Shift in rankings of companies listed in Rabobank Global Dairy Top 20

For the second consecutive year, there are no new entrants to the Rabobank’s Dairy Top 20 list, but there’s been a slight shuffle in rankings.

The world’s largest food and beverage company, Switzerland’s Nestlé, reigns supreme on the list, but the gap between number one and number two has narrowed.

French Lactalis swapped places with Danone, moving into second place.

Danone slipped to the third spot, after divesting Stonyfield following the acquisition of WhiteWave, reducing its stake in Yakult, and selling its holdings in the Al Safi Danone joint venture in Saudi Arabia.

READ: Nestlé pledges to use only certified sustainable palm oil within five years

Dairy price recovery in 2017 has positively affected the combined turnover of the top 20 global dairy companies, which was up 7.2 per cent on the year in USD, RaboResearch has shown.

Dairy senior analyst Peter Paul Coppes said the USD five billion threshold was difficult to achieve due to a scarcity of large acquisitions or mergers.

“However, while the names have remained the same, the order shifted in 2017.”

Merger-and-acquisition (M&A) activity in the dairy sector grew in 2017, fuelled – as in other sectors – by the availability of cheap capital.

Cooperatives are still dominating, but they are also challenged. Deals between Danone and WhiteWave, and Saputo and Murray Goulburn, had limited impact on rankings within the Global Dairy Top 20.

While M&A occurs in the dairy sector, dairy acquisitions tend to be limited in size and financial impact.

There is potential for growth within increased collaborations between Chinese and non-Chinese companies. If this happens, China has the potential to create a pipeline of global management talent.

Chinese companies need to address the integration of non-Chinese management as they consider global growth opportunities.

Rabobank sees an increased amount of disruption-based M&A deals, either defensive or opportunistic.

By nature, these deals are often small and involve start-ups, but they are growing in volume.

Busy weekends offer opportunities for premium breakfast products

As the fast-paced nature of twenty-first century life continues to change breakfast from an enjoyable pastime to a chore, consumers are increasingly seeking out convenience foods in the morning. While an established trend during the week, it is increasingly creeping into weekend habits.

According to a Canadean survey of packaging executives worldwide, 77% expect high or moderate demand for on-the-go grocery products during weekday mornings, while 63% forecast high or moderate demand during weekend mornings. While the high demand during weekday mornings is to be expected, this study shows that the industry is preparing to take advantage of a surprising opportunity: convenience breakfasts for those who are time-poor at weekends.

As a result, Canadean said it expects more innovative pack formats to be developed for breakfast drinks and smoothies, including dual packs separating liquid and solid contents, and heat-retaining packs to keep indulgent breakfasts warm while on the go.

“Brands built around convenience should consider brand extensions targeting weekend needs, while those built around enjoyment and indulgence should consider diversifying their product portfolios to offer new, more convenient products that still provide something special for weekend consumers,”

Safwan Kotwal, Analyst at Canadean, says: “Focusing purely on weekday breakfast convenience means brands risk leaving money on the table. While consumers’ timetables are arguably more flexible during the weekend, busier social lives are creating a new market for convenient, but at the same time indulgent, weekend breakfast products.

“Convenience purely targeted at busy office workers or busy parents on the school run means brands could be excluding themselves from a potentially very profitable weekend market.”

While convenience is an important consideration for many consumers, indulging and enjoying breakfast on the weekend is something they look forward to. Although high demand on weekday mornings will remain the most important occasion for convenience products, Canadean said it believes brands must not discount weekends as an opportunity.

“Brands built around convenience should consider brand extensions targeting weekend needs, while those built around enjoyment and indulgence should consider diversifying their product portfolios to offer new, more convenient products that still provide something special for weekend consumers,” Kotwal concluded.

Ski launches new lite yogurt

Yoghurt Company Ski has announced a new range of Ski D’Lite that contains 25 per cent less sugar. 
 
“We’ve been working hard to improve Ski D’Lite’s formulation to offer families a healthier, delicious way to start the day and we believe we’ve achieved this with the 25 per cent less range,” said Brent Whelan, Category Marketing Manager for Yoghurt at Fonterra. 
 
To celebrate the launch of the new 25 per cent less sugar formulation, Ski D’Lite has also released a new branded content campaign titled ‘Practically Perfect’.
 
The advertising campaign is targeted at ‘Practically Perfect’ mum whose job it is to juggle work, home, kids, social commitments and family.
 
The new Ski D’Lite provides a lower sugar content "unlike many other low fat flavoured yoghurt," the company said.

US lead global yoghurt and dairy beverages protein boom

Protein content has been one of the key areas of activity in new product development in the food and drinks industry over the past couple of years. Nearly 4 per cent of global launches recorded by Innova Market Insights in the 12 months to the end of June 2015 used a high-in or source-of protein positioning, rising to nearly 8 per cent in the dairy sector and 14 pre cent in the yoghurt category.

“Dairy products have always had an inherently healthy image and a perception of high protein levels,” reports Lu Ann Williams, Director of Innovation at Innova Market Insights, “so it is a sector that has been able to adapt relatively rapidly to this rising interest in protein, in some cases by simply changing its labelling and/or positioning.”

The US has led this rising interest in protein content, both overall and specifically in the dairy sector. Over 17 per cent of US dairy launches were positioned on their protein content in the 12 months to the end of June 2015, which is well over twice the global average. Yoghurt had the highest penetration, with over one-third of launches marketed on a protein platform, followed by milk drinks with just under a quarter.

While one-third of yoghurt launches using a protein positioning is fairly impressive, it still trails behind US Greek and Greek-style launches, which accounted for nearly 57 per cent of total introductions, indicating that by no means that all Greek yoghurts are using a high-protein positioning yet.

In addition to Greek-style yoghurts, other traditionally high-protein fermented dairy products are being introduced onto the market, led by the Icelandic fermented dairy product skyr. Skyr is also moving from its home in Iceland to a number of European markets. Perhaps not surprisingly this started in Scandinavia, but there were launches by Arla Foods in countries such as Germany, the UK and the Netherlands in the spring of 2015.

In the milk drinks market, performance was initially a key focus for protein beverages, but we are now seeing both relatively specialist performance products and more mainstream lines. In the US, introductions have included an organic version of Cytosport’s market-leading Muscle Milk protein beverage, Morning Protein Smoothies from Sprout Foods, Plus Protein Dairy Beverages from retailer Safeway and TruMoo Protein Milks from Dean Foods.

In Europe, recent launches include Lactel’s Sporteus protein-enriched milk drinks in France, positioned as sports beverages; the leading US protein shake Muscle Milk Protein in Germany; and Austrian dairy company Nöm’s extension of its fasten flavoured milk range with a fasten Protein Drink option.

“High protein foods are one of the most sought-after nutritional choices of the moment,” according to Williams “and the dairy sector appears to be extremely well placed to benefit. Yoghurts and milk drinks are the current leaders in terms of activity, but there may also be opportunities in other products such as cheese, particularly soft and fresh products.”

 

The war of “origin” yoghurts

Greek style yoghurt has been one of the biggest success stories in dairy. Having initially caught on in the US, it soon spread to Europe, Latin America and now the Asian market. Chobani, one of the largest Greek style yoghurt brands, grew by US$1.8 billion in just seven years from the US market alone. For Chobani, 2011 was the turning point as the brand's sales doubled over the previous year and hit the billion dollar mark.

Yet since the "big Greek" consumers have continued to be bombarded with new variants as brands try to piggyback on Greek yoghurt's success. We've seen a plethora of new origin yoghurts claiming to be better than or different to Greek yoghurt, ranging from Australian creamier yoghurt in North America, to Icelandic yoghurt (Skyr) in Europe, to Bulgarian yoghurt in East Asia. The question remains whether consumers will be impressed with yet another origin yoghurt? Euromonitor assesses the potential of the latest launch of Bulgarian yoghurt in East Asia as well as where yoghurt should go next.

Bulgarian yoghurt success in Singapore and Thailand but is it enough?

Japanese dairy giant Meiji is attempting to differentiate itself in Asia by promoting its range of Bulgarian yoghurts. This has been supported by a US$3 million marketing campaign in Thailand, as well as strong media efforts in Singapore. As stated in the company's future growth strategy, its aim is to "open the plain yoghurt market through unrelenting marketing efforts", and it seems it has done so. However, is the return on investment enough to sustain growth?

Since its 2013 roll-out in Thailand, Meiji's sales have increased by US$17 million up to 2015 (according to Euromonitor's new provisional data) and it has overtaken leading player Dutch Mill Co Ltd in plain yoghurt as of 2014. While this may indeed have achieved Meiji's objective of "open[ing] the plain yoghurt market", it did so at considerable cost with its marketing efforts representing 20% of sales.

Drinking yoghurt preferred in East Asia

In most East Asian markets, drinking yoghurt is the preferred variant of yoghurt because of its lower unit price. As such higher-value origin-specific products such as Bulgarian yoghurt is not accessible to vast chunks of the population. While Meiji is banking on selling its range to the affluent middle classes in Southeast Asia, it is worth noting that this population in China, Singapore and Thailand represents under 25 per cent of the total population.

Ratio of Drinking Yoghurt vs Spoonable Yoghurt Across Key Markets 2014

Developed markets should prove more attractive

The US, New Zealand and Australia should make far better target markets as consumers can afford premium products such as Bulgarian yoghurt and prefer spoonable yoghurt over drinking yoghurt. These markets are also more likely to favour products boasting health credentials such as the ones that come with Bulgarian yoghurt (which supposedly contains the best strain of LB81 bacteria which Meiji connects to helping people live longer). New Bulgarian yoghurt brand, Trimona, recently launched in the US, has been promoting the fact that its whey is not strained from the yoghurt (unlike Greek yoghurt) so it retains important minerals such as calcium, potassium and magnesium.

Australian-style yoghurt has been another trend in the US with WhiteWave Foods introducing Yulu yoghurt and Advent International acquiring a majority interest in Noosa Finest Yoghurt at the end of 2014. With US per capita yoghurt consumption at 7kg, compared to Western Europe's 12kg, the US market still has considerable growth potential and targeting millennials will be key to success.

The future of yoghurt across the globe

While there might be a plethora of origin yoghurts currently out there, it is something that will continue to sell in developed markets over the short to medium term as it offers excitement to the category and foodies will continue to be intrigued trying something new. Yet in emerging markets, affordability will weigh heavier as a key criterion and drinking yoghurt will continue to set the scene should prices of the likes of Greek and Bulgarian yoghurts remain that much higher.

In markets where yoghurt is already at its peak and widely features in consumers' diets, origin-specific yoghurt might grow tired and convenience is likely to become a more critical success factor. The dairy industry here could take a lesson from Japan, which has seen a non-stick yoghurt lid, introduced by Meiji in partnership with Morinaga Group, enjoy commercial success. Instead of origin, the next big thing in Europe could instead be mess-free yoghurt.

For further insight, contact Lianne van den Bos, Food Analyst at Euromonitor International, at lianne.vandenbos@euromonitor.com

 

Raw goat’s milk recalled due to E. coli contamination

Ebuta Goat Dairy Townsville has recalled Ebuta Dairy Goats Milk Unpasteurised from greengrocers in Townsville, QLD due to E. coli contamination.

In Queensland, goat’s milk is the only milk which can be sold unpasteurised. Unpasteurised goats milk is permitted subject to compliance with the dairy scheme which includes strict requirements for testing, appropriate recall procedures, and labelling. The statement ‘Caution— this milk is an unpasteurised product and may contain organisms that could be injurious to health’ is required to be included on the product.

Ebuta Goat Dairy are currently one of three dairy’s in Queensland accredited to sell raw goat milk to the public.

The recall applies to products with the following date markings:

Packaged between: 11.06.2015 – 17.06.2015

Fresh Use by: all dates between 20.06.2015 – 27.06.2015

Frozen Use by: all dates between 20.12.2015 and 27.12.2015

Food products contaminated with E. coli may cause illness if consumed. Any consumers concerned about their health should seek medical advice and should return the products to the place of purchase for a full refund.

 

Murray Goulburn to publically list on the ASX

Shareholders of Murray Goulburn have voted in favour of publically listing the company on the Australian Stock Exchange (ASX).

At an Extraordinary General Meeting (EGM), shareholders voted in favour of all items of business presented including the adoption of the new capital structure and related constitutional amendments, the consolidation and conversion of B and C Class Preference Shares to non-voting Ordinary Shares and the increase in the aggregate Director fee pool.

The structure will see 100 percent farmer control of the co-operative maintained but allow external investors to invest in MG via a unit trust to listed on the ASX.

MG Chairman Philip Tracy said “Today’s historic vote takes MG a critical step closer to achieving our goal of raising $500 million to fund capital investments to enable the delivery of sustainably higher farmgate returns.”

“The strength of today’s vote demonstrates that MG’s suppliers are not only overwhelmingly in favour of the new capital structure, but also see the growth that lies ahead for dairy foods. They see the opportunity that Asia presents and support MG’s growth and value creation strategy.

“From the outset, the Board believed it was critically important to involve MG supplier shareholders in the capital structure development process and after 18 months of consultation and discussion, including five rounds of supplier meetings, what we saw today was a co-op in unison and alignment. I am enormously proud of the process undertaken to develop the capital structure and I thank all supplier/shareholders for their involvement and commitment.

“With the EGM now behind us, we will move forward with the various Offers to eligible suppliers and external investors to invest in MG’s future, with the aim of completing the fundraising process and listing the MG Unit Trust on the Australian Securities Exchange in July,” Mr Tracy said.

Following the meeting, MG Managing Director, Gary Helou, said “Today’s result represents a strong vote of confidence in MG’s growth and value creation to transform the business and improve farmgate returns. The approval of the capital structure gives us the opportunity to raise $500 million in new capital which we will invest to further our strategic shift towards premium value-add dairy foods and in the process reduce MG’s exposure to the volatility of the dairy commodity price cycle.”

“Global demand for dairy foods continues to grow, particularly in Asia. All global dairy companies are racing to capture a share of these growth opportunities and in this context, MG does not have a moment to waste. We will invest the new capital we ultimately raise, in world’s leading manufacturing capability and market reach, to ensure we are well placed to meet and serve the growing needs of dairy customers and consumers in Australia and internationally for premium, quality, Australian made dairy foods,” Helou said.

 

a2 Milk Company approved for ASX listing

The a2 Milk Company Limited (a2MC) has gained in principal approval to list on the Australian stock exchange, subject to customary pre-quotation conditions.

The Auckland-based milk marketing company issued a statement which said it is not planning any capital raising as part of the ASX listing process.

According to AAP, a2MC plans keep its New Zealand incorporation and NZX listing.

The ASX has not yet confirmed the date on which the official listing will commence. However, a2MC expects to be able to soon make it public.

The company announced its intention to list on the ASX in November.

"With a significant part of our earnings and growth coming from Australia, seeking an ASX listing is a logical strategic move for the company," Geoffrey Babbage a2’s managing director said at the time.

"Listing on ASX will enable more Australian investors to participate in the company's growth and will increase the attractiveness and liquidity of its shares. The board believes that this will benefit all shareholders."

Earlier this year, Curtin University received funding from a2MC to conduct a pilot study into the digestive benefits of a2 milk, and found that subjects on a diet of a2 milk reported less bloating and abdominal pain than those consuming A1 milk.