Dairy Giant Lactalis to Cut 450 Million Litres from Milk Pool
Source: DairyNews.today
Lactalis, the world’s largest dairy company based in northwest France, has announced plans to reduce its annual milk intake by 450 million litres, representing nearly 9% of its total volume of 5.1 billion litres in France.
This decision has raised concerns among farmers across Europe, transforming their relationship with the processor into a significant challenge.
The company has served notice to 12 farmer suppliers in Scotland, giving them one year to secure a new processor for their milk. In France, a similar fate awaits 270 farmers, who will have their contracts terminated by 2026, while other suppliers will have until 2030 to find alternative buyers. The affected farms are located in regions with lower supplier density, making milk collection more costly.
Lactalis, which has long been a major player in the global dairy market, is pivoting towards more profitable consumer products such as cheese and yogurt, while stepping away from bulk ingredients like non-fat dry milk (NFDM). The company faces intense competition in the export market, particularly from countries like New Zealand.
To soften the impact on French farmers, Lactalis stated that reducing the production of bulk commodities would ultimately lead to better farm gate prices for milk. However, this rationale has not appeased the Union of French Dairy Farmers (FNPL), which condemned the decision as “unacceptable” and “unworthy of the market leader.” The National Farmers’ Organization (FNSEA) echoed these sentiments, calling it a betrayal of trust for farmers supplying the largest processor globally.
Lactalis has seen remarkable growth, becoming the first dairy company to surpass $30 billion in annual revenue in 2023, bolstered by significant organic growth and acquisitions. The company operates 270 production sites in 51 countries and reported a net profit of €428 million (1.45% of sales) in the last fiscal year, up from €384 million in 2022.
Despite this financial success, the decision to cut French milk intake was met with significant backlash from dairy farmers. Lactalis CEO Emmanuel Besnier had hinted at potential reductions back in April, and the recent cuts are attributed to intense global competition in bulk ingredient markets and declining demand from China.
This trend has prompted EU milk processors to reduce NFDM production by approximately 4%, with more cuts expected in 2025 due to deteriorating export prospects. The EU’s major NFDM exporters include France, Belgium, Germany, the Netherlands, Ireland, and Poland, with domestic consumption primarily serving sectors such as UHT milk, yogurt, cheese, and animal feed.
In a related move, Lactalis has initiated a review of its milk supply in southwest Scotland, affecting 12 dairy farmers supplying the Stranraer facility. With Tesco also scaling back its Scottish milk suppliers, concerns have been raised regarding the stability of contracts for farmers, who now face uncertainty in a challenging market. NFU Scotland Vice-President Andrew Connon criticized the lack of clarity around the decisions, questioning why farmers would continue to invest in their operations when their contracts only extend for one year.
The company has served notice to 12 farmer suppliers in Scotland, giving them one year to secure a new processor for their milk. In France, a similar fate awaits 270 farmers, who will have their contracts terminated by 2026, while other suppliers will have until 2030 to find alternative buyers. The affected farms are located in regions with lower supplier density, making milk collection more costly.
Lactalis, which has long been a major player in the global dairy market, is pivoting towards more profitable consumer products such as cheese and yogurt, while stepping away from bulk ingredients like non-fat dry milk (NFDM). The company faces intense competition in the export market, particularly from countries like New Zealand.
To soften the impact on French farmers, Lactalis stated that reducing the production of bulk commodities would ultimately lead to better farm gate prices for milk. However, this rationale has not appeased the Union of French Dairy Farmers (FNPL), which condemned the decision as “unacceptable” and “unworthy of the market leader.” The National Farmers’ Organization (FNSEA) echoed these sentiments, calling it a betrayal of trust for farmers supplying the largest processor globally.
Lactalis has seen remarkable growth, becoming the first dairy company to surpass $30 billion in annual revenue in 2023, bolstered by significant organic growth and acquisitions. The company operates 270 production sites in 51 countries and reported a net profit of €428 million (1.45% of sales) in the last fiscal year, up from €384 million in 2022.
Despite this financial success, the decision to cut French milk intake was met with significant backlash from dairy farmers. Lactalis CEO Emmanuel Besnier had hinted at potential reductions back in April, and the recent cuts are attributed to intense global competition in bulk ingredient markets and declining demand from China.
This trend has prompted EU milk processors to reduce NFDM production by approximately 4%, with more cuts expected in 2025 due to deteriorating export prospects. The EU’s major NFDM exporters include France, Belgium, Germany, the Netherlands, Ireland, and Poland, with domestic consumption primarily serving sectors such as UHT milk, yogurt, cheese, and animal feed.
In a related move, Lactalis has initiated a review of its milk supply in southwest Scotland, affecting 12 dairy farmers supplying the Stranraer facility. With Tesco also scaling back its Scottish milk suppliers, concerns have been raised regarding the stability of contracts for farmers, who now face uncertainty in a challenging market. NFU Scotland Vice-President Andrew Connon criticized the lack of clarity around the decisions, questioning why farmers would continue to invest in their operations when their contracts only extend for one year.
