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THE LAST 18 months were especially hard on dairy manufacturers, said Rabobank. Weak economies and supply constraints chipped away at sales growth in major markets. To survive, companies have mergers and acquisitions as one route, but to sustain their rates of growth, they have to consider tie-ups with more companies. In 2013, there were 124 transactions recorded, versus 111 in 2012.
Manufacturers also continue to vie for a larger share of the China market, and as evidence, Mengniu and Whitewave, and COFCO and Danone revealed tie-ups. Yili and Dairy Farmers of America also announced theirs. Mengniu and China Modern Dairy partnered for raw milk supply. As of writing, FrieslandCampina and Huishan are considering a joint-venture as well. The industry will see more of these consolidations as a way for companies to grow. While there will be market improvement, growth rates will not go as high as they did before 2008, according to Rabobank.
Trends also show that some dairy companies will continue to outpace others in sheer growth terms, said analyst, Tim Hunt. Examples are Yili and Mengniu which expanded 14% and 20%, respectively, and are now in the top 10 list for the first time (see table). Another is Montreal-based Saputo, which climbed to rank 8th after a series of acquisitions. However, the sharp drop in the value of the Yen caused Japanese dairies, Meiji and Morinaga to fall from their current positions. Nestlé, Danone and Lactalis maintain their standings.
Figure 1: Global dairy top 20, 2014 # Last year Company Country of headquarters Dairy turnover, 2013 Dairy turnover, 2013 1 1 Nestle Switzerland 28.3 21.3 2 2 Danone France 20.2 15.2 3 3 Lactalis France 19.4 14.6 4 4 Fonterra New Zealand 15.3 11.5 5 5 FrieslandCampina Netherlands 14.9 11.2 6 6 Dairy Farmers of America USA 14.8 11.2 7 7 Arla Foods Denmark/Sweden 12.5 9.4 8 9 Saputo Canada 8.8 6.6 9 8 Dean Foods USA 8.6 6.5 10 12 Yili China 7.6 5.7 11 11 Unilever* Netherlands/UK 7.5 5.6 12 10 Meiji Japan 7.4 5.6 13 17 DMK Germany 7.1 5.3 14 15 Mengniu China 7.0 5.3 15 14 Sodiaal France 6.6 5.0 16 18 Bongrain France 5.9 4.4 17 16 Kraft Foods USA 5.8 4.4 18 20 Muller* Germany 5.0 3.8 19 19 Schreiber Foods* USA 5.0 3.8 20 13 Morinaga Milk Industry Japan 4.8 3.6 *Estimate Note: Turnover data are dairy sales only, based on 2013 financials and M&A transactions completed between 1 January and 15 June 2014; the pending merger of Arla Foods and Walhorn is not included. Source: Rabobank, 2014
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