Dairy Global

News 677 views last update:24 Jul 2014

Dairy: Challenging conditions spur acquisitions

The latest annual Rabobank survey of the world's largest dairy companies highlights the giants of one of the world's most valuable food sectors. The last 18 months have seen most of these players battle challenging conditions, with weak economies and supply constraints undermining sales growth in key markets.

Against this backdrop, mergers and acquisitions have become an attractive route to growth and profitability. But with billion dollar deals increasingly hard to come by, dairy giants will need to acquire or cooperate with more companies to sustain the same rates of growth in future. Those adept at acquiring and embracing new businesses will remain well positioned to survive and thrive.

Positioning for maximum effectiveness in the expanding Chinese market remains prominent. In 2013, joint ventures were announced between Mengniu and Whitewave and COFCO and Danone while Yili announced a partnership agreement with Dairy Farmers of America. Mengniu took a stake in China Modern Dairy to secure raw milk supply. A further joint venture is pending between FrieslandCampina and Huishan. Despite the increase in transactions, the dairy sector saw no billion dollar deals in the 12 months to 30 June 2014.

While underlying growth will pick up in coming years, many markets will not return to the rapid growth rates seen before 2008. In this context, mergers, acquisitions and joint ventures will remain a key avenue to growth and profitability.

[Source: Rabobank]

Fabian Brockotter

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