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Rabobank
 

Global dairy markets: new leader, sustainability, dairy alternatives, and changing demographics shaping the future

Rabobank’s annual Global Dairy Top 20 report shows that the combined turnover of the top 20 industry leaders fell by just 0.1% in US dollar terms, following the prior year's 1.8% gain. In euro terms, the combined turnover decreased by 1.9%. Merger and acquisition activity slowed in 2020, with approximately 80 announced deals vs. the prior year’s 105. Activity picked up in 2021, with over 50 deals announced through midyear.

In 2021, privately held Lactalis unseated long-time industry titan Nestlé as the world's largest dairy company, according to Mary Ledman, Global Dairy Strategist for Rabobank. “Lactalis's attention to organic growth, as well as its dedicated global M&A strategy, propelled the company from ninth place in 2000 to a dominating leadposition in 2021,” says Ledman.

In 2020, dairy companies faced significant challenges due to the Covid-19 pandemic, but overall, the sector fared better than expected, demonstrating its resilience. The pandemic also heightened consumers’ awareness of environmental challenges.

Sustainability as a growth driver

RaboResearch - Agribusiness Monthly

“Consumer sentiments are being heard, and many companies included in the Global Dairy Top 20 have made sustainability commitments for 2030 and carbon-neutrality commitments for 2050,” according to Richard Scheper, Dairy Analyst for Rabobank. According to NYU Stern Center for Sustainable Business, 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 yogurt sales grew over 30% and 20%, respectively, compared to near 10% growth for those categories broadly over the five-year period.

Dairy alternatives keep growing and blurring the definition of dairy

The sales growth of liquid milk and yogurt alternatives – especially oat- and almond based alternatives – have not gone unnoticed. Most significantly, Danone's turnover in dairy alternatives, following its acquisition of WhiteWave Foods in 2017, was recorded at EUR 2.2bn (USD 2.5bn) in 2020, a gain of 15% compared to the previous year. Adding these sales would lift Danone to third position. Dairy alternative du jour Oatly surged in market capitalization, to more than USD 10bn, after its IPO debut in May 2021. “The designation of dairy is also becoming more blurred as hybrid products, containing both dairy and plant-based ingredients, enter the marketplace,” says Scheper.

Dairy markets expected to remain in balance

Rabobank anticipates investment activity to stay robust in the on-trend channels and categories, including specialty cheese, innovative dairy ingredients like human milk oligosaccharides, dairy alternatives ranging from plants and fermentation to cellbased, and lifestyle nutrition. In addition, acquisitions in adjacent sectors, such as logistics and inventory management, are likely.

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 the Big-7 exporting regions to less than 1.2%.

The future: consolidation, changing demographics, and China as a growing force

In the past two decades, the Global Dairy Top 20 saw consolidation as a constant, and this is expected to continue. From 2001 to 2020, the combined turnover of the top 20 companies more than doubled, expanding by 3.8% annually. From 2010 to 2020, China rose, evolving as a dairy-consuming nation and the world's largest dairy importer. The two Chinese dairy giants – Yili and Mengniu – have ambitious growth
targets and are proactively looking for overseas growth opportunities.

Over the next decade and beyond, changing demographics will drive dairy opportunities. Over 35% of the population growth will occur in Africa, which remains a net – and growing – dairy importer, largely importing from international players in the Global Dairy Top 20. Still, there will be pockets of flourishing regional domestic production growth, such as in East Africa, based on the availability of natural
resources and social, economic, and political stability. Similarly, Indonesia remains a growing market for global dairy exporters.

China will continue to reign as the world's largest dairy importer. Rather than being dominated by the infant nutrition market of the past two decades, China’s dairy sector will find growth in the ‘Active Silvers’ (i.e. people over 50 years old) market.

The US and EU-27 markets are expected to be aging and affluent, attracting innovation and competition.

“By 2030, we anticipate that 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,” says Ledman. She concludes: “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.”

 

Global Dairy Top 20, 2021

 

Rabobank New Zealand is a part of the global Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has nearly 120 years’ experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 40 countries, servicing the needs of about 8.6 million clients worldwide through a network of close to 1000 offices and branches. Rabobank New Zealand is one of the country's leading agricultural lenders and a significant provider of business and corporate banking and financial services to the New Zealand food and agribusiness sector. The bank has 32 branches throughout New Zealand.

Media contacts:

David Johnston
Marketing & Media Relations Manager
Rabobank New Zealand
Phone: 04 819 2711 or 027 477 8153
Email: david.johnston@rabobank.com


Denise Shaw
Head of Media Relations 
Rabobank Australia & New Zealand 
Phone: +612 8115 2744 or +61 2 439 603 525 
Email: denise.shaw@rabobank.com

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