Dairy Giant Borden Files for Bankruptcy Protection - The New York Times

Borden, the dairy producer founded a century and a half ago, has filed for Chapter 11 bankruptcy protection, the latest victim of an industry battered by declining prices, rising costs and changing tastes.

The company, which is based in Dallas and reported $1.18 billion in sales in 2018, has been trying to adjust to those unfavorable trends but was hampered by debt, Borden’s chief executive, Tony Sarsam, said on Monday.

“The biggest cause, if you dial it back, is a circumstance where we have debt that is inappropriately sized for the company,” he said.

Executives at Borden, which employs 3,300 people, had been trying to renegotiate its debt agreements for months, Mr. Sarsam said, but filed for bankruptcy on Sunday after talks with lenders fell through.

Just two months ago, Dean Foods, the largest milk company in the United States and one of Borden’s biggest competitors, also said it was seeking bankruptcy protection.

Borden’s financial troubles extend to 2017. After arranging for about $275 million in loans that year, the company, known for its “spokescow,” Elsie, suffered net income losses in each of the next two years.

The company, whose business is largely focused on the Southeast, attributes that misfortune to dairy industry trends, including shifting consumer preferences and increased competition.

Consumption of fluid milk, which accounts for the vast majority of Borden’s revenue, has been declining for decades, with per capita consumption down about 40 percent since 1975, according to Agriculture Department data. Meanwhile, dairy alternatives like milks from soy, oats, almonds and other sources have been on the rise.

More recently, raw milk prices have spiked, with the cost of milk up 27 percent since last January, according to Borden, which expects inflation to continue this year, too.

“We’re at a high point, and that’s been one of the more significant market challenges that we’ve been enduring this past year,” Mr. Sarsam said.

In filing documents, Borden also highlighted eroding profit margins caused by industry consolidation and rising costs for fuel and the resin used in its bottles. A truck driver shortage has propped up transportation costs, too, it said.

Borden also said the cost of various pension and retirement obligations had contributed to its bankruptcy filing, including a $33 million pension settlement.

This isn’t the first time that Borden has suffered financial distress. After making a number of acquisitions in the late 1980s, the company entered a turbulent period resulting in its 1995 sale, for $2 billion, to the private-equity giant KKR. Over the next decade, the company was slowly whittled down, with many of its divisions and brands sold off, Borden said in the filing.

While following Dean’s path into bankruptcy, Borden sought to distance itself from its competitor, arguing that it was in a better position to recover from a reorganization.

“Our operations are running in a way that gives us confidence that when we come out of this we’ll be in better shape,” Mr. Sarsam said.

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