Rabobank Global Dairy Top 20

Rabobank Global Dairy Top 20 – A Shuffling of the deck chairs

Dairy price recovery in 2017 has positively affected the combined turnover of the top 20 global dairy companies, which, in 2017, was up 7.2% on the year in US dollar terms and 5.1% in euro terms, according to RaboResearch’s latest Global Dairy Top 20 – A Shuffling of the Deck Chairs report.

“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.” says Peter Paul Coppes, Senior Analyst – Dairy. “However, while the names have remained the same, the order shifted in 2017.”

The world's largest food and beverage company, Switzerland's Nestlé, reigns supreme on the list, but the gap between number one and number two has narrowed. French Lactalis swapped places with compatriot Danone and moved into second place, boosted by its acquisitions of US yoghurt businesses Stonyfield and Siggi’s. Danone slipped to the third spot, after divesting Stonyfield following the acquisition of WhiteWave, reducing its stake in Yakult, and selling its holdings in the Al Safi Danone joint venture in Saudi Arabia.

Other highlights from the Dairy Top 20 report include:

Fonterra up one spot

Fonterra moved up one spot on the list into fifth, switching places with FrieslandCampina which dropped to sixth.

M&A is on the rise

Merger-and-acquisition (M&A) activity in the dairy sector grew in 2017, fuelled – as in other sectors – by the availability of cheap capital. However, unlike other food and agribusiness sectors, the mega-deals which did occur – Danone/WhiteWave and Saputo/Murray Goulburn – had limited impact on rankings within the Global Dairy Top 20.

Cooperatives still dominate... but are also challenged

The dairy sector trails other sectors in terms of industry consolidation through large-scale acquisitions. That is not to say that M&A doesn't occur in the dairy sector – it just means that dairy acquisitions tend to be limited in size and financial impact.

China considers global growth opportunities

Chinese companies need to address the integration of non-Chinese management as they consider growth opportunities around the globe. Increased collaboration between Chinese and non-Chinese companies in China has the potential to create a pipeline of global management talent.

Local or global... or both?

Historically, the dairy industry was very local. That is, milk production, processing, and consumption occurred locally. This was particularly true in markets dominated by fluid milk consumption. However, economies of scale in milk production and the conversion of milk into longer shelf-life products like butter, cheese, and dry dairy ingredients has required many dairy companies to be more globally-oriented.

The disruptors are here!

Rabobank sees an increased amount of ‘disruption’-based M&A deals, either defensive or opportunistic. By nature these deals are often small and involve start-ups, but they are growing in volume.

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