The Top 20 dairy processors are responsible for some 40% of the world’s raw milk pool that is being processed in factories. These companies and cooperatives have increased their milk processing by 50 million tonnes during the past ten years, which is half of the US’ annual production. At the same time, they have an enormous impact on our societies and the planet. In order to monitor this, IFCN has created a comprehensive analysis to benchmark the processors with a focus on People, Planet and Profit parameters, which was published in the IFCN Dairy Processor Report 2021.
The new top 20 dairy processor list
Since IFCN began this ranking in 2007, there have been many changes due to mergers, acquisitions, bankruptcies and organic growth. Developments over the past year though have been minor. Six processors improved their ranking in 2020, and interestingly all of them are based in Europe. At the same time, half of the top 20 have their headquarters based in Europe, six of them are located in North America, three in Asia, and one in Oceania. However, the top three dairy processors by milk intake are spread across all continents: Dairy Farmers of America (US), Lactalis (F) and Fonterra (NZ). The full list can be found in the annex.
People, planet and profit
People: The dairy processing sector provides nutritious food to society. However, with over US$100 billion per year, it also contributes to the livelihood of dairy farmers, employees, shareholders and, through taxes, also governments. Despite challenges such as fluctuating milk prices, the industry is showing resilience and a steadily growing trend that is unlikely to end any time soon.
Planet: The topic of climate neutrality is on the agenda of almost all top 20 dairy processing companies. 90% of them plan to be carbon neutral by 2050 and thus contribute to the fulfilment of the UN Sustainable Development Goals. Within a year, eight more companies decided to commit to reducing greenhouse gas emissions.
Profit: 2020 was a challenging year for all value chains. However, looking at dairy processors’ profitability (EBITDA margin, net profit) and their drivers (15 comparable financial indicators), IFCN found that the Covid-19 pandemic had no negative impact. Although there was a high degree of variability between companies, processors generally did a good job handling the uncertainty, achieving stable net sales and the highest free cash flow margin since 2014. The EBITDA margin of the Top-20 processors in 2020 was 8.5%.
Next steps
What does it take to keep the industry strong? According to panellist Desley Haas from Contec Group International, it is less due to the size of the processing companies than to the availability of up-to-date and accurate data. She pointed out the importance of improved communication and intelligent milk supply solutions. With a digital transformation, even small processors will find their market opportunities.
Erika Elgersma from Strategic Analysis Services emphasised the significance of benchmarking and the use of the IFCN report to learn from the best in the industry to make informed decisions, while addressing the increased demands of society and economic challenges. Even companies that are not part of the Top 20 ranking can be compared at any time using the IFCN methodology.
Considering all areas of sustainability, the dairy processing industry is already on the right track. Accelerating the progress, improving the recognition of the work already being done and serving societies even better will be key in the future.
IFCN strives to create transparency and monitor trends in the industry by providing benchmarking solutions so that stakeholders can make better decisions based on validated data and 20 years of experience.
