Record-high revenues reshuffle Rabobank’s Dairy Top 20 ranking

Rabobank’s annual Global Dairy Top 20 report, which highlights revenue performance of the world’s dairy industry leaders, shows that only five companies kept the same position as last year, indicating a reshuffle along the entire list. Lactalis managed to hold its top spot, while Dairy Farmers of America moved up to second place, pushing Nestlé into third. A stronger US dollar influenced position changes in the ranking. The combined turnover of the Top 20 companies jumped 7.4% in US dollar terms, following the prior year’s gain of 9.3%. Merger and acquisition activity for these 20 market leaders was nearly on par with the prior year. A slowdown was noted in the second half of 2022, which continued into the first half of 2023.


Record-high turnover in 2022, due to inflated dairy commodity prices

Fueled by a second round of war-induced inflation, EU dairy product prices rallied to new annual average highs. In Oceania and the US, milk powder prices were also elevated. At the same time, lower-than-anticipated milk production growth in the main exporting regions and decent domestic demand contributed to an overall tight dairy market with limited exportable surpluses during most of 2022.

Overall, year-on-year average price gains in butter, cheese, milk powders, and other dairy products set the stage for double-digit turnover growth in local currencies in 2022.

Higher revenues counteracted by a surging cost base and unprecedented milk prices

“In the end, most turnover gains were absorbed by exploding costs, leaving little left on the companies’ bottom lines,” explains Richard Scheper, dairy analyst at Rabobank. “Many dairy companies paid record-high average farmgate milk prices to offset large farm input costs.” At the factory gate, rising energy costs and the availability of natural gas – especially in Europe – were the largest concerns for energy-intensive dairy processing. Costs for other components, such as logistics, packaging materials, and labor, also escalated in 2022.

A stronger US dollar influenced position changes in the ranking 

“For non-US-based dairy companies, turnover gains in local currencies were partly or even largely offset by the stronger US dollar, giving rise to position changes along the entire list and contributing to the entrance of Ireland-based Glanbia,” according to Scheper. The majority of Glanbia’s revenues are derived from sales in the US and the company recently announced that it will switch to reporting in US dollars instead of in euros in the near future.

The Canadian dollar also strengthened against many other currencies – including the euro. This helped Canada-based Saputo (10th) solidify its position in the top 10 and bumped Agropur up one spot to 15. Both companies have considerable sales volumes in the US, giving them a competitive advantage over the 11 companies on the list reporting in euros.

FX developments in 2022 were particularly unfavorable for dairy companies reporting in New Zealand dollars, renminbi, and yen, contributing to New Zealand’s Fonterra dropping three spots, China’s Yili and Mengniu losing turnover gains in US dollar terms, and Japan-based Meiji, a longstanding Top 20 company, exiting the list.

Mergers and acquisitions: Less activity and smaller deals

In 2022, merger and acquisition activity was nearly on par with the prior year, with almost 25 deals. However, 1H 2023 activity slowed both in the number and size of deals, with about eight deals announced versus approximately 12 deals in the first six months of 2022.

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