge difference in taste. Plus, they can feel like they’re being virtuous knowing that oat milk production requires just a fraction of the water and land that dairy farms use. But also cows are mega methane producers, which isn’t that cool in a climate crisis. 

But Gaines herself isn’t ready to abandon dairy quite yet.

Kayla Gaines: I’m a dairy girl, I think I'm just a dairy girl. But it's so popular, I'm the exception. But like I hate it and like I'll never take oat milk for anything. Like I'm like ugh.  

So none of this — not the changing tastes of consumers nor the proliferation of plant-based alternatives — spelled good news for Dean Foods, the nation’s largest dairy processor. 

Still, after Suiza and Dean merged, the new Dallas-based company kept rolling up other dairy operations around the country. But the rollup game wasn’t the company’s only strategy. It also went after niche markets like organic milk, coffee products and ironically, plant-based beverages. 

CLIP [Silk Commercial]: No, can’t do it./Oh you’re pathetic./All right.../Right? Right? Well, what do you think?/Wow, it’s good. You guys should try this!/Silk. Beyond nutrition.

Post-shopping spree, Silk and a bunch of other brands were now owned by Dean Foods. But here’s the thing: you shouldn’t go on a buying spree when your balance sheet looks like a dog’s dinner. 

And why was Dean’s balance sheet such a mess? Well, thank you for asking. See, the founding CEO, Gregg Engles, made a little miscalculation in 2007. He allowed the company to borrow almost $5 billion so that it could reward shareholders with some whopping huge dividends. That happened just before the 2008 financial crisis. Yikes.

In the years following the global financial meltdown, things were not alright in Dairyland. Dean decided to spin off its organic and plant-based milk subsidiary to “focus on our core business.” Which was dairy milk — a declining consumer category. 

But in 2013, then-CEO Gregg Tanner was super optimistic about the future of Dean Foods, despite its lingering debt and the fact that the company had recently closed plants around the country. Here he is talking to KERA in Dallas. 

CLIP [Gregg Tanner on KERA]: I think there’s such a great opportunity for Dean Foods because there’s just a ton of different alternatives that we have. And now we have a balance sheet that allows us to invest and do those things. So it’s a very exciting time for us.  

But that unbridled, over-the-top, crazy-about-milk enthusiasm wouldn’t last. 

CLIP [CNBC]:  ...the big retailers like Walmart and Kroger are getting into the milk business. And that is spelling trouble for dairy farmers across the country.

And that really curdled things for Dean because Walmart was the company’s biggest customer. It was a huge hit at a time when Dean could least afford it. And it foretold a grim future for the company just beyond the horizon.

We’re going to take a quick break. When we come back, I brave cow poop and coronavirus to talk to some real-life farmers. Also, did you know that robots milk cows now? Well, they do. And I’m here to report that the cows have welcomed their new robot overlords. 

PART TWO   

I can’t in good conscience tell you a story about the state of dairy in America without taking you to an actual dairy farm. So I hopped in my little Subaru and drove about 150 miles southwest of Washington D.C. to a place called Weyers Cave, Virginia. 

Laruen: I haven't been on a dirt road in 100 years. They're so fun to drive on.

I was headed to meet with Wes Kent of Winding River Farm. It’s a 650-acre diversified operation with about 120 dairy cows. Plus, some beef cattle and about 20,000 terrifying turkey poults that Wes raises for agri-giant Cargill. 

Lauren: Oh yeah, winding river farms. Oh, we're here. How about that? [duck]

Wes and his 13-year-old son Lee greeted me and immediately took me to see the showpiece of his farm — his robotic milkers. Basically, using a system of lasers and video and a transponder that hangs around every cow’s neck like a bell, the robots are able to milk each cow with no human interaction. 

And get this: the cow can get milked whenever she damn well pleases. 

Lauren Ober: Crazy. How do they know when they-- they just know.

Wes Kent: Well, you know, they're creatures of habit. So they, they kind of develop their own routine. And that's the beauty of robotic milking. These things are in operation 24 hours a day, seven days a week. And so the cow decides her own schedule. And most of our cows, you know, come in and get milk almost three times a day. 

While Wes was explaining this, a cow walked into the milking stall and the robot got to work. First, it located her teets. Then it cleaned them. 

Lauren: Oh my God! It's like a carwash. 

Wes Kent: Yeah, basically. The brushes are really soft, if you feel them they’re really soft. You know, obviously we want clean milk. So the cleanliness part of it is very important. And now it's drying her teet so it washes them and dries them because you want her teats to be clean and dry before the unit is attached. 

Lauren: Ok.

Then we walked down to the barn where most of the cows were just hanging out. Wes’ herd is made up of the traditional black and white Holsteins and some red and white Holsteins. Shoutout to ginger cows. 

The average cow on Wes’ farm produces about 85 pounds of milk a day and each milking takes about seven and a half minutes with the robots. So the cows are free to party for the rest of the day. Kind of. Not really. I mean they’re cows.

Wes Kent: If I was to open this gate right now, they would go out for five minutes and turn around and come back in here. 

Lauren: Because they’re too hot.

Wes Kent: They're too hot because of the sun.

Wes has been farming for 20 years. It was kind of his destiny.

Wes Kent: Well, I've always wanted to farm from the time I was a little boy, you know, I played with toy tractors and toy farmed and wore all those pant legs, knees out of my pants, you know, in the flower beds playing with a toy tractor, you know?

When he was in college studying ag, his friends used to call him Mr. Dairy Farm USA. Boy, would I love to see the swimsuit portion of that pageant. 

But dairy farming these days is not for the faint of heart. Particularly not when there’s a glut of milk and a drop in demand, which means that farmers like Wes often aren’t even breaking even. Wes needs to make about $18 per hundredweight (or 100 pounds) of milk to cover his expenses. When I visited he was making just over $11 per hundredweight.  

Wes Kent: Here when we've been losing money for five years you just really wonder, what in the world am I doing? I could go get a job somewhere and make a lot more money. But then I've got to answer to somebody, too. 

Wes is part of a large co-op in Virginia and that offers him some protection. But it doesn’t inoculate him from the vagaries of the industry. The last five years have been brutal as Wes and his fellow farmers have watched milk prices plummet. “America First” trade policies and a global pandemic haven’t helped.

Wes Kent: Before five years ago, my operating loan balance was a big fat zero. However, we've had to use our operating loans to the max, they got maxed out to do things like make repairs that were absolutely necessary in order to keep to stay, you know, in production and keep moving and to put crops out. 

Diversification helps make sure Wes’ operation doesn’t totally drown. But the way things are going just isn’t sustainable for small farmers. Operations like his have been closing up shop at an alarming rate. More than 3,000 American dairy farms closed in 2019 alone. It was the largest decline since 2004. And amidst all of this, consumers are feeling like milk is less and less necessary.

Still, despite the whole rollercoaster ride of it all, Wes and his son Lee are keeping their chins up. Farming is in their future. 

Lee Kent: I would love to keep farming. That's what I want to do whenever I get out of school, and I like to farm and take care of the animals and I hope to do it for a long time and with my dad.

Wes Kent’s co-op didn’t sell milk to Dean Foods. But he knows farmers who did. And he remembers in March of 2018 when a hundred Dean producers got letters in the mail saying they would have to find a new market for their milk. Dean couldn’t take their product anymore.  

Dean dairy farmer Caleb Watson — a fourth-generation dairyman from Sweetwater, Tennessee — was one of the folks who got that letter. Here he is talking to the Knoxville News Sentinel. 

CLIP [Caleb Watson, Knoxville News Sentinel]: As of now, we’re still looking for options to sell our milk to other companies. Not giving up just yet. We’ve got 82 more days left. This ain’t over. So we’re hoping, we’re getting a hold of some Congressman and something will open up. And I think it’s kind of dirty the way they did us.  

I love this guy. How can I be friends with him?

CLIP [Caleb Watson, Knoxville News Sentinel]: Uh, we got a lot of fight in this family, so we’re not yet out of ideas. We’ll still be here. 

But Dean’s troubles weren’t entirely of its own making. For one, milk is a commodity   product, and the government is involved in how it’s priced and there’s not a ton the industry can do to influence that. 

There’s an old adage in the dairy industry: “Only five people in the world know how milk is priced in the U.S.... and four of them are dead.” So I don’t think I can explain it to you. If I tried, my head would explode and so would yours. But here’s a little taste: 

Andrew Novakovic: It's a little bit like you saying, so how do you guys figure out what my home mortgage rate is? I mean, where the hell does that number come from? You listen to it, and like, you understand all the words that the guy said. But, I still don't get it.

Thank you Prof. Novakovic for reminding me that I barely understand my mortgage. But what about milk pricing?

Back in the day, when dairy cooperatives worked out a system for pricing milk, they used two tactics: classified pricing and pooling. Classified pricing means that milk for drinking and milk for things like cheese and butter fetched different prices. Pooling meant taking a weighted average of those different prices. Like honestly what is even happening here?

Andrew Novakovic: Between 1940 and 1965 this system slowly grew and more places adopted and the places that adopted it got bigger, and it wasn't until the 1960s that half of the milk in the United States was regulated in this fashion. Today, the number is probably about 85%. 

But then there’s this totally cuckoo thing called a “basing point,” which is the  geographic proximity to Eau Claire, Wisconsin of all places. And it’s somehow used to establish minimum fluid milk prices. 

I don’t know, it’s bonkers.

So by now you’re getting the point that milk pricing is truly and needlessly byzantine. Except says Novakovic…

Andrew Novakovic: The industry, although it often complains and says we should do it different, the fact of the matter is it hasn't been able to figure out anything that everyone agrees would be better.

So milk prices fluctuate and are damn near impossible to figure out. Also, says writer Kirk Kardashian, the whole supply and demand of the dairy industry is very out of whack. 

Kirk Kardashian: When prices go up, that encourages farmers to to bring more cows into their herd and to milk more cows so they can kind of, you know, make more money and reap more of that benefit of a high price. 

That puts more milk in the system, thus driving down prices. 

Kirk Kardashian: Then once once that price goes down again, farmers will go out of business or they'll cull their herds, and then the price will go up again, because the supply has gone down. And then that just kind of kind of happens over and over again. 

Kardashian says dairy trends are cyclical and roughly go in three-year waves. 2014 was a highwater mark for dairy. Farmers were bringing in almost $26 per hundredweight at one point. But for the past five years, milk prices have been in the tank and can’t seem to recover.

It was against this backdrop in late 2019 that things went way south for Dean Foods. This milk mammoth seemingly could not find a way to stay afloat in an increasingly impossible industry. 

CLIP [NBR from CNBC]: America’s largest milk producer has filed for bankruptcy. Dean Foods has struggled in recent years as that industry changed and the demand for cow’s milk has declined. The company’s in talks right now with the Dairy Farmers of American coop to possibly sell all of its assets. 

In its bankruptcy filing, Dean noted the “accelerated decline in the conventional white milk category.” Which is excellent bizspeak. But if I look at the contents of my own fridge, that’s fair. Literally not one dairy product in there. And there hasn’t been for years. 

Andrew Scurria: There's an argument that the decline was unavoidable simply because of consumer tastes changing.

That’s Andrew Scurria. He’s a deputy editor for bankruptcy at the Wall Street Journal. 

Andrew Scurria: You know, industries that are consumer facing, have difficulty changing on their own, right. If people don't want to buy a particular item of clothing, it's going to be difficult making money selling that type of apparel. 

So the decline was kind of in the cards. Though it was likely sped up by this fact:  Dean’s aggressive acquisition strategy saddled the company with even more debt at a time when sales continued to tumble. Oops. 

Jessica Peters is a fifth-generation dairy farmer in Meadville, Pennsylvania. Her family’s 400-acre operation — Spruce Row Farm — is home to 500 Jersey cows.

Jessica Peters: Well as of this morning, 501.

Lauren: Congrats! 

Jessica Peters: Thank you.

For the past 10 years, Peters has been an independent producer, selling the herd’s yield to a Dean Foods processing plant about an hour from her farm. Every day, the milk tanker would truck away the Jerseys’ extra rich milk to the Dean plant. Then two times a month, Peters would get a check for the haul. 

Lauren: What was your relationship like with them? Did you have any? Or was it just kind of like, yeah, it's a contract, we get paid, they pick up the milk, that's all?

Jessica Peters: I mean, there was no relationship. The way it works within the dairy industry there are processors, which was Dean's, which basically, I mean, you don't really have a say in anything. They're a company and they pay you.  

Until they don’t.

Peters says she had no idea the company had gone bankrupt until she read about it on Facebook. 

Jessica Peters: And I got the letter two days later. Does that tell you what our relationship was? Does that help?

Lauren: It does. It truly does.

For Peters, Dean Foods felt like it was a nameless, faceless company based in a faraway place that didn’t really care about her or her Jerseys. Like Maude, Cosmo and Teacup. I mean, how could you not care about a little brown cow called Teacup?

When it came to a milk market, Peters didn’t have a lot of options and Dean was the best of them. As long as the check came, it didn’t really matter if the company felt impersonal or not. Except in April the check didn’t come. That was a real blow, particularly at a time when coronavirus had already put a huge dent in the price of milk. 

And Peters wasn’t the only farmer who didn’t get paid. More than 100 independent producers in Pennsylvania waited months for their April check. 

Jessica Peters: You know, once a week or a couple times a month you sit down at your kitchen table and decide who you're going to pay this month. We've been doing that for five years. The last really good year we had was 2014. The problem is if we never get that money, you know, I mean, we're holding on right now, but it's just going to snowball until this is just over. 

All those farmers have since been made whole, so it might seem like hyperbole until you remember how many farms have gone under in recent years. Peters says she gets a message almost every day from a dairy farmer saying they lost their milk market and they’re worried about what they’re going to do. 

Despite the dissolution of Dean Foods, Peters’ milk is still picked up regularly — though she’s not sure exactly by whom. It’s likely a processor working with Dairy Farmers of America, or DFA, a co-op of more than 13,000 farmers. 

When Dean declared bankruptcy, it already had a stalking horse bidder waiting in the wings to take over its operations — the DFA, a multi-billion-dollar company. 

Andrew Scurria: They went into bankruptcy having already settled on a sale process and having already named Dairy Farmers of America, which is sort of a dominant dairy cooperative throughout most of the country as their lead bidder for the company, which is unusual.

Now, here’s the thing you need to know about these two companies: 

Andrew Scurria: Dean was DFA’s largest customer and DFA was Dean's largest supplier. 

Hold up. WHAT?!

Andrew Scurria: The two companies depended on each other, which is why DFA very much had a lot to gain by bringing them underneath the umbrella, because then DFA became a much more vertically integrated organization that controlled the processing of milk all the way from the farm to the processing plant. So where previously DFA farmers would sell milk to Dean, once the assets were in DFA’s hands, the company was sort of selling milk almost to itself.

If all kinds of antitrust bells are going off in your head, ding ding ding — you win! Dean’s bankruptcy and DFA’s subsequent takeover of the company’s assets meant that the Dairy Farmers of America (which let’s be real is run like a huge corporate giant not like a quaint country co-op) was going to be really powerful. 

And this could mean a few things — that Wes Kent’s local co-op in Virginia will have a hard time competing with DFA, which represents thousands of big farms across the country. And that independent farmers like Jessica Peters will likely have to join DFA in order to have a market for their milk. 

Also…

Andrew Scurria: Regulators were concerned that DFA would lower the prices that it charged to its suppliers, raise the prices that it charged to its customers, its retailers and end up in a situation where everyday people would be paying more for milk at the store. 

Wes Kent’s co-op, the Maryland & Virginia Milk Producers Cooperative Association, filed objections to the sale, claiming that the merger would be real bad for their business. Particularly in the Carolinas, where there was already a lack of competition.

The brief also accused DFA of suppressing competition in the past by driving down payments to milk farmers and increasing their cut of milk processing and packaging costs. 

Andrew Scurria: But the judge disagreed. So did the Justice Department.

In May, a short six months after Dean declared bankruptcy, the DOJ approved the sale to the Dairy Farmers of America, over the concerns of smaller regional co-ops. It’s possible that the move will pave the way for even more consolidation of the dairy industry. And that could mean fewer choices and higher prices for consumers. It could also mean that farmers like Jessica Peters and Wes Kent will have to take whatever bad milk processing deals come their way because the only other option is to sell their farms. 

Agriculture is the backbone of America. We pride ourselves in being able to feed the world with our great bounty. And we have a certain nostalgia for farming, even though a lot of us are saying uh, no thanks to “Got Milk?”

But all the sentimentality in the world isn’t going to change an unsustainable industry that produces a product that fewer and fewer people want. For decades the dairy industry has been reluctant to adapt to the changing needs of consumers. It doesn’t respond to consumer tastes so much as dictate them with catchy slogans — ”Milk, it does a body good.” “Got milk?” “You can always count on milk.” But can you? Or do you even want to? That’s the question Dean Foods never asked. But maybe it should have.

Spectacular Failures is a production of American Public Media. It’s written and hosted by me, number one ice cream eater Lauren Ober. Amateur oat milk maker Whitney Jones is the show’s producer. Our editor is herd manager Phyllis Fletcher. Yogurt enthusiast David Zha is our assistant producer. Our theme music is by the delightful David Schulman. Other original music this season comes from Jenn Champion and Michael Cormier. Kristina Lopez is our Audience Engagement Editor and Lauren Dee is our executive producer. Concept by Tracy Mumford. The general manager of APM Studios is Lily Kim. If you want to see photos of my trip to Winding River farm, check out our website spectacularfailures.org. Much love to Anna-Lisa Laca of Farm Journal for doing some legwork for us. And super special thanks to Wes and Lee Kent for letting us bug them when they were supposed to be haying. 

Lauren: Hey, wait, wait. I'm sorry. I have to stop you. What is happening there? 

Wes Kent: Oh, that's a brush.

Lauren: I know but she's like getting her bum brushed. 

Wes Kent: Oh yeah, they love it.