Dean Foods, Inc.: Executive Summary

The company I work for is Dean Foods of California, a dairy manufacturer located in Buena Park, California. We are solely owned by Dean Foods Inc, the countries largest supplier of milk. Dean Foods, Inc. currently controls over 65% of milk business in America. However each subsidiary is considered a separate company and encouraged to compete with each other. Dean Foods of California (DFC) is sole supplier of milk for all the Southern California Albertson's stores.
Market Structure For Dean Foods of California we are in a monopolistic competition market. Even though we have a contract for the next three years, to be the supplier of milk to Albertson's, there are still a number of other suppliers who would love to have that business, even some of our sister companies. The amount of volume would be a large enough to help any milk manufacture.
Understanding your Buyers: Buyers Power
Since we only have one customer, they have a huge influence on Dean Foods of California.
We must make sure that we always meet their needs, while trying to control our cost. To be able to re-negotiate the contract with Albertsons we need to make sure that the service they are receiving is the highest we can deliver, if not they will consider going with a different supplier. They can do this because the name brand sold is theirs and any company can produce it.
Number of Suppliers: Suppliers Power Since we are owned by a larger company we must follow their policies, and one of these is to use their milk brokers. We currently use two different brokers who buy milk from dairy farmers throughout California and Arizona. I am not sure what kind of power they have in their purchasing power, but they do dictate what farms are used. They also provide the price we use, within certain guidelines from the state.
Governmental Rules and
Regulations Both the state and federal governments have regulations controlling the milk business. California regulations take preference, except when we buy or sell milk outside the state. The milk board controls the cost of milk and regulates the dairy farms to make sure everyone is equal in their pricing. The state feels the milk is necessity and they do not want the price to go so high that low income households cannot afford milk. If we try to increase the price and it goes outside the states guidelines we have to pay a penalty, and the fees can be rather large. We must also pay all the taxes that every other business must pay. These include; income, use, CRV, and payroll taxes. The state does give us a break and we do not have to pay sales tax.
Ease of Entry / Exit Since we enter into long term contracts the ease of entry and exit are relatively hard to do. But once the contracts come to an end there will be many companies bidding for the business, hoping to have the steady volume.
Economic Strategy Currently we are practicing the economic strategy of Operational Excellence. We are doing a lot to control our cost, and to increase our profit margin. We have changed our delivery schedules from a seven day schedule to a four day schedule. By doing this we have reduced our delivery cost by nearly 40%. We have also reduced the expenses in our plant and are trying to become more efficient. We are also trying to increase our volume by producing products for our sister companies. If we increase the volume of milk produced it will lower our fixed costs and, increase are profit margin for those items we sell to Albertsons. Unfortunately due to our contract we are not allowed to go out and get additional customers, in direct completion with Albertsons.
Future Economic Strategies In the future we need to shift our strategy from Operational Excellence to Customer Intimacy, since we have this multi-year contract. Hopefully we will be able to change our contract, and allow us to seek outside business. If we could do this we could keep our current strategy of Operational Excellence. However we should not expect this happen so we need to make sure we have great customer service.