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Dairy demand globally firms up as product prices rallied to elevated levels in 2021, reveals Rabobank

Due to the strengthening of underlying milk commodity prices, industry’s leading dairy companies exhibited higher turnover growth and strategic activities, hailed as more significant than in recent years. This is according to Rabobank’s latest Global Dairy Top 20 report.

This year, four companies on the list are within US$150 million in sales. Notable highlights include the entry of UK-headquartered ice cream brand Froneri to the list and the departure of Kraft Heinz from this ranking.

“Supported by the recovery in foodservice channels after the initial COVID-19 pandemic and continued strong retail channel sales, dairy demand firmed globally,” outline the report’s authors.

“Combined with lower-than-anticipated milk production growth in the main exporting regions and exceptionally strong Chinese import demand, dairy product prices rallied to elevated levels in 2021.”

The combined turnover of the Global Dairy Top 20 companies jumped by 9.3% in US dollar terms, following the prior year’s decline of 0.1%. In euro terms, the combined turnover increased by 5.0%.

Meanwhile, merger and acquisition activity by top 20 companies remained relatively stable in 2021 compared to the prior year, but dropped in the first half of 2022, with around ten deals announced versus the prior year’s approximately 30 deals.

Movers: Elephant deals by Lactalis and Yili 
Even though Lactalis and Yili did not change in ranking, they accounted for the largest increases in turnover and acquisitions in 2021. After claiming the first position last year, privately-held Lactalis extended its lead on Nestlé to US$5.4 billion – compared to US$2.2 billion in 2020.

Lactalis’s 2021 sales are estimated at US$26.7 billion (+4.7 billion or 16.2%) or €22.6 billion (+2.4 billion or 11.9%).

The company’s double-digit percentage sales growth was driven by the acquisition of the Kraft Heinz’s US natural cheese business (eliminating that company from the Top 20), and Groupe Bel’s Royal Bel Leerdammer, Bel Italia, Bel Deutschland and Bel Shostka Ukraine, which added a combined estimated annual turnover of about US$2.1 billion.

Lactalis’ acquisitions spree continued into 2022 with the purchase of Australian-based Jalna Dairy Foods and German-based Bayerische Milchindustrie’s Fresh Dairy Division.

Asian brands have climbed the list, with Mengniu beating European leading dairy cooperatives FrieslandCampina and Arla Foods. 

Asian tigers continue to roar

China-based Yili takes the prize for largest gain (US$) in turnover among the global Top 20, Rabobank highlights. The acquisition of a majority – and controlling – stake in IMFproducer Ausnutria, along with strong domestic sales growth, propelled sales by US$4.4 billion to US$18.2 billion.

This reflects a 31.7% YOY increase. Yili nevertheless remains in fifth position but the company’s strong performance narrowed the gap with the leaders.

Fellow Asian dairy companies, Mengniu and Amul also fared well in 2021. Mengniu ranks seventh, a gain of two positions, and beating European leading dairy cooperatives FrieslandCampina and Arla Foods.

India’s largest dairy cooperative, Amul, posted a revenue gain of 18.8% or US$1.0 billion, resulting in a five-position gain in the ranking, from position 18 to position 13.

Both companies continued their strong organic growth rate in 2021, after a difficult COVID-19-impacted 2020. Mengniu’s turnover increased by 24%, or US$2.6 billion, to US$13.7 billion (15.9%), following a loss of 3.7% or US$400 million in 2020 following the sale of a majority stake in Junlebao Dairy, and due to foreign exchange rates.

Strategic add-ons and disposals
Saputo (10th place) divides the ranking by a margin of US$3.7 billion ahead of Unilever.

After several large previous acquisitions (including Murray Goulburn and Dairy Crest), Saputo continued with the integration of numerous, relatively small strategic add-ons in 2021: Scotland-based Bute Island Foods (alternative dairy cheeses), Wisconsin Specialty Protein (value-added ingredients), UK-based Wensleydale Dairy (specialty/artisan cheeses) and Carolina Aseptic & Carolina Dairy business (aseptic protein beverages and nutritional snacks).

In 2021, France-based companies Savencia and Sodiaal completed and integrated strategic addons. After already acquiring full control of Compagnie des Fromages & RichesMont in 2020, Savencia acquired Hope Foods (plant-based spreads) in 2021.

Both acquisitions supported turnover growth to US$6.6 billion in 2021, moving the company into 12th position, a jump of two positions compared to 2020. Sodiaal completed the acquisition of the remaining 51% of Yoplait – consisting of Yoplait’s activities in Europe and several other markets – from US-based General Mills.

Sodiaal’s sale of Stegmann Emmentaler Kasereien (SEKG) to Meggle was completed in the first half of 2021. Overall, Rabobank estimates that the acquisitions and disposals contributed to net gain in turnover of nearly US$400 million for this year’s ranking, propelling the company to 14th place.

Müller’s gained three positions as turnover increased by €400 million (8.8%) to €4.9 billion (US$4.9 billion), while Kraft Heinz and DMK slipped in the rankings. Müller’s acquisitions of FrieslandCampina’s German processing facilities and (fresh) brands are still pending and will likely support sales growth in the German retail segment.

Froneri is the “new kid on the block”

 Froneri, a private-equity ice cream company, has hit the Top 20 for the first time.

Private-equity ice cream company Froneri is a new name in the Top 20.

Froneri was established as a joint venture between Nestlé and private equity firm PAI Partners in 2016, combining some of their ice cream activities.

A series of acquisitions in the following years – including Nestlé Ice Cream Israel (2019), Tip Top Ice Cream (2019) from Fonterra and Nestlé Ice Cream USA (2019) – grew the company to the second-largest global ice cream manufacturer after Unilever (11th place).

Kraft Heinz drops out of list
In the opposite direction, Kraft Heinz dropped off the list, while DMK dwindled six positions in this year’s ranking as the sale of the majority stake in F+S contributed to a US$1.2 billion or -18.8% drop in turnover compared to last year.

Behind leader Lactalis, Nestlé managed to keep the second position – with a lead of US$400 million over Danone.

Dairy alternatives: If you can’t beat them, join them
With numerous product launches, dairy alternatives, ranging from beverages, yogurts, frozen desserts, cheese and hybrid products, have become more common in the product portfolio of Top 20 companies, making it more difficult to extract pure dairy revenues, Rabobank concedes.

Nestlé, for example, recently added Orgain to its portfolio, a company that focuses on plant-based protein powders and plant-based nutrition. As a result, the designation of dairy is also becoming much more blurred.

Danone reclaimed the third position, while including dairy alternatives sales. In EUR terms, Danone’s total dairy-related turnover increased by only 1.7% in 2021. Meanwhile, the company’s dairy alternatives-related turnover totaled €2.3 billion (US$2.9 billion) in 2021, a gain of about 4.5% compared to 2020, which is considerably lower than 2020’s reported 15% increase.

 Non-dairy companies are also increasingly reaching the Top 20 list.

Vision ahead for global dairy
Looking to next year, Rabobank analysts anticipate another strong year for combined Global Dairy Top 20 turnover as the underlying dairy commodity prices hit record or near-record levels around the globe on the back of the war in Ukraine and escalating inflation.

However, weaker global dairy demand in 2H 2022 is anticipated due the combination of COVID-19-related lockdowns, inflation impacting consumers’ purchasing power and other economic headwinds.

Due to the weakening of local currencies – especially the euro against the US dollar – some companies might struggle to maintain their positions and gains in this year’s ranking, the researchers forecast.

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