WORLD – The Global Dairy Top 20 list has seen no new entrants but shifts in positions, topped by the world’s largest food and beverage company Nestle SA, then French Lactalis which swapped places with Paris based food products corporation, Danone.

Their combined turnover was positively impacted by dairy price recovery which increased 7.2% in the year 2017.

Danone slipped to the third place after several divestments including sale of Stonyfield on acquisition of WhiteWave; reducing 14% stake in Yakult to enhance organic growth and maximize efficiencies towards 2020 and selling its holdings in the Al Safi Danone joint venture in Saudi Arabia.

Lactalis on the other hand moved to boost its dairy footprint in the United States by acquiring yoghurt businesses Stonyfield and Siggi’s Dairy to further grow the unique yoghurt brand.

“For the second consecutive year, there were no new entrants to the Dairy Top 20 list, with the USD 5bn threshold difficult to achieve due to a scarcity of large acquisitions or mergers,” said Peter Paul Coppes, Senior Analyst – Dairy at Rabobank.

“However, while the names have remained the same, the order shifted in 2017.”

Muscle of the cooperatives

The Dairy industry is dominated by large farmer-owned cooperatives with several mergers and acquisitions, but this is limited in size and financial impact compared to other F&A sectors.

Cooperatives occupied the fourth through seventh positions in the Dairy Top 20 list, accounting for US$54 billion in turnover in 2017, more than double that of Nestle.

Their expansion is limited by a challenging economic environment, capital/ investment allocations, fluctuating milk prices, and lack of right innovative structure to help access outside capital.

US based Alto Dairy cooperative was acquired by Montreal-based Canadian dairy company, Saputo in 2008.

Ten years later, Saputo acquired Australian dairy cooperative Murray Goulburn, making it the largest dairy processor in Australia.

Mergers and acquisitions on the rise

Mergers and acquisitions in the sector were largely due to availability of cheap capital.

Within the scope of the period of analysis, Danone acquired WhiteWave to form DanoneWave; Saputo acquired Murray Goulburn bringing the number of dairy deals to 127 in 2017 compared to 81 transactions in 2016.

While dairy industry grew much faster locally as a result of fluid milk consumption, acceleration in the global market was on longer shelf-life milk products such as butter, cheese and dry dairy ingredients.

China presents opportunities in the market as the country considers increased collaboration between Chinese and non-Chinese companies for global growth.

Rabobank report says dairy market is expected to grow by at least 30% in volume and value given population-income growth and urbanisation.