Enhancing, Enriching, Sustaining Dean’s Place at the Table Dean Foods Company 2004 Annual Report About Our Company We are one of the leading food and beverage companies in the United States. ur Dairy Group is the largest processor and LAND O LAKES® creamers and cultured and distributor of fresh milk and other products. Our Specialty Foods Group is the nation’s OOdairy products in the country, sold under leading manufacturer of private label pickles and more than 50 familiar local and regional brands non-dairy powdered coffee creamer, and maker of a and a wide array of private labels. Our WhiteWave variety of other specialty food products. We also Foods subsidiary markets and sells a variety of own the fourth largest dairy processor in Spain and well-known dairy and dairy-related products, such the leading brand of organic dairy products in the as Silk® soymilk, Horizon Organic® dairy products United Kingdom. and juices, International Delight® coffee creamers Contents Dean’s Place at the Table 1 Letter from the Chairman 2 Dean Dairy Group Enriched With Natural Goodness 4 WhiteWave Foods Enhancing Health, Enriching Lives, Sustaining Our Environment 8 International Enhancing Nutrition Internationally 14 Financial Review 16 Other Shareholder Information 87 Board of Directors and Officers 88 Dean Foods 2004 Annual Report Dean’s Place at the Table At Dean Foods, we are proud to be in the business of enhancing and enriching the lives of consumers. Our brands are known for freshness, purity, delicious taste and impeccable quality. We sell fresh, nutritious dairy products under an array of local brands that have been staples in their communities for generations. Meadow Gold®, Alta Dena®, Dean’s®, Country Fresh®, Oak Farms®, Mayfield®, and Garelick Farms® are just a few. Which one is on your table? We also are proud to be the nation’s leading organic foods company. Through our Silk® and Horizon Organic® brands, we are bringing healthy, delicious alternatives to tables across the country. From nutritious foods and beverages for people on the go – like single-serve milks, soymilks, juices and yogurts – to the creamy goodness of International Delight® coffee creamers, we make the products consumers rely on to enhance and enrich their lives. 2004 was an important year for us. Even as we faced an extraordinarily difficult raw material environment, we maintained our focus on our customers, and on reducing our costs, advancing our strategic objectives and maximizing shareholder value. We are proud of our accomplishments in 2004 and we look forward to continuing to enhance, enrich and sustain our customers, our consumers, our employees, our communities and you, our shareholders. 1 Dean Foods 2004 Annual Report Dear Fellow Shareholders, 2004 was a challenging year for Dean Foods Company. a major contributor to the future growth and success We faced unprecedented volatility in raw milk prices, of WhiteWave Foods. a difficult retail grocery environment and record-high In August 2004, we announced our decision to fuel, resin and other commodity costs. These and consolidate White Wave, Horizon Organic and the certain other factors caused us to fall short of our Dean National Brand Group, which are the three operating income and earnings goals for the year. branded companies included within our WhiteWave At the same time, we accomplished several Foods segment, into a single, stand-alone operating important objectives during the year. First, our unit. This is a strategic move that we believe will Branded Products Group, which we have renamed create significant long-term value. We believe the WhiteWave Foods, had an outstanding year. consolidation will allow us to go to market more WhiteWave Foods’ sales increased to $1.2 billion for efficiently and effectively as a single sales and the year, with operating margins more than doubling marketing organization, and enable us to create a more to 10%. We saw robust growth in all of our most streamlined and cost-effective supply chain. The full important brands. Also, our Dairy Group was able to integration of these businesses will be a lengthy leverage its position as the industry’s low-cost producer process involving all aspects of the three companies’ to expand its market presence, posting an approximately operations. We are in the midst of the consolidation 1% increase in fresh milk and cream volumes, and reorganization process, and we expect to com- compared to a 1% decline in overall consumption. plete it by mid-2006. Finally, we took several strategic steps that I believe In January of this year, we announced our intent to well-position us to create significant shareholder pursue a tax-free spin-off of our Specialty Foods Group value in 2005 and beyond. to our shareholders. We were very fortunate to hire a highly regarded management team, headed by Sam Building a Better Company Reed, former Chief Executive Officer of Keebler We began the year with the acquisition of Horizon Foods, to lead the new company. We are very Organic® on January 2, 2004. As the leading brand of enthusiastic about this transaction and believe that it organic foods in the United States, Horizon Organic provides a unique opportunity to unlock value for our is a key addition to our branded portfolio. Net sales shareholders. The Specialty unit’s strong operating of Horizon Organic products increased 24% in 2004 cash flow, combined with an unleveraged balance over 2003, which we believe indicates the considerable sheet, will provide the new management team with growth potential of the brand. ample financing capacity for the potential expansion Another meaningful strategic step was our of its platform through targeted acquisitions and acquisition in March 2004 of a license to use the other initiatives. Following the spin-off, we will be Land O’Lakes® name on certain dairy products sold able to further sharpen our focus on our core in the eastern United States. Now we have the businesses. This transaction, which we expect to be exclusive right to use the Land O’Lakes brand on completed in the third quarter of 2005, is another most dairy products (excluding cheese and butter) demonstration of our long-standing commitment to sold anywhere in the country, enabling us to effectively creating value for our shareholders. invest in national advertising and promotion. The We also took steps in 2004 to permanently Land O’Lakes brand is a superior brand with eliminate certain operating costs from our system. tremendous consumer loyalty and we believe it will be We closed 8 Dairy Group facilities in 2004 that had 2 Dean Foods 2004 Annual Report excess capacity or overlapping operations, and we Looking Ahead reduced headcount accordingly. The Dairy Group As we look to the year ahead, we believe there is responded quickly to the adverse commodity great value-creating potential. environment by accelerating several plant closings In the Dairy Group, we will focus on maintaining scheduled for 2005 into 2004. We expect the Dairy and growing sales volumes by continuing to provide Group to begin to reap the benefits of its 2004 cost our customers with the highest level of service, quality reduction efforts as we move through 2005. and value. At the same time, we will take steps to further reduce our cost structure through rationalizing Outstanding Brand Performance our manufacturing and distribution networks and We made a substantial investment in marketing and other efficiency initiatives. promoting our brands in 2004, and we were pleased Our primary strategic objectives in 2005 are the with the results. Silk® continued to perform well, successful consolidation of WhiteWave Foods and the with sales up 33% compared to 2003. Silk® market completion of the spin-off of our Specialty Foods share in the retail grocery channel held steady at 78%, Group segment. We are dedicating, and will continue indicating that Silk® remains the clear market leader. to dedicate, substantial resources to both of We introduced several new Silk® products during the these objectives. year, and initial reactions have been favorable. We also will continue to make meaningful invest- We launched our first national print advertising ments in our brands. We believe that we can continue campaign for Horizon Organic® in 2004 which, to increase sales and profitability by wisely investing when combined with expanded distribution, helped in marketing our biggest and fastest growing brands. to drive their impressive 24% increase in sales. As always, we will carefully analyze our balance Sales of International Delight® increased 29% in sheet and our portfolio of assets to ensure that we are 2004 compared to 2003. We believe the revived investing our capital where we believe returns are the momentum of International Delight® is due to greatest, and that our resources are always properly favorable consumer reaction to the new bottle aligned with our strategic objectives. introduced in 2003, new products introduced during I want to thank our employees for their focused 2004, including our new low-carb formulation, and dedication and hard work throughout a challenging our related marketing efforts. year at Dean Foods. Finally, I thank you, our share- Our portfolio of Land O Lakes® products also holders, for your continued investment in and support performed well in 2004. Sales of our Land O Lakes® of our company. I look forward to reporting out- half and half increased 14%, and sales of our entire standing results for 2005. portfolio of Land O Lakes® products increased by 34% over 2003. Strengthening Our Financial Position We also made balance sheet improvements during Gregg Engles 2004. We refinanced our bank facility in August to Chairman of the Board and CEO lower our ongoing interest expense. We also repurchased over 9 million shares of our common stock, for an aggregate purchase price of approximately $297 million.