FrieslandCampina forecast a poor start to the year for
Western European milk production as it cautioned of further tough industry
conditions ahead, which will drive yet further dairy mergers.
The Dutch dairy giant said that world milk output would
increase "slightly" over 2013, implying some balance with demand, which is also
said would show a "slight" rise.
However, in Western Europe, milk output "is expected to be
lower in the first half of 2013 than it was in the first half of 2012", the group
said, blaming the poor quality of on-farm feed and the high cost of buying in
The forecast comes days after the European Commission
forecast Western European milk output falling by 200,000 tonnes to 124.1m
"Climatic conditions - in some cases, drought, in others, too
much moisture - are still impacting milk supply and margins in certain regions,"
the commission said, warning that a trend of declining deliveries in France,
Ireland, Italy and the UK looks set to continue.
In November, the last month for which full data are
available, EU deliveries fell 1.5% year on year, with output in the rain-beset
UK tumbling 5.9%, and French production by 3.7%.
The first half of the calendar year is particularly important for northern hemisphere dairy producing countries as it includes the so-called spring flush, when the turnout of cows onto pasture prompts a surge in milk output, which typically peaks in May in Europe.
More deals ahead
FrieslandCampina added that with European demand soft too,
and "the market for dairy-based beverages and deserts expected to shrink even
further due to the economic crisis", dairy groups will extend their round of
"The upscaling of the European diary industry will continue
through mergers and acquisitions so that cost efficiencies can continue to be effective,"
the co-operative said.
In 2012, industry deals including Arla's mergers with
co-operatives in Germany and the UK, and the acquisition of the UK's Robert Wiseman
Dairies by German-based Theo Muller.
FrieslandCampina said it was continuing with a strategy which
aims to boost profitability through focusing on upmarket, and higher margin,
dairy products, while also exploring emerging markets which have better growth
'Shift away from
Last year, this strategy helped the group report a 27% rise
to E274m in profits, on revenues up 7.1% at E10.3bn.
"The key reason for the higher revenue was the shift in
volumes from commodities to products within the growth categories of infant and
toddler nutrition, dairy-based beverages and branded cheese," FrieslandCampina
Infant nutrition is "the segment in which the most robust
growth is being achieved by responding to the increasing demand from Asia for
high-quality dairy products", Cees 't Hart, the FrieslandCampina chief