Rabobank’s Global Dairy Top 20 Report Highlights Slower Growth, Shifting Strategies, and Potential M&A Activity
Source: DairyNews.today
Rabobank’s annual Global Dairy Top 20 report by RaboResearch has revealed that the world’s leading dairy companies experienced a modest 0.3% increase in combined turnover in US dollar terms for 2023, following a strong 8.1% rise in the previous year. The slowdown is largely attributed to lower milk prices in 2023 compared to the elevated levels seen in 2022.
In euro terms, the combined turnover of the Top 20 dairy companies declined by 2.3% year-on-year, a reflection of the euro’s recovery against the US dollar and weaker revenues reported by some key European cooperatives. The report also noted that fewer than half of the companies (eight) maintained their positions from the previous year, with foreign exchange (FX) developments and limited merger and acquisition (M&A) activity continuing to impact rankings.
The report highlights that the global dairy sector saw slower revenue growth in 2023, with seven companies reporting lower revenues in their local currencies compared to 2022. This was partly due to the substantial decline in dairy commodity prices, which negatively impacted earnings, particularly among European cooperatives. However, despite lower revenues, many companies reported stronger profits and/or margins, demonstrating resilience in a challenging market environment.
Grupo Lala’s Debut in the Global Dairy Top 20
A significant development in the 2023 rankings was the debut of Mexico-based Grupo Lala, driven by organic growth and favorable FX developments. The Mexican peso’s 11.8% strengthening against the US dollar, coupled with a 6% growth in organic revenue in peso terms, propelled Grupo Lala into the Top 20, displacing Ireland’s Glanbia, which had entered the list only a year earlier.
Limited M&A Activity, But Big Deals Could Be on the Horizon
The report noted that deal activity among the Top 20 remained limited, consistent with the trend seen in 2022. However, upcoming deals could mark a significant shift in the industry. Unilever’s announced divestment of its ice cream business and Fonterra’s plans to sell parts of its consumer business are examples of potential large-scale transactions. Additionally, General Mills’ proposed divestment of its Yoplait yogurt business could also impact the rankings, depending on the buyer.
These potential deals highlight a broader trend of companies refocusing on their core businesses while shedding non-essential units. Sustainability goals and strategic realignments are driving some of these decisions, with companies looking to maximize future growth and profitability.
US Dairy Companies Favor Internal Growth Over Acquisitions
In the US, M&A activity remains subdued, but substantial investments are being made in expanding and constructing new plants, particularly in cheese production. Industry estimates suggest that more than USD 7 billion will be invested in the US dairy sector between 2023 and 2026. This investment is expected to bolster confidence in the security of the US milk supply, with new facilities focusing on innovative products such as ultrafiltered, extended shelf life, and lactose-free milk.
As the global dairy industry navigates a period of slower growth and strategic shifts, Rabobank’s report suggests that the sector may be on the cusp of significant changes, with upcoming M&A activity potentially reshaping the Global Dairy Top 20 rankings in the years to come.
The report highlights that the global dairy sector saw slower revenue growth in 2023, with seven companies reporting lower revenues in their local currencies compared to 2022. This was partly due to the substantial decline in dairy commodity prices, which negatively impacted earnings, particularly among European cooperatives. However, despite lower revenues, many companies reported stronger profits and/or margins, demonstrating resilience in a challenging market environment.
Grupo Lala’s Debut in the Global Dairy Top 20
A significant development in the 2023 rankings was the debut of Mexico-based Grupo Lala, driven by organic growth and favorable FX developments. The Mexican peso’s 11.8% strengthening against the US dollar, coupled with a 6% growth in organic revenue in peso terms, propelled Grupo Lala into the Top 20, displacing Ireland’s Glanbia, which had entered the list only a year earlier.
Limited M&A Activity, But Big Deals Could Be on the Horizon
The report noted that deal activity among the Top 20 remained limited, consistent with the trend seen in 2022. However, upcoming deals could mark a significant shift in the industry. Unilever’s announced divestment of its ice cream business and Fonterra’s plans to sell parts of its consumer business are examples of potential large-scale transactions. Additionally, General Mills’ proposed divestment of its Yoplait yogurt business could also impact the rankings, depending on the buyer.
These potential deals highlight a broader trend of companies refocusing on their core businesses while shedding non-essential units. Sustainability goals and strategic realignments are driving some of these decisions, with companies looking to maximize future growth and profitability.
US Dairy Companies Favor Internal Growth Over Acquisitions
In the US, M&A activity remains subdued, but substantial investments are being made in expanding and constructing new plants, particularly in cheese production. Industry estimates suggest that more than USD 7 billion will be invested in the US dairy sector between 2023 and 2026. This investment is expected to bolster confidence in the security of the US milk supply, with new facilities focusing on innovative products such as ultrafiltered, extended shelf life, and lactose-free milk.
As the global dairy industry navigates a period of slower growth and strategic shifts, Rabobank’s report suggests that the sector may be on the cusp of significant changes, with upcoming M&A activity potentially reshaping the Global Dairy Top 20 rankings in the years to come.
