Rabobank: M&A provides progression in dairy

Macro economic challenges have pushed aspiring dairy businesses to use M&A as a means of achieving their expansion goals, according to a recent report by Rabobank.

Dairy companies that expand and acquire new businesses are better placed to weather recent macro economic difficulties, according to a recent report by Rabobank.

The report highlights that the challenges faced by the global dairy industry, including constraints in supply, stagnant sales and generally weak economies, have forced dairy companies of all sizes to assess their growth strategies. And M&A is proving to be a popular method of overcoming these constraints, according to Tim Hunt and Saskia van Battum, the report’s authors.

“Two thousand and thirteen was a challenging year for most of the world’s major dairy companies, with stagnant sales volumes in most OECD dairy markets,” they wrote. “Acquisitions have become a more attractive route to grow sales and in 2013, there were 124 dairy transactions, up from 111 in 2012 and the highest since 2007.”  There have already been 41 dairy transactions this year, he added.

Acquisition mission

Source: Rabobank

The report also emphasises the importance of the expanding dairy market in China. “Positioning for maximum effectiveness in the expanding Chinese market remains prominent,” reads the report. “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.”