DOW JONES NEWSWIRES Dean Foods Co.'s (DF) better-than-expected first-quarter earnings were due largely to cost-cutting, Chief Executive Gregg Engles said Tuesday. The company reported earnings per share of 14 cents, up from Dean's own February projection of 5 cents. Cost reductions accounted for four or five cents of the increased earnings, Engles said in a conference call. The company cut 600 positions in the first quarter, eliminating 28 distribution routes and closing a dairy processing plant in the southeastern U.S. The Dallas-based company said it plans more closures. Engles added that the company now plans to cut administrative and operating expenses by $60 million, double Dean's previous estimate of $30 million. The company is trimming costs and streamlining in an effort to offset intense pricing pressure from private label brands. Retailers have used cheaper private-label milk to drive traffic, but Engles said that retailers are backing away from that strategy. Retailers are increasing prices as they determine selling milk significantly below cost hasn't improved their profitability, Engles said. "That's what you expect economically rational people to do," Engles said. However, private label brands will continue to gain market share in the long-term, Engles said. The main concern for the rest of the year, Engles said, is sluggish volume of conventional milk. Milk consumption industry-wide has lagged due to weak wages, declining U.S. birth rates and a drop in breakfast cereal consumption, Engles said. He said cereal accounts for 30% of milk use. Specialty milks, including organic milk and "plant-based beverages" such as almond milk, continue to grow, Engles added. Dean's Horizon Organic milk sales jumped 20% in the quarter, Engles said. -By Ian Berry, Dow Jones Newswires; 312-750-4072; ian.berry@dowjones.com
