Dairy Global
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Nestlé, Lactalis and Danone hold the top 3 positions of the world’s largest dairy companies in 2014. Dairy Farmers of America pushed into the top 5 on the back of record US milk prices and its merger with Dairylea. This is according toRabobank’s ‘Global Dairy Top 20’ report, released last July.

"While the names of the world's 20 largest dairy companies in 2014 will be familiar to industry followers, the order saw something of a shakeup compared to 12 months prior," says Rabobank Global Dairy Strategist Tim Hunt.

French company Lactalis was the third biggest dairy company last year, but now took over the second position from the other French dairy firm Danone (now at number 3 on the list). Nestlé has retained its number 1 position over the last couple of years. With a dairy turnover of €20.9 billion in 2014, its makes it the only firm to reach above the €20 billion. Land O' Lakes from the USA made its entrance in the top 20 list, set at position 19. New entrance in the top 5 is Dairy Farmers of America, displacing FrieslandCampina from the Netherlands. Currency shifts impacted company rankings, but also highlighted the deterioration of economic growth and near-term growth prospects for dairy in many emerging markets, along with enhancing the buying power of US and Chinese companies.

Factors influencing weak growth

Rabobank estimates that the top 20 have posted combined dairy sales of US$223 billion (€167 billion) in 2014. This represented a nominal 5% expansion over the previous year (in both US dollars and euro terms). However, with retail dairy price inflation running at 4-5% in key markets in 2014, real inflation-adjusted growth was weak.

There are 3 factors explaining the weak underlying growth in the top 20 in 2014:

1. Slow economic growth and high pricing ensured only fractional volume growth in the key EU, US and Chinese dairy markets in 2014.
2. The value of sales in many emerging markets (like Brazil and Turkey) was also devaluate by the depreciation of their currencies when reported in euro or US dollar terms.
3. The slow growth is attributed to scarcity of large acquisitions or mergers by the world's top 20 dairy companies during the last 18 months.

 

Chinese companies might need new approach

According to the list, Chinese dairy companies Yili and Mengniu have staged a remarkable climb up the ranks of the world's largest dairy companies in the last decade. This growth, almost uniquely among their peers, has been achieved largely through organic growth, fuelled by years of rising volume and price/mix growth in their home market. But according to Rabobank, Chinese dairy companies are now facing a new reality: slower economic growth and the maturation of several product categories has trimmed underlying volume growth and made trading up harder to achieve. With cost-push inflation also set to ease, reported domestic sales growth values are likely to be far slower in the next few years than they have been in the last decade, unless growth is supplemented by acquisitions of other dairy businesses inside and/or outside China. Foreign investment companies are interested in China and the next phase in its evolution may well see China develop into the home of the newest ranks of dairy multinationals.

Author

EDITORIAL-EMMY-5
Emmy Koeleman studied Animal Sciences at Wageningen University in the Netherlands. She is the editor of Dairy Global and All About Feed.

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