Dean Foods Company (DF - Free Report) remains committed toward strengthening its brands portfolio to make the most of consumers’ rising inclination toward healthy and nutritional products. To this end, the company raised its ownership stake in Good Karma Foods, in which it had made a minority investment in May 2017.
Dean Foods’ majority stake in Good Karma reflects its solid brand building strategy. Markedly, Good Karma is a leading provider of flaxseed-based milk and yogurt alternatives, which will help Dean Foods expand in the growing plant-based food and beverage space. Clearly, this reflects Dean Foods’ focus on diversification, as the addition of Good Karma will enhance its presence within and beyond the dairy category.
Good Karma is likely to be a deemed fit, given its allergen-free plant-based options that include nutritional benefits, alongside having a neutral flavor and rich texture. These factors will help Dean Foods attract consumers looking for tasty substitutes for the typical dairy products.
Well, Dean Foods has long been taking strategic steps to optimize capital allocation, concentrate on core business activities and diversify its brand portfolio by moving beyond the pure milk products. While the company is on track with the growth of its core dairy-related business with products like ice cream, flavored milk and sour cream; it is also vouching for opportunities in foodservice and other beverages.
The company’s pace of boosting growth at the core dairy business was anchored by the introduction of the DairyPure milk brand in 2015 and the TruMoo flavored milk in 2012. In 2018, the company expects to build brand equity on DairyPure and TruMoo, through new product innovation and improved marketing. Additionally, the company explored the ice cream business with the acquisition of Friendly’s Ice Cream manufacturing and retail operations in 2016, which is delivering results.
Moreover, we applaud the company’s efforts to grow in the healthy food and beverage space, evident from its deals with Good Karma and Organic Valley Fresh milk brand, as well as the acquisition of Uncle Matt's Organic juices. Such endeavors along with the company’s robust cost-reduction efforts drove its performance in the first quarter of 2018, wherein both top and bottom lines beat estimates. With this, Dean Foods broke its trend of earnings miss/in-line earnings in the preceding seven quarters. Also, sales beat estimates after three straight quarters of miss.
We believe, these factors should continue to raise investors’ optimism in this Zacks Rank #3 (Hold) stock that has rallied 22.1% in the past three months, outpacing the industry’s almost 18% growth.
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