Keeping cyber attacks at bay
Fonterra says it takes the ongoing threat of 'adverse cyber action' extremely seriously.
The 2019 Rabobank Global Dairy Top 20 report says this is one spot up from 2018.
The rise results from Fonterra buying the remainder of the Darnum IMF plant in Australia and completing a partnership with Future Consumer in India.
Nestle (Switzerland) retains the top spot, followed by Lactalis (France) and Danone (France) with Fonterra and Friesland Campina (Netherlands) rounding out the top five.
Lower commodity prices, adverse weather in key export regions, a strong US dollar, and currency shifts have affected the combined turnover of the top 20 companies.
In US dollar terms, the top 20 companies’ combined turnover increased 2.5% for the year versus 7.2% in 2018, but combined 2018 turnover in euro terms dropped by 2% versus an upward trend of 5.1% in 2017.
Dairy mergers and acquisitions persisted in 2018, a tried-and-true growth strategy for most of the companies. Despite this, for the third year in a row no newcomers entered the list due to no ‘elephant’ deals (transactions over $40m) occurring in the last 18 months.
Mergers and acquisitions are here to stay, and aquisitions will prompt more growth next year, likely a long-awaited shift in the top three of the global rankings, says Rabobank.
“However, slower economic growth in China and a looming (US) recession will probably hamper organic growth.
“At the same time, companies will reconsider their positions in light of future risks caused by US/EU/Mexico/China trade tensions, Brexit and increasing environmental constraints around the globe.”
In 2018 there were 111 deals, slightly down on 127 deals in the previous year. But at mid-2019 the number of dairy deals stands already at 85, of which 32 were cross-continental.
In the last 18 months, there were 87 domestic deals, followed by 70 cross-continental deals and 39 regional deals.
Europe dominated the cross-continental deals with a 60% share and accounted for 40% of the domestic transactions. But none of the deals was a real game changer.
Nestlé was aided by a relatively stable Swiss franc vs the US dollar, to again top this year’s list. This is supported by organic growth by its infant nutrition business rather than by milk and ice cream.
But Lactalis is closing in. With 15 deals, a Lactalis buying spree will extend its global footprint further into the Middle East & Africa, South America and Asia.
Danone ranks third, with a buy-up of a 49% stake in Yashili New Zealand pending.
Fonterra moves into fourth place. Its joint venture with Future Consumer in India -- named Fonterra Future Dairy Partners - will tap into growing demand for quality dairy nutrition with the Dreamery brand.
The Tip Top ice cream business will be sold to Nestlé’s ice cream joint venture Froneri, and its majority stake in the UK Fast Forward joint venture will be acquired by First Milk.
Fonterra’s stake in the German firm DFE Pharma, a joint venture with FrieslandCampina, is also up for sale.
On the non dairy side, Fonterra invested in the US biotech start-up Motif Ingredients, which plans to develop animal-free protein, and at the same time sold its stake in the German protein start-up foodspring to Mars.
FrieslandCampina climbs to the fifth spot, as a result of small investments in cheese in the Netherlands, the US, and Spain.
Dairy Farmers of America slipped to sixth place, with sales dropping by 7.5% following lower milk and commodity prices. The cooperative bought a US dairy plant from Agropur and recently started merger talks with St. Albans Cooperative Creamery.
Arla Foods remains in the seventh slot, despite buying the Middle East Kraft brand cheese business from Mondeléz.
Yili leapfrogs Saputo and moves into eighth place, with sales up 13.4% year on year in US dollar terms.
Yili also bought a Thai ice cream brand and teamed up with a biotech company to develop new innovative IMF products.
Increasingly fierce competition in the domestic market forced Chinese Yili and Mengniu to look overseas for growth. Yili remains the largest Chinese/Asian player in the Global Dairy Top 20, while Mengniu keeps its number ten position.
Little movement is seen in the second half of the top 20 list.
