European dairy consolidation
Two major European dairy companies are merging in what is slowly starting to become a rising tide of of cross-border mergers in the EU. What is notable about the merger is that both companies are owned primarily by the farmers' cooperatives. Denmark's Arla Foods is Europe's largest milk producer, and a major maker of butter, cheese, and desserts. It is a cooperative owned by some 13,000 farmers and operates in Scandinavia and UK, as well as through Europe, in the Middle East, and Asia.
Dutch-based Campina BV makes milk, yogurt, and dairy desserts in the Netherlands, Belgium, Germany, Russia, and Greece. It has about 8,000 member farms.
Commentators note that one reason for the mergers is the widely anticipated fall in dairy prices as the EU institutes farm reform. Another reason cited is the growing power of supermarket chains that work to suppress prices. The new company, to be named Campina Arla, will have revenues of $13,4 billion. That's second to Nestle in the dairy sector. and Nestle (like Danone) has a far wider focus in general.
Major European competitors in the basic dairy business include Italy's scandal-ridden Parmaalat ($7.2 billion, though it, too, sells more than dairy products), France's Lactalis ($7.2 billion), and Dutch Royal Friesland Foods ($5.7 billion). The US's Dean Foods is the largest US dairy company at $9.1 billion.
Already, according to an article on Dairy Reporter.com (12/8/04),
the new company is looking beyond Europe for significant expansion.
The burgeoning dairy markets in the Middle East and Asia will be targeted in particular. The company already has a strong position in the Middle East for cheese, butter, cream and milk powder through Arla's units in the UAE and Saudi Arabia, while and the recent acquisition by Campina of Parmalat's Thai unit gives the new company a platform on which to grow in what is one of Asia's fastest-growing economies.
