Nestlé Remains Top of Dairy Market, Market Growth Slows

31 Jul 2015 --- In its annual Global Dairy Top 20, Rabobank has revealed that Nestlé remains the market leader in the global dairy industry, while changes at the top leave Danone in third place and Lactalis creeping up to second place. US cooperative Dairy Farmers of America (DFA) pushed into the top five.

“While the names of the world’s 20 largest dairy companies 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.

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.

Faced with slowing growth at home, Chinese companies may need to harness that improved spending power if they are to continue to rise up the ranks at the pace they have achieved over the last decade, says Rabobank.

Nestlé surged ahead with sales of €20.9bn. Sales in second and third place companies lagged somewhat, compared with Nestlé, allowing Lactalis to edge ahead of Danone, based on Euro earnings (€14.7bn and €14.6bn, respectively).

Further down the top 10, Dairy Farmers of America took the number 5 place with a €13.5bn turnover, overtaking Dutch dairy FrieslandCampina, with €11.1bn earnings.

Last month Rick Smith, chairman of Dairy Farmers of America, spoke to FoodIngredientsFirst about how the US market differs from the rest of the world market, making consolidation difficult and global trade inevitable: “In the last 10 years things have really changed,” he said “The US is still largely a domestic market. It will take a long time, maybe more than a decade before the US exports a majority of its milk. However, the US would be involved in the global dairy industry if it never exported a drop, because the global players are in the US.

Smith continued: “In today’s climate, US dairies have a lot to think about. Despite the fact that most of its production remains domestic, the global market place is having an impact on the US industry. The Russian import ban, for example, is having an indirect effect on sales, not least because of European producers coming to the US and Mexico with their surplus, driving prices down.”

Smith concluded: “While the US industry will be doing all it can to move forward, there are barriers, not least when it comes to consolidation. In stark contrast to the European dairy market, which is dominated by a few big cooperatives, the US authorities have very strict rules on consolidation.”

Further down the top 20 table there was more action, with companies such as China’s Mengniu, French companies Sodiaal and Savencia as well as US dairy Schreiber all moving up the table. In June, Sodiaal announced that it plans to take advantage of the ‘new world’ after the abolition of EU milk quotas and that it aims to double EBITDA by 2020 as part of an aggressive growth strategy.

Last year Rabobank predicted a stagnant market with little room for growth in its Dairy Report. It predicted that mergers and acquisitions would be the only way to grow in such a difficult economy. In 2014 Danone raised its stake in Chinese dairy Mengniu from 4% to 9.9% and it has recently announced that it will raise its stake in the dairy further, which will help Danone expand its product offering in China.