Consolidation among Europe’s dairy processors will continue in an “accelerated fashion” due to falling milk output and the age profile of farmers, RaboBank’s research arm RaboResearch has predicted.

In its annual Global Dairy Top 20 report, RaboResearch said the merger plans involving Danish dairy giant Arla and German co-op DMK, as well as moves by Holland’s Friesland-Campina to tie up with Belgium’s Milcobel, were indicative of the “ongoing consolidation trend in western European dairy”.

The proposed mergers were “driven by declining milk supplies, which in turn are caused by tightening EU regulations and an aging farmer base”, the RaboResearch report maintained.

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“Dairy processors are actively seeking ways to keep their factories running efficiently, offering competitive milk prices and attractive bonus schemes to retain farmers,” the report explained.

Key focus

“As a result, the price paid to farmers has become a key focus. To maintain high milk prices, processors are pursuing economies of scale and operational synergies,” RaboResearch stated.

The report pointed to the experience of Friesland-Campina, which it said was facing major challenges.

In 2024, Friesland-Campina lost 4.4% of its members and processed 3.4% less milk, the report noted.

"Milk supply in its core sourcing regions is expected to decline by an average of 2% annually over the next five years,” RaboResearch claimed.

“The co-operative’s goal is to stabilise milk volumes in a shrinking market, signalling that further consolidation may be on the horizon,” RaboResearch predicted.

In terms of rankings in the report, French firm Lactalis retained its position as the largest global dairy company, expanding its lead through strategic acquisitions, including General Mills’ US yogurt business and Fonterra’s consumer foods division.

Larger acquisitions are in the 2025-2026 pipeline, RaboResearch forecast.

“We expect Lactalis to easily retain its pole position based on an estimated $31.9bn [€27.5bn] in revenue,” said senior dairy analyst with RaboResearch Tom Booijink.

The other companies in the top five were Swiss giant Nestle, Dairy Farmers of America, Danone of France and Chinese firm Yili.