Dean Foods, America’s largest milk producer, has filed for bankruptcy protection, citing the drop in dairy sales as consumers switch to milk alternatives.

The Wall Street Journal called Dean’s Chapter 11 filing “a fresh setback to a U.S. dairy industry struggling against declining U.S. milk consumption and rising competition” as “beverage sales shift toward bottled water, fruit juices, and milk alternatives” made from soy, oats and almonds.

Dean noted in court papers filed on Tuesday that traditional milk demand has fallen approximately 2% year-over-year in North America for the past 10 years and its own volume declines “continue to outpace the overall category,” dropping 11.4% year-over-year through the end of September compared with 4% for the industry as a whole.

The company has lost money for five straight quarters and its 2018 sales of $7.8 billion were down 38% from a decade ago.

“Despite our best efforts to make our business more agile and cost-efficient, we continue to be impacted by a challenging operating environment marked by continuing declines in consumer milk consumption,” CEO Eric Beringause said in a news release.

“In recent months, we have put in place a new senior management team that not only has considerable experience in the dairy and consumer product industries, but also in executing major turnarounds,” he said. “I am confident we have the right people in place to lead us through this process.”

Beringause, formerly CEO of Gehl Foods, took over at Dean in July. CFO Jody Macedonio resigned in September.

Dean said existing lenders have agreed to provide about $850 million in debtor-in-possession financing and it has engaged in “advanced discussions” with Dairy Farmers of America, the largest U.S. dairy cooperative, about a possible sale of substantially all of its assets.

“Dean Foods is integral to the dairy landscape,” Monica Massey, executive vice president of DFA, told the WSJ.

Dean said it had cut costs and attempted to manage the lost sales volumes by consolidating seven plants in just eight weeks, but the bankruptcy filing was necessary to “prevent potentially ruinous customer flight.”

Jennifer Rinaldi/The Boston Globe (Getty Images)

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