In 2018, lower commodity prices, adverse weather conditions in key export regions, a strong US dollar, and currency shifts affected the combined turnover of the Global Dairy Top 20 companies. In US dollar terms, we still saw an increase of 2.5% on the year, compared to 7.2% in the previous year. However, combined 2018 turnover in euro terms dropped by 2.0% vs. an upward trend of 5.1% in 2017.

According to Dairy Analyst Saskia van Battum, “The top three remained the same, although the gap between numbers one and two continues to narrow. For the third year in a row, there are no new entrants in the list, due to a lack of elephant deals over the past 18 months, but some reshuffling took place.”

 

 

Other highlights from the Dairy Top 20 report include:

M&A Is Here to Stay

M&A activity in the dairy sector is here to stay. In 2018, 111 deals took place in the dairy complex, slightly down compared to 127 transactions in the previous year. However, as of mid-2019 the number of dairy deals stands already at 85, of which 32 were cross-continental.

2018 Review: Movers and Shakers

Nestlé, aided by a relatively stable Swiss franc vs. the US dollar, still tops this year’s list, supported by organic growth coming from its infant nutrition business rather than from milk and ice cream. Nevertheless, Lactalis is closing in. Fonterra moves into fourth place, following the acquisition of the remaining stake of the Darnum IMF plant in Australia. Yili leapfrogs Saputo and moves into eighth place, with sales up 13.4% YOY in US dollar terms. Meanwhile, increasingly fierce competition in the domestic market forces Chinese Yili and Mengniu to look overseas for growth.

Looking forward into the next year, we expect to see further growth from acquisitions, with a long-awaited shift in the top three of the global ranking likely. However, slower economic growth in China and a looming (US) recession will probably hamper organic growth. At the same time, companies will reconsider their position in light of future risks caused by US/EU/Mexico/China trade tensions, Brexit, and increasing environmental constraints around the globe.