Why Are All the Dairy Companies Going Bankrupt?
For starters, people stopped drinking milk
In November 2019, during an economic expansion, Dean Foods declared bankruptcy. The nation’s largest dairy company, with the number one white and chocolate milk brand, could not make money. In January 2020, Borden Dairy followed suit. Most post-mortems dealt with the fact that both companies produced dairy — a product that fewer and fewer people consume. This is true. According to the USDA, from 2000 to 2017, per capita milk consumption in America declined 24%. Very few companies can survive a massive decline in their keystone product. But it’s not the full story.
To understand how two of America’s largest dairy companies found themselves with hundreds of million in debt and few good options, you need to understand the competitive forces that drove the evolution of the dairy industry.
“The Five Competitive Forces That Shape Strategy”
The most common way to analyze industrial competition was first popularized in Michael Porter’s classic 1979 paper “The Five Competitive Forces That Shape Strategy.” According to Harvard Business School, Porter’s article has been cited over 6,000 times, making it arguably the most influential management paper of all time. The general crux of Porter’s…
