GLOBAL – The total combined turnover of the top 20 dairy companies globally increased by 1.3% in 2019 compared to the 2.5% rise in 2018, according to Rabobank in its latest listing of the Global Dairy Top 20.
The relatively modest gains in the combined turnover were as result of exchange rate fluctuations, modest commodity price appreciation, below-trend increases in milk production in key exporting countries, and limited organic growth in major dairy categories.
Rabobank’s ranking of companies is based on the year’s financials and M&A transactions completed between January 1 and June 30, 2020,
Merger and acquisition activity in the global dairy arena during 2019 totalled 115 deals, just outpacing the prior year’s 112.
The majority of 2019 transactions, which include investments, divestments, acquisitions, joint ventures, and strategic alliances took place in Europe (64), followed by North America and Asia (39 and 25, respectively).
As of mid-2020, the number of dairy deals stands at 52, impeded by Covid-19 and foreshadowing a more active deal environment for 2021.
According to Rabobank’s 2020 listing, the top two companies retained their spots with Nestle coming in first with turnover of US$22.1bn. Closely following is Lactalis with turnover of US$21bn.
Nestlé’s parring of its US$1.8bn US-based ice cream business, along with other assets (some of which were acquired by Lactalis), resulted in a significant narrowing in the gap between the top two global dairy companies.
In 2018 the gap between the companies was US$3.5bn and in 2019 it is US$1.1bn.
Jumping three spots coming third is Dairy Farmers of America with turnover of US$ 20.1bn (£18.0bn).
The leapfrogging by the US’s largest dairy cooperative was facilitated by its strategic and significant acquisition of Dean Foods in early 2020, securing a home for a substantial portion of its members’ milk, and boosting year-on-year sales by 47.5%.
According to Rabobank, DFA will experience additional organic growth later this year, with the commissioning of a large-scale cheese plant (135,000mt per annum) in Michigan, which is a joint venture with Select Milk and Glanbia.
Asian companies strongly featuring in year’s rankings
Asian companies made major moves in this year’s list with China’s largest dairy company, Yili, moving into the top 5, with year-on-year growth of nearly 20%, due in part to its acquisition of the New Zealand-based Westland cooperative.
China’s second-largest dairy company, Mengnui, rose from number 10 to number 8, on the heels of acquiring Australia-based Bellamy’s and entering into a joint venture with Coca-Cola to sell chilled milk in China.
However, Mengnui’s planned acquisition of another Australian business, Lion Dairy & Drinks – currently owned by Kirin (Japan) – failed to gain approval from Australia’s Foreign Investment Review due to rising tensions between the two countries.
Entering the Global Dairy Top 20 this year, from the world’s largest milk-producing country, is India’s Gujarat Co-operative at number 16, with US$5.5bn in 2019, up 17% from the prior year.
Known for its Amul brand of milk and dairy products, the cooperative has experienced a 17% compound annual growth rate of more than 17% over the past decade, due to growing milk collections, expanding into processing capacity, entering new markets, and launching new products.
Drops in ranking
Danone came in fourth in this year’s survey, slipping down from a high of number 2 in 2017 when it has made several acquisitions, indicated that organic growth was not enough to retain it’s ranking.
Consolidating of key dairy assets by Fonterra and FrieslandCampina resulted in lower year-on year sales in both US dollars and euros, and each slipped two notches in this year’s survey coming in number 6 and 7 respectively.
Likewise, Arla Foods also dropped two spots in the rankings to number 9, but it did manage to post a year-on year gain in euros.
Cooperative members in New Zealand and Europe are facing greater environmental constraints which are limiting growth. As a result, these companies are likely to focus on value strategies and rationalization of plant capacity.
Other companies that featured in the top 20 list include Saputo (10), DMK (11), Unilever (12), Meiji (13), Sodiaal (14), Savencia (15), Agropur (17) Kraft Heinz (18) Schreiber Foods (19) and Müller (20).
Amid the COVID-19 crisis and the looming economic recession, the Dairy Products market worldwide is projected to grow at CAGR of 3.6% in 2020-2027 to reach US$129.4 Billion by 2027, according to a recent report by Research and Markets.
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