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Value versus volume

The recovery of the global dairy market means that the global dairy companies can now become focused on value strategies instead of volume strategies, according to Rabobank’s recently released survey of the top 20 global dairy companies. Unsurprisingly, Swiss giant Nestlé again topped the league table, through its Froneri ice cream partnership (formerly R&R Ice Cream). Danone has shuffled places with Lactalis, via the method of purchase, as the former bought WhiteWave Foods in the US. However, Lactalis is in the process of buying Stonyfield in the US from Danone, as well as Germany’s Omira, so expect the firm to move up the table again when next year’s listing comes out.

The year 2017 is expected to be busier on the mergers and acquisitions front, as there have already been 50 deals made mid-year, whereas in 2016 there were only 73 purchases in the dairy sector globally. Chinese dairy companies may again be on the lookout for international purchases and markets, as they look outside the home country for continued growth.

Overall, the global dairy price recovery came a bit late for the year to show up in the tables, and overall the top 20 companies were down by 1.6 per cent in turnover. Meanwhile, the prices dropped by 2.7 per cent in Euro terms, due to a significant reduction in the milk volume, along with a weakened world demand.

However, Rabobank says that mitigation of risk in light of Brexit, trade agreement changes and further changes to environmental and food safety regulations globally, will mean that moves by dairy companies may be somewhat on the defensive going forward. It will be an interesting year, no matter who buys who, but predictions are for organic growth  to return, along with more milk production, particularly in the north eastern US states.

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