Each year, Rabobank ranks the top players in the dairy industry by turnover and highlights the strategic and market movements that influenced the ordering.
In 2023, only five companies retained their positions whilst there was reshuffle across the entire list largely due to foreign exchange market developments. The combined turnover of all 20 companies increased 7.4% in US dollar terms and 21% in euro terms, with favorable dairy commodity prices ensuring many companies recorded strong turnovers. However, Rabobank noted that activity slowed, with just eight deals announced in the first half of 2023 compared to 12 during H1 2022.
Having replaced Nestlé at the top in 2021, Lactalis remained in the leading spot, with a turnover just shy of $30bn. The company has increased its turnover by 20.5% from 2021, or €4.6bn, reaching €27.2bn/$28.6bn in 2022. The company continued to make acquisitions, most notably of Italian cheesemaker Ambrosi, which will add around €425m/€459 in revenue.
Making a leap from fourth to second place is Dairy Farmers of America (DFA), which overtook both Nestlé and Danone, now in third and fourth place respectively. High dairy product prices and organic growth were behind DFA’s ascent, the co-op having recorded turnover gains of 26.9% to reach $24.5bn, or €23.3bn, up 42.6% in euro terms.
In comparison, Danone’s dairy turnover increased 13.6% (€2.4bn) to €20.1bn, or 21.2bn in US dollar terms, while Nestlé’s stands at $23.3bn/€22.1bn, with the caveat that Nestlé also holds a non-controlling equity share in 19th-place Froneri, a UK-based ice cream company that recorded a $5.3bn/€5.1bn of dairy turnover. For Danone, developments around its Russian business – which was taken over by a Russian federal government agency this summer – are expected to be ‘key to watch’ for investors, as the division is the company’s fifth largest sales contributor.
Rabobank notes that Danone is increasingly turning its attention towards specialized nutrition, having acquired Poland’s Promedica and China’s Eurbest Nutritional Food while disposing of a dairy production facility in Spain; and taking full control of infant formula supplier Dumex while exiting its partnerships with Mengnui in China.
Europe-based Arla and FrieslandCampina swapped positions to 6th and 7th respectively, with less than €100m in revenue separating the two companies.
Unfavorable foreign exchange market developments contributed significantly to the results of companies reporting in New Zealand dollars, yen and renminbi. For example, New Zealand co-op Fonterra (9) dropped three spots and China’s Yili (5) and Mengnui (8) lost turnover gains in US dollar terms, while Japan’s Meiji exited to list. Fonterra’s disposal of its Chilean business Soprole affected the co-op’s turnover by more than $750m for the second half of 2022 and first half of 2023; the co-op still awaits approval for the purchase of DPA Brazil (a JV with Nestlé), which is not included in this year’s rankings. Saputo remained 10th on the back of a strong Canadian dollar having recorded a double digit revenue growth to $13.7bn/€13bn.
In the second half of the table, Unilever remained in 11th place, the CPG giant’s newly-formed ice cream division reporting an increase in sales (€1bn/$0.2bn) raising total sales to €8.3bn/€7.9bn. India’s Amul (12) and France’s Savencia (13) swapped positions while Muller leaped three places to 14th, increasing turnover to €6.2bn/$6.5bn.
Glanbia PLC, whose largest shareholder is dairy co-op Tirlán, entered the list at #20 having recorded a revenue growth of €13bn, up 36% to €4.8bn, or $5.1bn (+21%) in US dollar terms. The company benefitted from increasing sales in US dollars and has said it will switch to reporting in USD instead of euro in the future. Glanbia made several notable market movements, including the rebrand of the co-op to Tirlán and the disposal of its 40% shareholding in Glanbia Ireland, as well as the acquisition of dairy bioactive solutions maker Sterling Technologies and the sale of Glanbia Cheese to Leprino Foods.
Dairy alternatives: shift towards new technologies
Rabobank found that while alt dairy products featured on the portfolios of most of the top players, the trend is now shifting away from plant-based products to precision fermentation-derived proteins, with Nestlé, Danone, Fonterra and FrieslandCampina all partnering with precision fermentation specialists.
“Looking ahead, we expect weakening dairy and retail prices will make 2023 a challenging year in terms of profitability for some companies in the ranking,” Rabobank predicted, adding that the expectations are for muted growth next year and some companies ‘unlikely’ to match their 2022 revenue gains.