Dean foods co (USA:DF) shares declined on Monday, as the company’s main product is not selling as well as it did in the past.
DF shares reached a six-year low after the downgrade, the analysts of Goldman Sachs group Inc (GS), which lowered the stock rating from “neutral” to “sell”. This is because the weakening of the sales can influence to reduce the cost of milk, according to analyst Judy Hong.
The main reason why milk is not selling as well as before, is the fact that there are many non-dairy substitutes which essentially serve the same purpose as cow’s milk, including almond milk, oat milk and soy milk. The price of a gallon of whole milk fell in March to about 2.90 $in US grocery stores.
This is the cheapest price for milk in 14 years, according to the Bureau of labor statistics. This prompted Dean foods to reduce costs, according to the company’s announcement earlier this year.
This means that the company will conclude supply contracts with some farmers as the industry becomes more competitive. Other companies such as retail chain food lion is also the end of their contracts with Dean foods.
DF shares fell about 7.7% as of Monday Afternoon, while shares of government securities amounted to about 1.3%.