Rabobank’s Global Dairy Top 20 shows increased turnover for industry

Rabobank’s annual Global Dairy Top 20 revealed 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%. Merger and acquisition activity by Top 20 companies remained relatively stable in 2021 but dropped in the first half of 2022. Lactalis and Nestlé retained the first and second spots, while Danone edged up and swapped places with Dairy Farmers of America for third. Yili rounded out the top five spots.

Supported by the recovery in foodservice channels after the initial Covid-19 pandemic and continued strong retail channel sales, dairy demand firmed globally, according to Richard Scheper, dairy analyst for Rabobank. “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,” says Scheper.

He adds, “This year’s ranking is characterised by the movers and the shakers.” Both turnover growth and strategic activities were more significant than in recent years causing movement in the ranking. Strategic repositioning and M&A activities, for example, resulted in the entry of Froneri and the departure of Kraft Heinz in the ranking. The second half of the leader board remains crowded with less financial separation between the companies. In 2020, eight companies in the second half of table were separated by less than US$1bn. This year, four companies are within US$0.15bn in sales.

Meanwhile, 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. As a result, the designation of dairy is also becoming much more blurred.

The four global cooperative giants are bunched in the sub-top of this year’s ranking. Each is facing some degree of limitation for organic growth in their domestic market. In 2021, DFA continued its integration of the Dean Foods assets, while both Fonterra and FrieslandCampina disposed of non-core assets.

Gradually, more dairy companies are aligning their climate ambitions with the Science Based Targets initiative (SBTi). To date, eight of the Top 20 companies have made a public commitment to (some of) the SBTi targets or have targets that are considered aligned with SBTi. Rabobank expects this number to grow in the near term as evaluation and target setting are still underway. As such, dairy companies are working on their climate and sustainability targets for 2030, but also adding net-zero ambitions for 2050.

“Looking forward to next year, we expect 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,” says Scheper. “However, weaker global dairy demand in the second half of 2022 is anticipated due the combination of Covid-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.”

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