‘The Global Dairy Top 20’, looks at dairy turnover in billions of US dollars to come up with its chart.
In 2017, there are no new additions to the 20 companies, although a few have switched spots.
Retaining its number 1 ranking is Nestlé, at $24bn. Two French companies take up second and third, swapping places from 2016: Danone is now the number two company at $18.3bn, with Lactalis close behind at $18bn.
Recently, Danone sold its subsidiary Stonyfield in the US to Lactalis, in order to meet the requirements of its purchase of WhiteWave.
The data Rabobank used for its calculations was based on 2016 financials, as well M&A transactions completed between January 1 and June 30, 2017, meaning the Lactalis acquisitions of Omira and Stonyfield did not factor.
Also in the US, Dairy Farmers of America sits in fourth spot with a turnover of $13.5bn.
Dutch dairy cooperative FrieslandCampina and New Zealand’s Fonterra switch places, in fourth and fifth places respectively. Rabobank attributes this, in part, to FrieslandCampina’s acquisition of a 51% stake in Pakistan’s Engro Foods.
The biggest jump is Meiji (Japan), which rose three places to 14th overall. Dropping four places from 15th to 19th was German company Müller.
The report noted that while there are two Chinese companies in the top 20, their combined sales growth was 0% year-on-year in 2016 compared to 3% in 2015 and 14% in 2014, which Rabobank suggested means the companies need to look beyond China to continue their movement up the list.
Rabobank noted the dairy sector has started to recover after two years of significant downturn.
It said as prices start to move up again and milk volumes delivered by farmers become more limited, dairy companies have become more focused on value strategies rather than volume strategies driving their actions and attitude to growth.
The report said for several companies, the question has been whether or not to move in or out of adjacent sectors.
It said cooperatives have often moved to their dairy core, and divest non-dairy businesses, as Arla Foods sold Rynkeby and FrieslandCampina looks to sell Riedel.
Growth, and caution
Some companies have diversified into non-dairy. Rabobank cites as examples Danone’s takeover of WhiteWave, Dean Foods acquiring a stake in Good Karma (dairy alternatives) and Uncle Matt’s Organic (juices), and Bega Cheese acquiring Mondelēz’ grocery business in Australia/New Zealand.
In the next year, Rabobank said it is predicting organic growth return, and growth from acquisitions, however, it warned mitigation of risk is likely to become a major driver for events, including risks from Brexit, potential and announced changes to trade agreements, and changes to environmental and food safety regulations around the world.