Manufacturing News

Growth of dairy industry dependent on acquisitions

Annual report from the Rabobank Group ranks the world’s top 20 dairy producers

Pediatricians say pregnant women and children should not drink raw milkWith challenging conditions and weak economies damaging sales growth in key markets for the dairy industry, the latest annual Rabobank survey suggests dairy giants will need to acquire or merge with more companies to sustain growth rates as big deals become harder to come by.

Rabobank Group, a wholesale and retail banking provider, says 2013 was a challenging year for dairy companies, which saw stagnant sales volumes. By contrast, in 2013, there were 124 dairy transactions, the highest since 2007.

The bank’s Global Dairy Top 20 report ranks the world’s top dairy producers.

“Once again, giants Nestlé, Danone and Lactalis [numbers 1, 2 and 3 respectively] top the list, showing the world’s largest dairy companies are reasonably entrenched,” says Tim Hunt, Rabobank analyst. “We continue to see some companies outperform their peers in sheer growth terms. In particular, the Chinese giants Yili and Mengniu, which saw their sales expand by 14 percent and 20 percent respectively, with Yili entering the top 10 for the first time ever.”

Canadian company Saputo continued to climb the list into eighth place, up one spot from last year’s survey, in part because of several recent acquisitions. Japan’s Meiji and Morinaga slipped down the list largely because of the sharp decline in the value of the yen, according to Rabobank.

Fonterra took the fourth spot, followed by FrieslandCampina, Dairy Farmers of America, Arla Foods, Saputo, Dean Foods and Yili to round out the top 10.

Rabobank says while underlying growth will pick up in coming years, many markets will not return to the rapid growth rates seen before 2008. Because of this, mergers, acquisitions and joint ventures will remain key avenues to growth and profitability.

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