Lower milk prices compared to the robust values seen the year prior attribute to the deceleration in revenue growth for the world’s largest dairy companies in 2023, according to an annual international report from Rabobank.
Rabobank’s yearly listing of the “Global Dairy Top 20” companies was released in late August, highlighting revenue performance of the world’s dairy industry leaders in 2023. Based on financial data in U.S. dollars, the combined sales of the world's 20 largest dairy companies were slightly up 0.3% from the year before. That followed 2022’s increase of 8.1% (U.S. dollar basis). Read: Rabobank: Strong revenues, reshuffling highlight dairy’s ‘Top 20’
Driven partly by lower average dairy commodity prices, companies’ revenues grew more slowly and in some cases declined. Seven companies reported lower 2023 revenues in their local currencies compared to 2022. However, many companies reported stronger profits and/or margins than in 2022, and upcoming merger and acquisition deals could mark a shift.
“While limited in recent years, multiple possible deals are on the horizon, some of which could be the largest the sector has seen in some time,” explained Lucas Fuess, senior analyst at Rabobank. “Companies are reexamining priorities and, in some cases, returning to core businesses while shedding parts of the business that are less profitable or misaligned with key strategic priorities.”
For some, sustainability goals might come into play, with increasing pressure from impending self-imposed or industry-driven commitments leading to a reexamination of assets and priorities. Some companies may choose to keep minor controlling interests as a way to achieve sustainability-related goals more easily by keeping parts of the business further from the core.
Top 20 rankings
Among the top 20 spots, European companies decreased their hold by one, to 11, with companies in the U.S., China and Canada holding two spots each (Table 1). Companies in New Zealand, Japan, India and Mexico rounded out the list.
Only seven companies kept the same positions as last year, indicating a reshuffle along the entire list. Lactalis kept its top spot in the ranking for the third year and became the first company ever to exceed $30 billion in revenue. Nestlé moved up to second, pushing Dairy Farmers of America (DFA) into third, largely due to weaker milk prices.
In a notable development, Mexico’s Grupo Lala secured a position in the top 20 for the first time, displacing Ireland’s Glanbia from the list.
Rankings impacted by exchange rates
Currency exchange rates had an impact on rankings. The euro strengthened against many other currencies, including the U.S. and Canadian dollars.
Danone (4) faced a decline in revenue due to both voluntary and involuntary divestments, and leading Chinese dairy companies Yili (5) and Mengniu (8) maintained strong positions despite facing tough competition and currency exchange challenges. Fonterra's (9) revenue increased significantly, but future rankings may be impacted by its strategic shift to focus on core businesses. Meanwhile, European cooperatives Arla (6) and FrieslandCampina (7) remained close in rankings, though Arla pulled ahead financially with the gap expected to widen.
“With a stronger euro versus the U.S. dollar in 2023, European cooperatives saw a slight boost compared to other global companies in U.S. dollar terms,” Fuess said. “For most, the change was not material enough to cause a significant shift in rankings, except for Sodiaal, which gained one place this year, and Muller, which lost a spot.”
Sodiaal (16) benefited from the weakness in the Canadian dollar, which negatively impacted Agropur (17), which fell two spots in the ranking. A combination of improved revenues and a strong peso significantly boosted new entrant Grupo Lala (20).
The dairy industry continued to experience limited merger and acquisition activity for these 20 market leaders in 2023, with Danone’s divestment of its Russian business and the shedding of its Horizon Organic and Wallaby brands being notable exceptions. These strategic moves reflect a broader industry trend of companies refocusing on their core businesses.
Looking ahead, Rabobank expects some calmer waters, but the elimination of hazards in a volatile world is not guaranteed for some companies in the rankings.
