Fonterra has retained its sixth place in Rabobank’s annual Global Dairy Top 20 report for 2021.
Ahead of it are Yili, Danone, Dairy Farmers of America, Nestlé and Lactalis, which unseated long-time industry titan Nestlé to now be the world’s largest dairy company.
Rounding out the top 10 are FrieslandCampina, Arla Foods, Mengniu and Saputo.
The combined turnover of the top 20 companies fell by just 0.1% in US dollar terms last year, as the global dairy sector navigated the disruptions caused by covid-19.
Merger and acquisition activity slowed in 2020, with 80 announced deals compared to the prior year’s 105. Activity picked up in 2021, with over 50 deals announced through mid-year.
The pandemic also heightened consumers’ awareness of environmental challenges.
Rabobank dairy analyst Richard Scheper says consumer sentiments are being heard. Many companies included in the top 20 have made sustainability commitments for 2030 and carbon-neutrality commitments for 2050.
Sustainability-marketed US milk sales grew more than 20% from 2013 to 2018, compared to negative growth for the category as a whole.
Sustainability-marketed natural cheese and yoghurt sales grew over 30% and 20%, respectively, compared to near 10% growth for those categories broadly over the five-year period, according to the NYU Stern Centre for Sustainable Business.
Dairy alternatives also keep growing and blurring the definition of dairy.
The sales growth of liquid milk and yoghurt alternatives – especially oat and almond-based alternatives – have not gone unnoticed.
Danone’s turnover in dairy alternatives following its acquisition of WhiteWave Foods in 2017 was recorded at €2.2 billion (US$2.5b) in 2020, a gain of 15% compared to the previous year. Adding these sales would have lifted Danone one place to third position.
“The designation of dairy is also becoming more blurred as hybrid products, containing both dairy and plant-based ingredients, enter the marketplace,” Scheper said.
The report expects dairy markets to remain in balance.
At the farm level, the rising cost of production due to drought-induced higher feed costs and inflationary pressures will keep margins tight, limiting milk production growth in exporting regions to less than 1.2%.
Over the next decade and beyond, it believes changing demographics will drive dairy opportunities. Over 35% of the population growth will occur in Africa, which largely imports its dairy from players in the Global Dairy Top 20.
While China will continue to reign as the world’s largest dairy importer, its dairy sector will find growth in the over-50-year-old market, rather than being dominated by the infant nutrition market. The US and EU markets are also expected to be aging and affluent, attracting innovation and competition.
At the farm level, consolidation will continue worldwide and dairy farms will market ecosystem credits along with their milk. Social and environmental pressures will limit herd-size growth in Europe and New Zealand, resulting in most of the production gains coming from greater production per cow. Dairy cooperatives in these two regions will become even more challenged to deliver growth, due to a combination of a matured domestic market and limited growth in milk volumes in response to sustainability constraints.
As a result, these companies are likely to focus on value strategies, including bolt-on dairy alternatives, rationalisation of plant capacity, and global marketing alliances, the report said.
Rabobank global dairy strategist Mary Ledman expected that by 2030, consumers will have the option to buy competitively priced plant-based and cell-cultured dairy alternatives, with non-GMO-sensitive consumers opting for the plant-based alternatives.
“Natural dairy’s nutrient density will keep it a dietary staple. But, it is also imperative that the dairy sector be part of a global carbon-reduction solution that resonates with climate-sensitive consumers and prevents food manufacturers and foodservice operations from taking natural dairy out of their products and off their menus,” Ledman said.
