DAIRY SECTOR CONSOLIDATION - Dairy Farmers of … · DAIRY SECTOR CONSOLIDATION (MERGERS &...

DAIRY SECTOR CONSOLIDATION (MERGERS & ACQUISITION, NEW INVESTMENTS AND STRATEGIES)

1

Béranger GUYONNET (CNIEL) February 3, 2016

DFC Annual Dairy Policy Conference, Ottawa Canada

2

Introduction :

Current dairy situation

DFC February 3, 2016

3

Cniel / Clal, Commission, Dairy Australia, DCANZ, Siap, ODEPA, Turkstat, Ukrstat, USDA, ZMB

USA12 m 2015 : + 1,2%

Australia11 m 2015 : + 3,0%

New Zealand12 m 2015 : - 1,4%

EU 2811 m 2015 : + 1,7%

Japan11 m 2015 : + 0,6%

Mexico12 m 2015 : + 2,4%

Russia11m 2015 : stable

Chile6 m 2015 : - 6,0%

Turkey11 m 2015 : + 3,4%

Ukraine11 m 2015 : - 5,0%

Brazil9 m 2015 : - 2,5%

Belarus11 m 2015 : + 5,3%

Uruguay11 m 2015 : + 2,1%

Argentina11 m 2015 : - 1,1%

Importing country

Exporting country

Production trends in 2015 in key global dairy areas


Monthly evolution of milk production in the 5 main producing areas of the

World

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

01/2013 01/2014 01/2015

Mln litres

UE à 28* Nelle-Zélande Etats-Unis Australie Argentine* Total

Cniel / Commission, Dairy Australia, DCANZ, Siap, USDA, ZMB *Deliveries


AlgeriaImport 6 months 2015

SMP : - 17%WMP : + 16%

5

Import trends at the beginning of 2015 in key markets

NB : évolution des exportations sur base volume

USAImport 11 months 2015

Cheese : + 23%Caseins : - 6%

JapanImport 9 months 2015

Cheese : + 8%

ChinaImport 11 months 2015

SMP : - 22%WMP : - 49%Whey : + 7%

RussiaImport 10 months 2015

Butter : - 30% Cheese : - 40%

BrazilImport 11 months 2015

WMP: + 101%Cheese : + 5%

Cniel / Ubifrance, douanes nationales


6

FOB Price - Ocaania in 1 000 USD / tonne

Global prices in January 2016

Cniel / USDA

1

2

3

4

5

6

2011 2012 2013 2014 2015 2016

Butter

1

2

3

4

5

6

2011 2012 2013 2014 2015 2016

SMP

1

2

3

4

5

6

2011 2012 2013 2014 2015 2016

WMP

1

2

3

4

5

6

2011 2012 2013 2014 2015 2016

Cheddar


7

Current European milk deliveries

Evolutions * - monthly and cumulative 2015

Evolution EU 28

Cniel / Eurostat, ZMB, FAM (EML), PZ, DairyCo, CLAL * in %, vs. Same period of previous year

10

11

12

13

14

jan fev mar avr mai jun jul aout sep oct nov dec

Thousand tonnes

2013

2014

+1,7% first 11 months of 2015

2015


25

30

35

40

45


€ / 100 kg

Germany 2013

2014

2015

20

25

30

35

40


€ / 100 kg

Poland2013

2014

2015

25

30

35

40

45


€ / 100 kg

The Netherlands

2013

2014

2015

25

30

35

40

45


€ / 100 kg

UK20132014

2015

NB : fat and protein contents may differ from one member state to another.

8

Farmgate milk prices

Cniel / ZMB


9

In this context :

Dairy actors’ development strategies


AmericaDFA (US) 17.9

Dean Foods (US) (D) 9.5

Saputo (CA) (E) 9.4

Land O’Lakes (US) 5.1

Schreiber (US) (F) 5.0

Agropur (CA) 4.2

Kraft Foods (US) 4.1

Lala (MX) 3.4

Great Lakes Cheese (US) 3.2

Leprino (US) 3.1

Co-operatives

Private companies

32 groups generated dairy sales exceeding 3 billion USD in 2014

DFC February 3, 2016 10

Asia

Yili (CN) 8.8

Mengniu (CN) 8.1

Meiji Dairies (JP) (E) 5.8

Morinaga (JP) (E) 5.4

Megmilk Snow Brand (JP) (E), (G) 4.3

GCMMF Amul (IN) (E) 3.4

Bright Dairy (CN) 3.3

OceaniaFonterra (NZ) (C) 18.7

Europe

Lactalis (FR) 21.9

Nestlé (CH) (A) (B) 18.3

FrieslandCampina (NL) 15.0

Danone (FR) (A) 14.8

Arla Foods (DK) 14.1

Sodiaal (FR) 7.2

DMK (DE) 7.0

Savencia (FR) 6.1

Müller (DE) (F) 4.9

Glanbia plc (IE) 4.7

Emmi (CH) 3.7

Bel (FR) 3.7

Tine (NO) 3.3

Ornua (IE) 3.1

(A) Infant formula excluded

(B) Dairy and ice cream activities redefined in 2013

(C) Year finishing in July

(D) All activities included

(E) Year finishing in March of the following year

(F) Estimate

(G) Fruit juices and infant formula included

NB : Kerry, Unilever, PepsiCo & Mondelez not ranked

CNIEL

AmericaKraft (US) 4.1

Mid-America Dairymen (US) 4.0

Co-operatives

Private companies

11 groups generated dairy sales exceeding 3 billion USD in 1996


Asia

Snow Brand (JP) 6.8

Meiji Milk (JP) 3.0

OceaniaNZDB (NZ) 4.2

Europe

Nestlé (CH) 13.5

Danone (FR) 5.7

Besnier (FR) 4.7

Campina Melkunie (NL) 3.8

Sodiaal (FR) 3.3

MD Foods (DK) 3.2

CNIEL

The financial weight of the dairy leaders has massively increased


Total turnover of the 20 biggest dairy players (billion USD)

1996 2003 2010 2014

77

2010

100

162208

+ 170%

This growth is mostly a rise in terms of volume, insofar as the increase

of dairy product prices has been noticeably weaker


Price development of dairy products on the American market

1

2

3

4

5USD / Gallon

Whole fresh milk

96 14

+ 41%

2

3

4

5

6USD / lb

Natural cheddar

96 14

+ 71%

2

3

4

5USD / lb

American processed cheese

96

+ 35%

USD / lb

96 14

CNIEL / UW Madison

This growth is mostly a rise in terms of volume, insofar as the increase

of dairy product prices has been noticeably weaker


CNIEL / ZMB

4

5

6

7

8€ / kg

Young gouda sold on deli counters

96 14

+ 33%

Price development of dairy products on the German market

0.4

0.5

0.6

0.7

0.8€ / litre

Whole fresh milk

96 14

+ 17%

0.6

0.8

1.0

1.2€ / 250g

Butter tub

96 14

+ 4%

Despite the important restructuring that has occurred over the last 20

years, the dairy industry remains fragmented


Worldwide ‘organized’ market for dairy products in 2013(milk delivered to and processed by dairies)

~ 460 million tons in milk equivalent

~ 500 billion USD at factory level

The world market share of top players is about 4%

CNIEL

The current set of dairy leaders presents a wider geographical diversity

than before


7 countries

developed countries only

14 countries

including Mexico, India & China

Origin of the biggest dairy players(turnover > 3 billion USD)

1996 2014

CNIEL

In Asia, dynamic domestic demand has stimulated the emergence of

national dairy leaders


CNIEL

0

2

4

6

8

10

2004 2006 2008 2010 2012 2014

Mengniubillion USD

x 9 within 10 years

8.1

0.9

NB: total turnover

0

2

4

6

8

10

2004 2006 2008 2010 2012 2014

Yilibillion USD

x 8 within 10 years

1.1

8.8

In Asia, dynamic domestic demand has stimulated the emergence of

national dairy leaders


CNIEL

0

1

2

3

4

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

billion USDFiscal year ending in March

0.4

0.7

3.4

moderate growth

x 5 within 10 years

Some western groups have also achieved strong growth during the last

few years. This is the case of Canada’s Agropur since 2002


NB: total turnover

CNIEL

0

1

2

3

4

5

1997 1999 2001 2003 2005 2007 2009 2011 2013

billion USD

0.9 1.2

4.4moderate growth

x 3.6 within 12 years

Canada’s Saputo, which was a regional company until the mid-nineties,

increased its turnover thirtyfold since 1996


CNIEL

0

2

4

6

8

10

1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

billion USD

0.3

1.3

9.4x 4 within 3 years

x 7 within 14 years

Fiscal year ending in March

1.3

French Lactalis has also sped up its growth during the last decade


CNIEL

0

5

10

15

20

25

1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

billion USD

4.2

21.9

x 4 within 13 years

4.9

moderate growth

Expansion of Western companies relies on a growing

internationalization of their activities. Example of Saputo in the USA


CNIEL

0

1

2

3

4

5

1998 2000 2002 2004 2006 2008 2010 2012 2014

Dairy turnover in the USAbillion USD

0.3

4.7


International activities outside the USA have also been a new growth

engine for Saputo over the last few years


CNIEL

0.0

0.5

1.0

1.5

2.0

2012 2013 2014 2015

Dairy turnover international(outside USA and Canada)

billion USD

0.9

1.4


Lactalis generated 75% of its turnover outside of France in 2014, as

compared to only 32% in 1993


CNIEL

0

5

10

15

1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

billion USD

Rest of the World

France

Turnover geographical breakdown

However, internationalization is not a prerequisite feature to be

considered as a world dairy leader


Milk processed abroad

(Billion litres)

2

4

6

8

10

12

14

2 4 6 8 10 12 14 16 18 20 22 24

Milk processed

or collected

at national level

(Billion litres)

50% / 50%

25% / 75%

10% / 90%

% of milk processed abroad and at national level by dairy leaders in 2013

All the other dairy leaders with dairy turnover > 3 Billion USD NB : Borden Dairy Company split from Lala in 2013 CNIEL

Some dairy leaders such as Lactalis have massively internationalized their

processing activity over the last few years


Location of its acquisitions since 2005

2005: McLelland (GB), Cadermartori (IT), Al

Nour, ACFFI (EG), UFIC (EG), Bacha (PL)

2006: Galbani (IT), Célia (FR), Lactalis Nestlé

UF (FR, ES)

2007: Dukat (CR, RS), Klatovy, Kunin (CZ),

Fanni (UA), Mozzarella Fresca (US), Mama

Luise (ES)

2008: Obory (PL), Baër (CH), activity of Milupa

Nutricia in FR

2009: Lubborn (GB)

2010: Forlasa, milk activity of Puleva, Sanutri

(ES), Lemnos (AU), Efremov (RU), Rachel’s (GB)

2011: Parmalat (IT, CA, PT, RO, RU, ZA, AU, BW, CO, CU,

EC, MZ, PY, SZ, VE, ZM), Wächli, Fromageries de l’Etoile,

Cibem (FR), El Castillo Debic Food Service (ES)

2012: Skånemejerier (SE), Ljubljanske Miekerne (SI),

Fromagerie du Dauphiné (FR), Jindi (AU)

2013: Balkis (BR), Tirumala (IN)

2014: Harvey Fresh, Longwarry (AU), Fromagerie de Banon

(FR), 4 plants of LBR, dairy assets of BRF (BR)

2015: Latterie Friulane (IT), Lácteos Algil (MX, UY, AR), 80%

of AK Gida (TR), 49% of Walhorn (BE)

CNIEL

Likewise, investment strategy undertaken by Nestlé over the last few years

shows no geographical limits


Investments announced or finalized by Nestlé in the dairy sector

between 2011 and 2014 (million USD)

.China

Dairy farming institute (400)

Dairy farm with 2 000 cows

BrazilUHT milk (80)

Whey (31)

ChileMilk powder (140)

PhilippinesMilk powder (95)

IndonesiaMilk powder (200)

UEAMilk powder (136)

SwitzerlandInfant formula (213)

New research center

GermanyInfant formula (152)

PortugalMilk powder (2)

AlgeriaMilk powder (n/a)

AngolaPowder packing (11)

ZimbabweImport of 2 000 heifers (13)

Sri LankaUHT milk (6)

MoroccoMilk intake (6)

ColombiaLiquid milk (n/a)

CNIEL n/a: not available

SpainConcentrated milk (8)

JamaicaDairy Beverage (10)

WorldPfizer’s infant formula

activities (11 850)

IndiaDeliveries (through Indocon Agro)

Facility Modernisation (65)

Dominican Rep.Concentrated milk (14)

MalaysiaDairy Beverage (49)

MexicoInfant formula (370)

Milk intake (55)

EgyptIce cream (28)

FranceMilk powder (16)

Even co-operatives are becoming transnational


Geographical breakdown of Arla Foods’ shareholders

0

5,000

10,000

15,000

01 02 03 04 05 06 07 08 09 10 11 12 13 14

Denmark

Sweden

Germany(2 769)

shareholders

Sweden(3 336)

Denmark(3 144)

United K.(2 854)

Belgium(997)

Luxembourg(228)

Netherlands(55)

CNIEL

Western leaders are investing massively in Africa –A few examples in 2014

and 2015


FrieslandCampina bought up Olam’s

dairy factory located in Abidjan (Ivory

Coast) for 19 million USD in September

2014.

In July 2014, Danone

purchased a 40% stake in

Kenyan dairy leader Brookside.

CNIEL

In November 2014 and in December 2015, Danone increased

its stake into Moroccan La Centrale Laitière from 67% to

90.9% then 95.9% for 370 million USD and 70 million USD.

French Fromageries Bel

bought 69.8% of Safilait, the

third biggest Moroccan dairy

group in May 2015.

In June 2015, FrieslandCampina

increased its stake into Nigerian Wamco

from 54.6% to 67.6% for 200 million USD.

PZ Cussons became the sole owner of Nigerian

Nutricima, by acquiring the 50% stake of its

partner Glanbia for 30 million USD in April 2015.

In 2015, Arla Foods

expands its distributing

network, setting up

partnerships in Egypt

with Juhayna, in Nigeria

with Tolaram and in

Senegal with Attieh

group.

Western leaders are investing massively in Latin America – A few examples in

2014 and 2015


Nestlé is investing 370 million USD in a new

infant formula factory in Ocotlán, expected to

be operational in 2016.

In January 2015, Lactalis, through its

subsidiary Parmalat, acquired Mexican

Lácteos Algil for 105 million USD.

CNIEL

In 2014, Lactalis undertook two

colossal acquisitions in Brazil: first,

4 plants previously owned by LBR

for 105 million USD; second, all the

dairy assets of Brasil Foods for 770

million USD.

Arla Foods took an 8% stake in

Brazilian dairy leader Vigor in

September 2014.

In July 2015, Danone planned to

invest 55 million USD in a new

yoghurt factory in Itapetininga.

In July 2015, Arla Foods and SanCor

obtained a 56 million USD loan to

increase whey production in their

Argentinean joint-venture Afisa.

Western leaders are investing massively in Asia –A few examples in 2014 and

2015


Lactalis purchased 80% of

Turkish dairy leader AK Gida for

780 million USD in May 2015. CNIEL

Danone invested 645 million USD to

increase its stake into Mengniu from

4% to 9.9% in February 2014, and

bought 25% of Yashili International for

580 million USD in October 2014.

FrieslandCampina purchased 50% of

Huishan Dairy’s infant formula factory

located in Xiushui as well as a stake in

Huishan Dairy’s capital for 145 million

USD in October 2014.

Fonterra purchased 18.8% of infant

formula manufacturer Beingmate for

570 million USD in 2015.

Yoplait, owned by General Mills (51%)

and Sodiaal (49%), set up a new

yoghurt factory in Eastern China in

spring 2015.

Conversely, Asian leaders are investing in Western countries –A few

examples in 2014 and 2015


In April 2015, Chinese Biostime inaugurated a new 80 million

USD milk powder plant set up with French Isigny Sainte Mère.

By mid-2016, Chinese Synutra is expected to have opened

two new driers built in partnership with French Sodiaal.

CNIEL

Chinese Bright Dairy & Food bought

56% of Tnuva, Israel’s largest food and

dairy company, for 2.4 billion USD in

May 2014.

In November 2014,

Chinese Yili set up a

partnership with DFA

to develop a milk-

powder production

facility in Kansas.

Chinese Yili announced

the construction of a

new milk powder and

UHT factory in Waimate

for 325 million USD in

November 2014.

The United States is particularly attractive to foreign investors


Investments announced or finalized between 2012 and 2014

in the United States by European companies

Total > 1 Billion USD

Acquisitions

Organic investments

Ireland

Whey 182 M USD

Aseptic solutions (60 M USD)

Sartori Foods (n/a)

Isopure (153 M USD)

France

Cheese 120 M USD

Germany

Yoghurt

50% of 250 M USD

with PepsiCo

Switzerland

Cheese 43 M USD

Yoghurt 12 M USD

25% of Siggi’s (n/a)

France

Cheese 40 M USD

Austria

Cheese 5 M USD

n/a : not available

CNIEL

Greece

Yoghurt 100 M USD

France

Yocrunch (n/a)

Germany

Yoghurt 62 M USD

Norway

Alpine cheese (n/a)

Ireland

Cheese 12 M USD

The United States is particularly attractive to foreign investors


Colombia

Yoghurt 18 M USD

n/a : not available

CNIEL

Canada

Morning Star 1,450 M USD

Yili

China

Milk powder

30% of 100 M USD with DFA

India

Paneer, ghee 9 M USD

Investments announced or finalized between 2012 and 2014

in the United States by Asian and American companies

Total > 2.5 Billion USD

Acquisitions

Organic investments

Canada

Cheese, whey 255 M USD

Foremost’s blending activity (n/a)

Davisco ~980 M USD

Vietnam

70% of Driftwood Dairy

7 M USD

New Zealand’s dairy sector has also particularly evolved through important

foreign investments over the last few years


Structure of the dairy processing sector / milk intake, shareholders

In 2001

340 Ml / y

~100 Ml / y

13 100 Ml / y

Today

750 Ml / y

150 Ml / y

17 900 Ml / y

930 Ml / y

Olam (SG)

535 Ml / y

Bright Dairy (CN)

Mitsui (JP)

FrieslandCampina (NL)

~200 Ml / y

Vinamik (VN)

(AU)

~ 300 Ml / y

Yili (CN)

Infant formula factory

(50 000 t / y)

Mengniu (CN)

Infant formula factory

(20 000 t / y)

Danone (FR)

CNIEL

Fonterra has been very active in terms of investments over the last few

years...


Investments announced or finalized by Fonterra between 2012 and 2015

in New Zealand (million USD)

Total > 1.6 Billion USD

Clandeboye: mozzarella (60)

Te Rapa: cream cheese (24)

Whareroa: cheese storage (19)

dry product logistic (25)

Darfield: drier n°1 15 t / h (162)

drier n°2 30 t / h (243)

Pahiatua: milk powder (193)

Waitoa: UHT milk (98)

Eltham: cheese slicing (27)

CNIEL

Lichfield: milk powder (249)

Edendale: MPC, AMF (124)

Hautapu : lactoferrin (8)

Studholme : milk powder (419)

…but so have the other players


Glenavy, infant formula (173)

Hamilton, goat milk powder (55)

Hokitika, drier (84)

Rolleston, UHT milk (33)

Pokeno, infant formula (179)

Waharoa, multi-products (16)

Dusandel, multi-products (145)

CNIEL

Balcutta, infant formula (n/a)

Christchurch, UHT milk (22)

Waimate, UHT milk

& milk-powder (325)

Yili

Investments announced or finalized by Fonterra’s competitors between

2012 and 2015 in New Zealand (million USD)

Total > 1 Billion USD

Otorohanga, poudre de lait (52)NZ Organic and Natural Dairy Company


Thank you for your attention!

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