Dairy consolidation on the cards?

Posted by Daniel Palmer on 9th July 2009

While the “turmoil” witnessed by the dairy market has left “little room” for major consolidation initiatives over the past 12-months, the coming year is expected to see an uplift in M&A activity, a Rabobank analyst has suggested.

In Rabobank’s annual Global Dairy Top 20, Mark Voobergen said that the current challenging operating environment could spur major consolidation in the sector, as evidenced by the recent demise of Dairy Farmers of Britain.

“Probably the most interesting transaction by a dairy company in 2009 to date was the cross-continental acquisition of the European soy drinks business Alpro by US liquid-milk specialist Dean Foods. The transaction did not affect Dean’s position in the top-20 since this ranking focuses on dairy sales. It does, however, put Dean back on the European retail landscape after earlier unsuccessful attempts in Spain at the beginning of the decade,” Voobergen said.

There was little movement in the list of the world’s ten largest companies, with Nestle retaining its number one position, followed by Danone, Lactalis, FrieslandCampina, Fonterra, Dean Foods, Dairy Farmers of America, Arla Foods, Kraft Foods and Unilever.

According to Voobergen, the most dynamic part of the ranking can be seen at the bottom of the chart, which welcomed Chinese dairy Mengniu.

The most active consolidators in the last 12 months were Lactalis, Arla Foods and Saputo.

Lactalis secured acquisitions in France, Croatia, Switzerland, Poland and Romania. It also acquired Numico’s babyfood assets that had to be divested over of anti-trust issues in France and the Benelux.

Arla Foods gained a “significant foothold” in the Netherlands by acquiring the Nijkerk plant of Friesland Foods and also initiated several acquisitions and alliances in Scandinavia and France.

Saputo acquired Alto and F&A Dairy of California in the US and Neilson dairy in Canada.

In Australia, the sale of Dairy Farmers was the only major deal over the past twelve months – with the purchase by National Foods following the 2007 acquisition of National Foods by Japanese firm Kirin Holdings.

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