Rabobank issues Global Dairy Top 20 – no new entries and Nestlé stays top
Peter Paul Coppes, senior analyst – dairy, said that for the second consecutive year, there were no new entrants to the Dairy Top 20 list, with the $5bn threshold difficult to achieve due to a scarcity of large acquisitions or mergers.
“However, while the names have remained the same, the order shifted in 2017,” Coppes said.
The world's largest food & beverage company, Switzerland's Nestlé, still tops the list, but the gap between number one and number two has narrowed. Moving into second place, ahead of fellow French company Danone, is Lactalis, which has been boosted by its acquisitions of US yogurt businesses Stonyfield and Siggi’s.
Both France and the US have four entries in the top 20.
Danone slipped to third 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.
Fonterra and FrieslandCampina also swap positions, in fifth and sixth respectively, with Saputo and Yili also exchanging places in eighth and ninth, due in part to Saputo’s acquisitions, including Australia’s Murray Goulburn.
The only company jumping more than one place is German cooperative DMK, which rises two places to 13th.
M&A on the rise
The report also notes that merger-and-acquisition (M&A) activity in the dairy sector grew in 2017, fueled – as in other sectors – by the availability of cheap capital. However, unlike other food & agribusiness sectors, the large deals that did occur – Danone/WhiteWave and Saputo/Murray Goulburn – had limited impact on rankings within the Global Dairy Top 20.
Rabobank said the dairy sector trails other sectors in terms of industry consolidation through large-scale acquisitions. However, while M&A does occur in the dairy sector, dairy acquisitions tend to be limited in size and financial impact.
Chinese companies need to address the integration of non-Chinese management as they consider growth opportunities around the globe, the report also notes. Increased collaboration between Chinese and non-Chinese companies in China has the potential to create a pipeline of global management talent.
The report notes that the dairy industry is becoming more global in scope. Previously, milk production, processing, and consumption occurred locally, especially 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 report concludes.
Rabobank said it also 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.