Fortifying Our Future

Fortifying Our Future Corporate Responsibility Update | April 2008 Dean Foods Company is the largest processor and distributor of dairy products in the United States. We sell milk and a full range of products in the dairy case under more than 50 wellknown local and regional brands and a wide array of private labels. Our WhiteWave Foods division produces a variety of nationally branded dairy and dairy-related products, such as Horizon Organic® dairy products, Silk® soymilk and International Delight® coffee creamers. Fortifying Our Future A Better Tomorrow Starts Today. Being a great company means more than just producing winning products and achieving financial success. It means doing business responsibly and realizing that sound business strategies, social responsibility and environmental stewardship go hand-in-hand in a successful, sustainable business. At Dean Foods Company, we are committed to doing business responsibly. Consumers count on us to provide them with healthy, nutritious products. Our employees depend on us to provide a safe workplace and to help them provide for their families and their futures. Our shareholders expect us to safeguard and grow the value of their investment. And protecting our environment is an obligation we have to all of our stakeholders. Although our pursuit of responsible business practices is nothing new, we have elevated our emphasis on sustainability. Finding ways to continuously reduce our environmental footprint and improve our business practices has become core to our business strategies. We are committed to transparency as we tackle these challenges. In this report, we discuss our initial steps and the actions you can expect of us in the future. Table of Contents Letter From Our Chairman and CEO Nourishing Bodies Protecting Our Planet Sustaining America’s Farms Strengthening Our Communities Promoting Ethical Behavior Building Strong Relationships Looking Ahead 2 4 6 10 12 14 15 16 1 Fortifying Our Future From Our Chairman and Chief Executive Officer In today’s world, finding ways to become more sustainable is a critical business priority. It is more than just the right thing to do: it is a requirement to succeed and stay competitive. The worldwide food industry leaves an enormous environmental footprint. Farming and ranching practices greatly impact our environment. Food processors collectively use a tremendous amount of energy and water to process the foods and beverages we consume. We all generate considerable amounts of waste. Transporting fresh foods to market requires a great deal of fuel. Solving these global problems will not be cheap, easy or quick, but it is imperative that, as individual companies and as an industry, we act now to ensure a better future for the generations to follow. At Dean Foods we understand that we have significant room for improvement when it comes to reducing our environmental footprint. We are one of the largest food processors in the United States, with over 100 manufacturing plants in 35 states. We use 4,700 diesel-powered refrigerated trucks, 2,600 tractors and over 6,000 refrigerated trailers to make daily deliveries of fresh, chilled products to our customers. Since we built our company primarily through acquisitions of established local and regional dairy processors, we are still relatively early in the process of streamlining and consolidating our acquired operations. As a result, there is significant decentralization and inefficiency in our system. As we work to transform our business to its optimal structure, we are committed to doing it in a way that is right for us, right for consumers, right for our customers and right for the environment. Over the past several years, we have begun to take steps to reduce our environmental impact. For example, we offset 100% of the electricity used to produce our two largest national brands, Silk and Horizon Organic, through the purchase of renewable energy certificates, or “green tags,” which represent the resulting reduction in carbon dioxide and other pollutants when clean, renewable energy sources replace power produced by burning fossil fuels. We have invested in a series of projects at our manufacturing plants to improve our energy efficiency, and we are pursuing other projects designed to reduce the environmental footprint of our vast distribution system. Last year, we began a program to reduce the impact of our packaging. We are proud of what we have already accomplished, but we are committed to doing much more. As a first step, we are preparing a formal company-wide greenhouse gas audit, calculating the carbon footprint of our manufacturing facilities and distribution system. We are also participating in the Carbon Disclosure Project and have voluntarily joined the California Climate Action Registry. We have committed to publish a thorough Corporate Responsibility Report by the end of 2008 that will include the results of our greenhouse gas audit, our strategy and goals for improvement, and more information on all of the topics covered in this initial update. To oversee our expanded Corporate Responsibility program, we created two new senior executive positions and formed an internal Sustainability Advisory Group made up of senior executives representing a broad range of experience and expertise. The audit committee of our Board of Directors will oversee our progress and ensure we are sufficiently focused on this important strategy. 2 We will align our sustainability initiatives with our business objectives and initially focus the bulk of our efforts on manufacturing and distribution, where we can have the greatest impact. We also will place a high priority on waste reduction by continuously improving our packaging and taking advantage of recycling opportunities. We will explore ways we can partner with our suppliers to help them reduce their environmental impact. We are collaborating with outside organizations and experts to develop systems to benchmark, track, audit and report on key projects. We recently became a member of the non-profit organization Business for Social Responsibility (BSR), a group that helps companies integrate social and environmental factors into their business. We will share our best practices both within our organization and with others in our industry. And we will provide an honest and straightforward assessment of our progress on a regular basis. Responsible business practices have long been a core principle at Dean Foods Company. We manufacture healthy, nutritious products that enhance the lives of consumers. We take pride in our relationships with our 26,000 customerfocused employees, and we maintain a broad range of programs designed to ensure not only that they are safe in the workplace, but that they have high-quality, affordable health care and opportunities for advancement. We have a long history of supporting our communities and we maintain a robust legal and ethics compliance program. We believe environmental stewardship is an equally critical component of corporate responsibility. We’re taking action now to ensure a better, stronger future for our company, for the people who depend on us and for our world. Gregg L. Engles Chairman of the Board and Chief Executive Officer 3 Fortifying Our Future Nourishing Bodies First and foremost, we are committed to helping people live better by providing them with wholesome and nutritious food and beverage options. From traditional dairy products such as milk, yogurt and cottage cheese, to alternatives like lactosefree milk, organic milk and soymilk, we sell products that help consumers live happy and active lives. reach maximum bone density. Several studies, including one recently published by the American Heart Association, show that increasing dairy intake as part of a low-calorie, nutrientrich diet could lead to a significant reduction in overall chronic disease risk. Dairy products are an important part of a balanced and healthy diet. When we think of sustainability, we are proud to be in the business of sustaining people through the lasting benefits of dairy. The Natural Goodness of Dairy Studies have shown that there are many health benefits associated with low-fat and non-fat dairy products. According to the United States Surgeon General, the rise in bone disease in the United States is directly linked to a decline in the nutritional quality of many Americans’ diets. Among the Surgeon General’s recommendations is the consumption of calcium- and vitamin-rich foods, including dairy products. In addition to promoting bone health, research has shown that dairy products also may reduce the risk of colon cancer, heart disease, stroke, obesity and obesity-related health issues, including diabetes. Calcium-rich dairy products may help to lower cholesterol and better enable children to Good for Bodies, Good for the Earth Through our Horizon Organic brand, we offer a full line of USDA-certified organic dairy products, perfect for organicminded consumers looking for the healthy benefits of dairy. In 2007, we introduced Horizon Organic Milk Plus DHA. DHA is an Omega-3 fatty acid that has been shown to support brain, eye and heart health through every stage of life. Our Silk Plus and Horizon Organic Milk Plus DHA is fortified with life’sDHA®, a vegetarian and sustainable source of DHA that does not use fish oil and does no harm to our threatened aquaculture. 4 Bringing Soy Into the Mainstream We sell a full line of Silk soy products, including plain and flavored soymilk, enhanced and light soymilk, soy creamers and soy yogurts. According to the U.S. Food and Drug Administration, a diet low in saturated fat and cholesterol that includes 25 grams of soy protein a day may reduce the risk of heart disease. Soy protein may also help to promote bone health, alleviate symptoms of menopause and reduce the risk of certain types of cancer. We take seriously our role in helping consumers to better understand the health benefits of soy and encouraging them to introduce soy into their diets. Focusing on Health Americans are becoming increasingly concerned with nutrition and we are proud to be part of the solution. We work continuously to advance nutritional education and promote healthy outcomes. To help consumers, we post educational information on our corporate and brand websites and on many lines of packaging. We often include educational information in our advertising and support scientific studies to further our collective understanding of nutrition. We are passionately committed to ensuring that all of our products are of the highest quality. We use internal and external quality control laboratories to test raw milk and other ingredients and finished products. We impose strict quality control standards on our suppliers. We have employees dedicated exclusively to quality control in each of our manufacturing plants. 5 Fortifying Our Future Protecting Our Planet At Dean Foods, continuous improvement of our environmental sustainability is one of our core business strategies. to improve our refrigeration controls with new state-of-the-art processors that allow us to incorporate ambient cooling, reducing electric use by an average of 3 million kilowatt hours for every plant we convert. We intend to implement these improvements in all of our major manufacturing facilities. As we look for ways to reduce our dependence on oil, it is important to consider various sources of renewable energy. At our WhiteWave division, we purchase renewable energy “green tags” that offset 100% of the electricity required to produce our two largest national brands, Silk and Horizon Organic. Working with the Bonneville Environmental Agency, a non-profit organization dedicated to developing new sources of renewable energy, our green tag purchases represent an environmental benefit equal to the elimination of 35,000 tons of greenhouse gas emissions annually. We are also beginning to invest in methane mitigation strategies. These systems will capture, scrub and clean methane from our existing waste treatment facilities. We plan to build two systems by the end of next year, which will provide us with almost 7 million kilowatt hours of renewable energy per year. Rethinking Energy Possibly the most important thing we can do to ensure a brighter future for the next generation is reduce our dependence on fossil fuels. Improving the energy efficiency of our manufacturing plants is one of our top priorities. For several years, we have been investing to make our plants more energy efficient. We are continuing to identify additional energy conservation opportunities. In 2007, we commissioned third-party energy audits at two of our largest plants and will now begin to implement the recommended improvements. In 2008, we intend to expand this energy conservation program to additional facilities. Also in 2008, we will continue the process of converting the lighting at our plants to high efficiency compact fluorescent lighting. Converting just one light bulb can prevent more than 110 pounds of coal from being burned and reduce greenhouse gas emissions by 450 pounds. We are also pursuing a plan 6 We are also using state-of-the-art Combined Heat and Power (CHP) systems at four of our plants. CHP captures waste heat from on-site power generation and routes it back to our plant in the form of steam and hot water. when trucks are parked at our facilities. During the past two years, we purchased more than 200 mechanical refrigeration units with electric auxiliary power, and we plan to continue purchasing units with this option. In addition, we have begun to heavily invest in transportation equipment designed with greater thermo-efficiency, reducing the amount of diesel fuel and electricity required to hold product at a consistent temperature. All of these projects are part of our Smart Fleet initiative launched in 2007. We intend to phase in Smart Fleet initiatives over the next five years, significantly reducing our annual diesel consumption and greenhouse gas emissions. In addition to our Smart Fleet projects, we are testing various driver incentive programs across the country to improve our miles-per-gallon, allowing us to burn less diesel fuel and eliminate harmful emissions. Smarter Distribution We are extremely focused on reducing our fuel consumption and emissions, and we have several initiatives underway. Last year, we began a project to replace the mechanical refrigeration systems in our straight trucks with new cold plate refrigeration technology that not only significantly reduces diesel fuel consumption, but also conserves water and reduces waste. We purchased nearly 200 cold plate refrigerated trucks during 2007 and will purchase nearly 250 more during 2008. We intend to convert our truck purchases exclusively to cold plates by 2011, which will reduce our annual diesel usage by nearly 1 million gallons and our greenhouse gas emissions by over 21 million pounds annually. We also plan to equip our refrigerated transportation fleet with electric auxiliary power units, replacing diesel fuel as the energy source, allowing us to keep product cold Our WhiteWave Foods subsidiary was recognized in four consecutive Using 2006 as the baseline year, in 2008 we plan to voluntarily register the carbon footprint of all our California locations with Cold plate refrigerated trucks reduce our annual diesel usage and greenhouse gas emissions. the California Climate Action Registry. years by the U.S. Environmental Protection Agency and the Department of Energy for our support of renewable wind power. 7 Fortifying Our Future Watching Our Waste Last year, we launched a program to improve the sustainability of our packaging. We reduced the weight of our plastic bottles, and decreased our label material usage. We’re also making a significant improvement to our packaging by changing the type of plastic we use to manufacture our bottles. For many of our packages, we are switching from Polyethylene Terephthalate (PET) to High Density Polyethylene (HDPE), because HDPE requires less energy to produce and results in less waste, and because there are more opportunities for consumers to recycle. We converted 2.1 million pounds of packaging in 2007 and will convert another 3.4 million pounds in 2008. In addition to finding ways to make our packaging more recyclable, we are exploring opportunities to recycle waste at our plants. Dairy products are highly perishable, so retailers often return products not sold before their “sell by” dates. In 2007, we began a milk recycling program at selected pilot plants. Under this program, we transfer returned products to a third party, who then dries the milk for use in animal feed. This arrangement eliminates the need to dispose of returned products in landfills or through land application. Due to the success of this program, we are exploring the expansion to other plants where these capabilities are available. Landfills are a major source of environmental degradation. As we begin to set goals under our continuous improvement initiative, we will place a high priority on identifying strategies for further reducing waste. Replenishing the Earth Our WhiteWave Foods division is one of the nation’s leading organic food companies. Organic products are produced using environmentally friendly farming practices that reduce the amount of pesticides in our air, soil and water; replenish and maintain soil fertility; use less fossil fuels; conserve water; and cause less erosion. Each year, our Horizon Organic brand processes millions of gallons of organic raw milk that comes from American Our WhiteWave Foods headquarters in Broomfield, Colorado, is working to become a zero waste facility. We have already saved 187,000 gallons of water and 127,000 kilowatts of energy. dairy farms spanning more than 22 states. We buy more than 1.5 million bushels of organic soybeans each year farmed on more than 40,000 organic acres for our Silk products. 8 We source 80% of our organic milk from independent family farmers and 20% from two dairy farms that we own and operate. One of our farms is located on the sensitive Chesapeake Bay waterway in Kennedyville, Maryland. Since being certified organic in 1998, our Kennedyville farm has inspired numerous neighbors to convert their farms to organic, which has significantly improved the environmental quality of the Chesapeake Bay area. Our second farm is located in Paul, Idaho, on the Snake River Aquifer. We are working with Holistic Management International, a non-profit organization dedicated to promoting land resource management. Our goals with this project are to preserve the symbiotic relationship between land and animal, emphasize grazing in order to restore the carbon cycle and improve the ecosystem, conserve scarce natural water resources, and improve biodiversity. As part of this project, we are adding 775 acres to our farm, converting them to organic. We also lease 6,000 acres for organic farming. We strongly believe in the importance of sustaining our environment, and we support organizations that promote sustainable agriculture and conservation, such as the Bonneville Environmental Foundation, Growing Gardens, The Organic Center, the Organic Trade Association, and the Organic Farming Research Foundation. We are a proud supporter of The Organic Center, whose goal is to educate consumers about organic practices and products. Their research and communication efforts are critical to expanding the recognition of the benefits of organic farming and food for human health and the environment. 9 Fortifying Our Future Sustaining America’s Farms Farmers are the backbone of our business. As one of the nation’s largest food and beverage companies, supporting American family farms has been a part of our heritage from the beginning. We purchase raw milk from approximately 11,500 family farms, including 450 organic farms. We purchase 80% of the raw organic milk that we use directly from family farms across the country. In order to encourage family farmers to convert to organic and to support them in their efforts, we established the Horizon Organic Producer Education (HOPE) program. The HOPE program was created in 2001 to assist conventional farmers with the transition to organic, and provide ongoing support and education for Horizon Organic family farmers. This program includes hands-on support from our producer relations staff, financial and technical assistance during conversion to organic, access to dairy and land conservation experts, assistance in obtaining organic certification and a scholarship program to encourage students to study organic dairy production and veterinary science. We have been a sponsor of the annual Farm Aid concert since 2003. Through public education and direct grants, Farm Aid supports national, regional and local efforts to support family farmers and sustainable agriculture. We are also partnering with dairy producers and processors across the country through our membership in the Dairy Carbon Council. The goal of this group is to design a Carbon Innovation Lab with industry-wide solutions to reduce the carbon footprint of the dairy industry and to successfully execute those solutions. 10 Part of our sustainability strategy is a commitment to help our farming suppliers improve their own sustainability. We are working in cooperation with dairy farmers to use anaerobic digesters that convert animal waste into usable “green” energy. Capturing and converting animal waste reduces the amount of methane, a powerful greenhouse gas, released into the environment. And converting this methane into electricity provides a reliable source of renewable energy that reduces the pollution caused by burning fossil fuels. This technology also produces solid waste that can be used as a soil enhancement product or as a much cleaner source of animal bedding. 11 Fortifying Our Future Strengthening Our Communities We are committed to nurturing and supporting the communities in which we do business. That means investing in those communities to ensure a healthier tomorrow. We support national and local organizations whose initiatives improve the quality of life for employees, customers and suppliers in our local communities. One of our primary areas of focus is health and nutrition. We support nutrition education, encourage healthy lifestyles, and support community health and wellness initiatives that affect millions of families each year. At our corporate headquarters, we sponsor Children’s Medical Center’s exercise and nutrition program, which helps families learn how to achieve healthy lifelong habits. We also strive to affect the lives of children, particularly at-risk children, through our support of education and the arts. We contribute to schools that improve access to educational and social services for disadvantaged children. And, we provide funding and volunteer support to educational programs for children with intellectual and developmental disabilities. We also support the work of university students as they develop community outreach projects that create real economic opportunities for members of the community. We do this because we strongly believe that the only true measure of a sustainable society is how we educate and equip our children to live happy, healthy and productive lives. After all, they are tomorrow’s inventors, teachers and leaders. Another area of community focus is environmental stewardship. We are as dependent on America’s dairy farmers as they are on the land they farm. So, we invest in ensuring the future sustainability of those farms and the rural communities and economies they support. To that end, we support organizations that promote sustainable agriculture, conservation of natural resources, animal welfare, and the preservation of family farms and communities. 12 We are particularly proud of our work with organizations such as Conservation International, which offers expertise on biodiversity. Finally, through our support of organizations such as America’s Second Harvest and the World Initiative For Soy In Human Health, we are joining the fight against hunger. At our WhiteWave headquarters in Broomfield, Colorado, we actively support Community Food Share through product donations, corporate giving and employee volunteerism. In 2007, our company donated hundreds of thousands of product to food banks, food-rescue organizations and shelters across the country. We are proud to be part of the far-reaching efforts that provide nutritious, wholesome food to so many American communities and families. And, when disasters such as Hurricane Katrina strike, we send food, donate money and volunteer our time to help our neighbors in need. Sustainability is a global issue, but its roots are local, within the communities where we all work and live. We believe that supporting and sustaining our communities is vital to sustaining our business and our world. We are proud to sponsor the Dean Foods LEAN (Lifestyle Exercise and Nutrition) Families program at Children’s Medical Center in Dallas, Texas, where our corporate headquarters are located. The program is designed to provide patients and their families with intensive weight management therapy to help them achieve and maintain lifelong habits of good nutrition and healthy activities. 13 Fortifying Our Future Promoting Ethical Behavior At Dean Foods Company, we are committed to operating our business legally, ethically and responsibly. Our Code of Ethics commits everyone at Dean Foods to honest, ethical behavior, and compliance with all laws applicable to our business. Support of and compliance with our Code of Ethics is expected and included in the annual performance goals of our officers and managers. We have a mandatory online legal and ethics compliance training program for our directors, officers and non-hourly employees. We assign courses based on job function and level of responsibility. Participants in the training program are required to complete approximately 10 courses per year. Each course concludes with an exam and we require a passing grade of at least 80%. Maintaining a high standard of corporate governance is an important part of our total commitment to responsible corporate behavior. We have a strong, active Board of Directors that is committed to creating and encouraging a culture of honesty, integrity and personal responsibility. We have made a significant investment in our compliance program because it is a vital tool that helps our employees to understand not only the legal and ethical requirements applicable to their jobs, but our unwavering commitment to responsible corporate behavior. We are in the business of selling wholesome and nutritious products, and we are dedicated to ensuring that our behavior always conveys the wholesomeness and quality that characterize the products we sell. 14 Building Strong Relationships We value each member of the Dean Foods family and aim to provide a safe, healthy workplace that fosters employee satisfaction, development and well-being. We are committed to building and maintaining a diverse group of employees that reflects the consumer base we serve, and creating an inclusive culture where everyone feels valued. This begins with offering a competitive compensation and benefits package benchmarked against other leading companies, a tiered medical plan that accommodates all income levels, a 401(k) plan with a company match, adoption assistance, tuition reimbursement and benefits for domestic partners. We also want our employees to grow personally and professionally during their tenure with Dean Foods, so we offer ongoing training and professional development programs and a tuition reimbursement program to encourage continuing education. To support work-life balance, we have established an array of family-friendly programs designed to help improve employee and family health, including a 24/7 NurseLine and an interactive, online Healthy Connections program, which allows employees to evaluate their health risk. We also provide a confidential employee assistance program to help employees deal with personal issues including financial, legal and workplace concerns. We have safety procedures in all of our facilities, and we have employees at each location whose responsibility is the safety of others. We also require our employees to participate in ongoing training programs to ensure a safe work environment for everyone. At Dean Foods, it is our policy to treat our employees with respect – even in times of hardship. Part of our current strategy is to streamline operations to maximize efficiency, which may result in unavoidable workforce reductions. We understand the hardships caused by job loss, both for our employees and for our communities. When circumstances require us to reduce our workforce, we offer competitive severance packages that include wage and benefits continuation based on length of employment. We also offer professional outplacement assistance to prepare people for the challenges that change often presents. We recognize that great corporate cultures are not created overnight, and we still have work to do. But we are committed to further shaping and strengthening our culture in a way that attracts, develops and retains the best and brightest employees. Our employees are the foundation of our company. Without them, our business would indeed be unsustainable. 15 Fortifying Our Future Looking Ahead We are committed to finding ways to improve the sustainability of our business. Our first step towards meeting our responsibilities for tomorrow is to assess how we’re doing today. We are in the process of preparing a company-wide greenhouse gas audit. Once we better understand our carbon footprint, we will develop specific reduction goals and strategies for improvement. We are focusing our early efforts on our manufacturing and distribution operations, looking for ways to become more efficient. We are also focused on finding ways to improve the sustainability of packaging and reducing our waste. Our goal is to identify, implement and analyze innovative solutions that will conserve resources and build our business capability. As we proceed on this journey, we will assess the impact of our entire business and prepare a Corporate Social Responsibility Report by the end of 2008. We will continue to explore alternative forms of energy, and consider ways to extend our commitment beyond our own walls. We will also continue to partner with our suppliers to help reduce our collective environmental impact. We’re proud of the steps we’ve taken to become more sustainable, and we’re looking forward to doing more to fortify our future. 16 We’re taking action now to ensure a better, stronger future for our company, for the people who depend on us and for our world. Dean Foods Company 2515 McKinney Avenue Suite 1200 Dallas, Texas 75201 Telephone: 214.303.3400 Facsimile: 214.303.3499 www.deanfoods.com