Lac Talis

LACTALIS GROUPE IN PACKAGED FOOD (WORLD)
January 2016
SCOPE OF THE REPORT
Scope
All values expressed in this report are in US dollar terms, using a fixed
exchange rate (2015).
2015 figures are based on part-year estimates.

All forecast data are expressed in constant terms; inflationary effects are
discounted. Conversely, all historical data are expressed in current terms;
inflationary effects are taken into account.
Packaged Food
US$2.2 trillion rsp
Dairy
US$450.8 billion rsp
Euromonitor International
Baby Food
US$62.2 billion rsp
Oils and Fats

US$114.9 billion rsp
PACKAGED FOOD: LACTALIS GROUPE
Disclaimer
Much of the information in this
briefing is of a statistical nature and,
while every attempt has been made
to ensure accuracy and reliability,
Euromonitor International cannot be
held responsible for omissions or
errors.
Figures in tables and analyses are
calculated from unrounded data and
may not sum. Analyses found in the
briefings may not totally reflect the
companies opinions, reader
discretion is advised.
Lactalis has become one of the
most acquisitive dairy producers
over the 2010-2015 period. It
moved from fourth to second
position in global dairy following
the acquisition of Parmalat in
2011. The company has
continued on its growth path
through inorganic means in 2015
with further Latin American,
Turkish and Australian
purchases. The intense
acquisition activity has left it with
a complex and fragmented brand
portfolio. A comprehensive global
strategy is needed to take
advantage of dynamic growth in
emerging markets and to rein in
costs.
PASSPORT 2
STRATEGIC EVALUATION
COMPETITIVE POSITIONING
MARKET ASSESSMENT
DAIRY
OILS AND FATS

BABY FOOD
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
Key company facts

Acquisitive strategy to secure second place in dairy
Lactalis, Groupe
Headquartered in Laval, Mayenne, in the southwest

of France, Lactalis leapfrogged Nestl as the world's
second largest dairy player in 2015. Acquisitions in
Global
Brazil, India, Turkey and Australia in the last two years
Dairy, oils and fats, baby have seen Lactalis closing the gap to leader Danone,
Category involvement:
food
albeit still at some distance.
World packaged food
In 2015, dairy accounted for over 92% of Lactaliss
0.9%
value share 2015:
packaged food value sales, with dairy also providing
World packaged food
the foundation for the company's presence in the oils
7.1%
value growth 2014-2015:
and fats and baby food categories.
Lactalis has become one of the most acquisitive dairy
Lactalis Market Value Share
producers over the 2010-2015 period. The company
Performance by Category 2010/2015
has continued on its growth path through inorganic
5
means in 2015 with further Latin American, Asian and
4
Australian purchases. The intense acquisition activity
has left it with a complex and fragmented brand
3
portfolio. A comprehensive global strategy is needed
2
to take advantage of dynamic growth in emerging
markets and to rein in costs.
1
While Lactaliss share in dairy and oils and fats
0
increased, the company has fallen behind in the fastDairy
Oils and Fats
Baby Food
growing baby food category, where it ranked 25th in
2010
2015
2015, compared to 19th in 2010.
Laval, France
% market value share
Headquarters:
Major regional
involvement:
PASSPORT 4
SWOT: Lactalis, Groupe

STRENGTHS
Wider geographic reach
WEAKNESSES
Increasing reliance on
drinking milk products
Weak position in
Group synergy due to
strongest growing region number of acquisitions
Its latest acquisitions in While the majority of

Brazil and Mexico
Lactaliss sales comes
significantly improved
from cheese, its reliance
the geographical
on drinking milk
diversity in Latin
products, a stronger
America as well as fast- performing category, is
growing Turkey and
expanding, from 15% in
neighbouring markets
2010 to 30% in 2015.
by acquiring a majority
stake in AK Gida.
The company remains Due to the number of

weak in Asia Pacific.
acquisitions Lactalis has
While acquisitions in
made in a short period
Australia will increase
of time, the company is
production capacity to
challenged by
serve China, it will need integrating a large
a strong local player to
workforce into a unified
help compete in this
whole, which could
market.
hamper growth.
OPPORTUNITIES
THREATS
Private label remains threat

Rising emerging markets Further expand in Latin Western Europe bias
demand for cheese
America
Private label remains a
Lactalis continues to
With Lactaliss recent
Lactaliss cheese
threat in many mature
be dependent on
acquisitions in Brazil, it
portfolio provides a
markets, particularly in
Western Europe.
can expand its
strong platform from
drinking milk and cheese as
Some 41% of its
production in a strong
which to exploit
packaged food sales in it is so commoditised.
growing dairy market
widespread growth in
Staying competitive against
and expand its business 2015 were attributable
demand for cheeses
retailers brands will remain
to this region, with a
especially in the Middle to neighbouring
an ongoing challenge and
countries and become a still unstable economic
East and Africa where
focus should be on addedenvironment.
strong regional player.
the appetite is growing.
value products.
PASSPORT 5
Key objectives and challenges

Intense acquisitive strategy
Adding value to staple categories
Acquisition has been the driving force behind

Lactaliss expansion and, particularly, its efforts to
reduce its reliance on the French market.
Given the maturity of dairy, Lactalis has looked to

more dynamic categories where it can add value,
such as drinking milk products (DMP) and yoghurt. In
2010, it acquired Rachels from Dean Foods in
yoghurt and in the same year acquired Quesos
Forlasa and Ebro Puleva's dairy business in Spain.
Latin America has been a key focus for Lactaliss

acquisitive expansion, with this region the largest
contributor to dairy growth, behind Asia Pacific. In
addition, the company has made acquisitions in
Australia for a production foothold in the
Australasian region. Strategically this could be
the pathway to future supply to China, as seen
with Fonterra.
Emerging markets expansion
Beating private label
Asia Pacific has not been a major focus for

Lactalis, however other global dairy players are
looking to expand in this region, establishing
Chinese dairy operations. With China set to lead
dairy market growth over the forecast period,
Lactalis may find it is frozen out by other players
if it does not move soon. Key to establishing a
consumer retail presence in these markets are
local production and supply chains.
Dairy categories are subject to high levels of

commoditisation and a strong private label presence,
particularly in Lactaliss native region, Western
Europe. In this environment, Lactalis is strongly
focused on building its brands through new product
development. This is particularly notable in milk, in
which Lactalis has used product innovation to
segment the consumer base according to factors
such as specific health requirements.
In 2014, Lactaliss acquisition of leading Brazilian

brands Batavo, Eleg and Parmalat in DMP will
significantly improve its position in Brazil.
PASSPORT 6
MARKET ASSESSMENT
DAIRY
OILS AND FATS

BABY FOOD
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
Lactaliss growth still outpacing overall packaged food growth

Lactalis vs Global Packaged Food Market Performance 2010-2015
65%
Y-o-y growth
50%
35%
A
C
20%
5%
-10%
2010
2011
2012
Lactalis, Groupe
A: The 2011 Parmalat acquisition

pushes Lactalis from fourth to
second place in the global dairy
market and boosts the companys
year-on-year growth to above
40%. The company gains a strong
presence in Australasia, Latin
America and in Canada as a direct
result of the acquisition.
2013
2014
2015
Packaged Food
B: Lactaliss sales growth falls

back in line with the market
level over 2012-2014. The
Quesos Forlasa and Ebro
Puleva acquisitions that give the
company a much stronger
presence in Spain also expose
the company to this weakening
market.
C: Over 2014-2015, Lactalis

accelerates its expansion strategy
with the most noteworthy acquisitions
in Turkey, India, Brazil and Mexico,
resulting in 33% sales growth in
2015, far ahead of the packaged
food average. Through this strategy
Latin America now makes up over a
quarter of global sales, up from a
negligible share in 2010.
PASSPORT 8
Close to US$2 bn worth of acquisitions for Lactalis over 2014/2015
January 2014
Tirumala Milk
products
(India)
US$250 mn
August 2014
LBR Lcteos
Brasil (Brazil)
UHT milk and
cheese
operations,
through
Parmalat
US$110 mn
January 2014
Tirumala Milk
products
(India)
US$250 mn
December
2014
Longwarry
Food Park
(Australia)
US$45 mn
May 2015
AK Gida dairy
(Turkey) - 80%
stake
US$700 mn
September
2014
Brf Brasil
Foods
(Brazil) dairy assets
through
Parmalat
January 2015
Latterie
Friulane (Italy)
US$11.5 mn
Group of
companies,
mainly Mexico
- cheese
US$700 mn
US$105 mn
December
2015
Fonterra yoghurt
dessert
business
(Australia)
US$10 mn
June 2015
Arla remaining
49% of
Walhorn joint
venture in
Belgium
PASSPORT 9
Lactalis regains global second position in dairy in 2015

Dairy: Global Top 10 Players Value Share 2015 and Ranking 2010-2015
Companies
% market
value share
2015
2010
2011
2012
2013
2014
2015
Danone, Groupe
4.9
Lactalis, Groupe
4.1
Nestl
3.4
2.7
2.6
Kraft Heinz Co
1.9
Royal FrieslandCampina
NV
1.3
Arla Foods Amba
10
1.3
Bright Food (Group) Co

Ltd
26
20
19
18
13
1.2
Yakult Honsha Co Ltd
11
11
11
10
1.2
China Mengniu Dairy Co

Ltd
Inner Mongolia Yili
Industrial Group Co Ltd
PASSPORT 10
International expansion core theme in global dairy

Emerging markets fuel top players
Bright Food enters the global top 10 dairy list
Those companies with the strongest emerging

market presence have been those that have seen
the strongest growth overall. Notably Inner
Mongolia Yili and China Mengniu Dairy advanced
most in the global ranking off the back of rapid
growth in the Chinese dairy market.
Lactaliss largest emerging region in 2015 is now
fast-growing Latin America, however it still needs
to address its weak positions in the wider Asia
Pacific region.
Bright Food (Group) Co Ltd entered the top 10 in

2015, rising from 13th place, overtaking Yakult in
the process, and claiming ninth place in 2015.
Bright Foods performance in China, which saw the
company climb the rankings in almost every
category it operated in, was instrumental in its rise
in the global dairy market. Bright Food follows an
expansion strategy through European acquisitions
in order to bring quality foods to the vast Chinese
consumer market.
Parmalat acquisition did not open doors to

China for Lactalis
General Mills slips in global rankings and falls

from top 10
Although the Parmalat acquisition has enhanced

Lactaliss global scale and added significant sales
in Latin America and the Middle East and Africa, it
has not addressed the companys weak presence
in the most attractive, and at the same time the
most competitive, dairy market, China.
However, the combined Lactalis and Parmalat as
well as the Brf Brasil Foods portfolio performed
strongly in new frontier markets, Brazil, Algeria,
South Africa and Saudi Arabia.
With its strong reliance on slow-growing developed

markets, General Mills has lost its number 10
position in dairy. When comparing General Millss
reliance on emerging markets and that of its main
competitors, all generating over 45% of sales from
emerging markets, General Millss portfolio needs
an even bigger shake up. Having said that, its
recent Brazilian dairy acquisition Carolina and entry
into the Chinese market with Yoplait are steps in the
right direction.
PASSPORT 11
Dairy becoming a game of fewer players

While the global dairy industry remains relatively
fragmented, it is expected to continue to consolidate, albeit
at a slower rate. The leading player Danone captured only
5% of global sales. Among the top five, no other player has
a market share greater than 4% and the top 10 combined
represent less than a quarter of global dairy sales in 2015.
Other multinationals have mainly tried to increase their

presence in fast-growing emerging markets such as
Lactaliss investment in Latin America with Brf Brasil Foods
and Lacteos do Brasil, and General Mills with Brazilian
dairy Carolina and entry of its Yoplait yoghurt in China.
Global dairy will continue to see acquisitions in the years
to come. However, as there are increasingly fewer
companies to procure, the size of the deals will be smaller.
Instead of the larger Lactalis-Parmalat deals that have
been seen in the past, small to medium-sized local
enterprises (SME) are likely to be the primary targets going
forward.
100%
80%
Market value share
A few of those local players, however, have grown sharply.

China Mengniu Dairy Co, Inner Mongolia Yili Industrial
Group and Bright Food Group have reaped the benefits of
the strong growth in home market China and as such
strengthened their positions in the top 10 list.
Global Dairy Market Consolidation

2010-2015
60%
40%
20%
0%
2010
2011
Top 10 Players
2012
2013
Private Label
2014
2015
Others
PASSPORT 12
MARKET ASSESSMENT
DAIRY
OILS AND FATS

BABY FOOD
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
MARKET ASSESSMENT
Heavy investment in emerging markets Brazil and Turkey

In 2014 and 2015, Lactaliss acquisition targets have been focused on increasing its foothold in emerging
markets. Especially the focus on Brazil has been increased with the purchase of 11 dairy plants from Brf
Brasil Foods SA for a reported sum of US$795 million and the UHT milk and cheese operations of LBR
Lcteos Brasil SA. The combined market share of Parmalat, Brf and LBR makes Lactalis the number two
dairy player in Brazil, 1.6 share points behind leading player Nestl.
Moreover, in May 2015 Lactalis bought an 80% stake in Turkish dairy giant AK Gida for a reported sum of
US$700 million, exposing itself to a fast-growing dairy market, including neighbouring markets.
Asia Pacific, however, will be the largest growing region, yet with the lowest company share of 0.4%, has
not changed due to a lack of investment in the worlds fastest growing region. Having said that, recent
investments in Australia will help the groups strategic position for export to the region.
Lactalis, Groupe: Dairy Presence 2015 and Growth Prospects 2015-2020 by Region
10
% CAGR 2015-2020
8
Asia Pacific
Middle East and Africa
Latin America
Australasia
Western Europe
North America
Eastern Europe
0
-2
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
Market size 2015 (US$ million rsp)

Note: Bubble size shows company share of region in 2015. Range displayed: 0.4-11.1%.
PASSPORT 14
MARKET ASSESSMENT
Increased reliance on faster growing categories except baby food

Dairy accounted for over 92% of Lactaliss packaged food value sales in 2015. Cheese is Lactaliss largest
dairy category, yet its significance has reduced from 58% in 2010 to 44% in 2015. As other categories are
growing stronger than cheese, Lactaliss diversification strategy to focus on higher growth markets is key in
the companys future growth. Reliance on drinking milk products (DMP) instead has doubled from 15% in
2010 to 30% in 2015. In fact, the company increased its global share from 1.1% in 2010 to 3.4% in 2015.
This was backed by the Parmalat acquisition in 2011 which has a strong presence in DMP as well as Brf
Brasil Foods. DMP is expected to outperform overall dairy (3.4%) with a CAGR of 4% over 2015-2020.
Yoghurt and sour milk drinks sales have shown slower growth in terms of Lactaliss priorities yet still
managed to increase from 7% of company packaged food sales in 2010 to 9% in 2015. With this categorys
dynamism and large global size, Lactalis ought to benefit from this increased reliance in the years to come.
Baby food is expected to post the strongest growth over the forecast period, yet the category is no priority
for Lactalis, making up just 1.4% of the companys total sales in 2015 compared to 2.5% in 2010. As the
majority of growth in baby food will come from Asia Pacific, where Lactaliss presence is low, the reliance is
likely to reduce even further unless the company includes China in its bold acquisition strategy.
% CAGR 2015-2020
Lactalis, Groupe: Packaged Food Presence 2015 and Growth Prospects

2015-2020 by Category
12
9
Drinking milk
products
Baby food
Other dairy
Cheese
Yoghurt and sour milk

products
Oils and fats
0
-3
0
Market size 2015 (US$ million rsp)

Note: Bubble size shows company share of category in 2015. Range displayed: 0.4-6.4%.
PASSPORT 15
MARKET ASSESSMENT
DAIRY
OILS AND FATS

BABY FOOD
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
DAIRY
Lactaliss significantly increases its reliance on developing regions
(US$ million)
Cheese
DMP (Drinking Milk Products)
Yoghurt and Sour Milk Products

Other Dairy
Baby Food
Inner circle: 2010; Outer circle: 2015
Despite diversification towards other

high-growth categories, Lactaliss
largest category remains cheese,
with a 47% share of its dairy sales.
However the biggest and most
significant change is Lactalis
reducing its reliance on developed
markets to just 56% in 2015
compared to 86% in 2010. This is
the direct result of its recent
acquisitions in Brazil and Mexico.
Brazil and Mexico have now made it
into the ranking of the top five
largest cheese markets.
Lactaliss reliance on drinking milk
products has also seen a significant
increase to 32% in 2015, up from
just 16% in 2010. With DMP
outperforming most dairy categories,
Lactalis is benefiting from strong
growth seen in Brazil where it now
has a 20% share through brands
such as Eleg, Parmalat and
Batavo.
Lactalis Cheese Sales by

Country 2015
100%
France
80%
Share of global cheese sales
Lactalis Global Dairy

Retail Value Sales by
Category 2010/2015
Italy
60%
Brazil
Mexico
40%
South Africa
20%
Other
0%
2015
PASSPORT 17
DAIRY
Lactaliss exposure to Latin America secures position to Kraft Heinz
Lactalis, Groupe: Absolute Value Growth

in Cheese by Key Market 2014-2015
Brazil
Mexico
Turkey
Russia
-200
300
800
1,300
South Africa
1,800
Egypt
US$ million (2015 fixed exchange rate)
Other
Note: *Data expressed in terms of latest owner
Top Five Players in Global Cheese

2010-2015
8
% retail value share
With Lactaliss latest acquisitions of LBR Lcteos

Brasil, Brf Brasil Foods and a group of companies
in Mexico, Lactalis is reaping the benefits of being
exposed to a fast-growing cheese region. In fact,
Brazil and Mexico have been the second and fifth
largest absolute value growth markets over 20142015, respectively.
Cheese in Brazil remains a fragmented market
where domestic manufacturers dominate sales,
accounting for more than 40% of value sales in
2015. However, due to the companys acquisition
of the Batavo, Eleg and Santa Rita cheese brands
from BRF Brasil Foods and the Poos de Caldas
brand rights acquisition from LBR Lcteos Brasil,
Lactalis became the second largest player with a
7% value share in 2015, increasing the presence of
international manufacturers in this market.
Domestic companies dominate cheese even more
so in Mexico, with over 70% of sales. Sigma
Alimentos, Grupo Lala, and Derivados de Leche la
Esmeralda are the three main domestic players,
however after exiting Mexican cheese in 2003,
Lactalis/Parmalat is returning to compete by buying
La Esmeralda for Mx$100 million.
Lactalis, Groupe
Kraft Heinz Co
Bel, Groupe
4
Savencia Fromage &
Dairy
Arla Foods Amba
2
2010 2011 2012 2013 2014 2015
PASSPORT 18
DAIRY
Latin America and Middle East key cheese growth markets

Top Absolute Growth Markets by Cheese
Category 2015/2020
For future growth in cheese, the US, Brazil, Mexico and

Russia are expected to lead growth in terms of absolute
retail value sales.
Growth in Brazil will be driven by increased purchasing
power, as Brazilians are more and more able to afford
various cheese types that can be a healthy part of ones
diet, rather than a luxury food. Both hard and soft cheese
are expected to contribute most to new sales.
Lactaliss purchase of 11 dairy plants from Brf Brasil
Foods SA as well as the UHT milk and cheese operations
of LBR Lcteos Brasil SA will expose the company to a
fast-growing market, especially for hard and soft cheese.
In addition, Egypt will be an attractive cheese market now
that political turmoil is easing and business is starting to
resume again. With sanctions against the country being
lifted, Iran is in a similar position, although this will require
a long-term plan. Consumers shifting from unpackaged to
packaged cheeses will drive cheese sales. Lactalis has
already shown interest in expanding in the Egyptian
market as it entered the race to acquire Egyptian cheese
maker Arab Dairy Products Company at the end of 2014,
which it ultimately lost to Pioneers Holding.
PASSPORT 19
DAIRY
Lactalis must realign regional focus of DMP
20
20
10
10
0
China
India
Brazil Pakistan Vietnam
US
Top Lactalis DMP Markets Absolute Value

Growth 2015/2020 and Company Share
2015
3,000
2,000
25
20
15
1,000
10
0
-1,000
30
Absolute value growth (US$ million)

2015/2020
30
Absolute value growth (US$ billion)

2015/2020
Top Future Growth Markets in DMP

2015/2020 and Company Share 2015
Absolute Value Growth (US$ billion) 2015/2020

Lactalis Groupe Market Share 2015
Absolute Growth 2015/2020
Lactalis Groupe Market Share 2015
Over 2015-2020, future growth will come from six markets for drinking milk products (DMP), namely China,
India, Brazil, Pakistan, Vietnam and the US. With global demand shifting towards Asia Pacific as well as
Latin America, the gap between China and the US is expected to widen significantly as average
consumption levels in the US are expected to decline while China will boom. Similar contraction is
expected for Western Europe as well as Japan.
Given this market situation, Lactalis faces a challenge in terms of refocusing its reliance on Western
Europe heavyweights (Italy, France and Spain) to Asia Pacific lightweights. In fact, four out of Lactaliss five
largest markets in terms of sales from DMP are expected to contract while its presence in five out of the six
key growth markets is negligible.
PASSPORT 20
DAIRY
Lactalis not exposed to all high growth markets in yoghurt

While Lactaliss yoghurt
position is increasing
dramatically, with a 1.1%
global share in 2010 more
than doubling to 2.3% in
2015, it is still not yet
positioned to fully benefit
from the potential large
gains in the worlds largest
absolute growth markets
over 2015-2020; indeed,
only five of Lactaliss core
yoghurt markets are to be
found in the top 25 largest
absolute growth markets
over the forecast period.
PASSPORT 21
DAIRY
Yoghurt should be a greater focus for Lactalis

Forecast Dairy Sales by Category in
Absolute Value Growth 2015/2020
Other dairy
Cheese
Yoghurt and
Sour Milk
products
Drinking Milk
Products
Japan
US
Brazil
India
China
Other
US$ million, constant 2015 prices, fixed 2015 exchange rates
Largest Global Yoghurt Players by Value

Share 2010/2015
6
4
2
0
Danone,
Groupe
Lactalis, Nestl SA China

Inner
Kraft
Royal
Groupe
Mengniu Mongolia Heinz Co Friesland
Dairy Co
Yili
Campina
Ltd
Industrial
NV
Group Co
Ltd
2010
2015
Yoghurt sales for Lactalis currently only represent

10% of the companys sales, while yoghurt will
represent over a quarter of forecast global dairy
value sales. Currently it will miss out from most
yoghurt sales in China, the US and Iran.
The acquisition of Parmalat significantly
enhanced the company's standing in yoghurt,
strengthening its position in the Italian market as
well as in South Africa and Venezuela. Lactalis
however will need to expand the brand into other
markets in those regions or risk creating orphan
brands that absorb disproportionate marketing
and distribution costs. The acquisition of Swedish
dairy cooperative, Sknemejerier, gave Lactalis
Swedens fifth-ranked brand in the category,
however once again it will find the brand isolated
on a regional basis as it is present only in
Sweden.
Asia Pacific currently only accounts for 3% of
Lactaliss yoghurt sales, while the majority of
forecast value sales will come from this region.
Lactalis therefore should look at future expansion
in the region. Unsurprisingly of the top global
yoghurt players, the most growth in terms of
market share is coming from companies that have
a strong focus on Asia Pacific.
PASSPORT 22
DAIRY
Where does yoghurt take share of dairy desserts?

Yoghurt consumption differs by market; in some it is
considered a breakfast, while others view it as a dessert
or both.
In the US and Australia, yoghurt share in comparison to
desserts has been increasing over the years which
could indicate that consumers are switching to healthier
options for dessert. This increases the potential for
yoghurt, as per capita consumption in the US lags far
behind levels seen in Western Europe.
In Australia, where Lactalis has acquired Fonterras
yoghurt division, the company could further expand into
a more indulgent yoghurt offering to entice Australian
consumers with a healthier but indulgent dessert.
US
Australia
PASSPORT 23
MARKET ASSESSMENT
DAIRY
OILS AND FATS

BABY FOOD
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
OILS AND FATS
Core butter countries have changed for Lactalis

Lactalis is the world's third largest producer of butter, after Arla Foods and Land O' Lakes Inc. Parmalats
integration into Lactalis has shifted the companys geographic presence, entering Canada as its second
largest market by value sales, where previously it was not present. In addition, Parmalats purchase of Brf
Brasil Foods SA in 2015 has made Brazil its fourth largest butter market, replacing Russia which saw its
sales decline.
Lactaliss largest market by value sales, France, recorded 2% growth in 2015 after a static performance
over the review period as French consumers sought healthier alternatives to butter. Lactalis however
remains a strong leader in the category, at a distance followed by Cooprative des Agriculteurs de
Bretagne (Coopagri Bretagne).
In Canada, butter will remain one of the most popular products, with a value CAGR of 4% expected over
2015-2020 as butter is seen as a more natural product. Lactalis can capitalise on this and further
strengthen its number two brand Lactantia in Canada.
Lactaliss Oils and Fats Retail Value

Sales by Category 2010/2015
(US$ million)
Lactaliss Top Five Butter Markets 2015

Country
Butter
Cooking Fats
Spreadable Oils and Fats
Inner circle 2010; Outer circle 2015
Retail value
sales (US$
million)
2015
France
Canada
Italy
Brazil
Vietnam
196.0
125.8
74.5
58.0
47.5
%
growth
2014/
2015
2%
5%
4%
14%
% market
value share
2015
18.6
25.5
15.6
9.2
52.5
PASSPORT 25
OILS AND FATS
The US should be on Lactaliss list for future butter markets
Top Seven Butter Absolute Value

Growth Markets 2015/2020 and
Company Share 2015
500
30
20
300
200
10
100
% company retail value share
400
US$ million rsp
In order to maximise growth potential and its existing

scale in butter, Lactalis should focus on new growth
markets, including the US, Iran, India and Germany.
Of the future growth markets, Lactalis only enjoys a
strong presence in butter in Canada and China, while
the rest would be new frontier markets for the
company.
In Canada, Lactalis should position its number two
ranked butter Lactantia as a foodie product by
sponsoring popular TV cooking programmes and
advertising in food magazines. It could highlight butters
natural and wholesome qualities again. In this market,
Canadians continue to be torn between natural butter
and low-fat spreadable oils and fats. Therefore, further
investment in light butter should also be considered.
While Iran and India require more consideration
because of a complicated retail network as well as
political barriers, especially in Iran, the US should be on
Lactaliss radar. It will be the largest growth market for
butter and there is still room for expansion. While the
market is controlled by Land O' Lakes Inc and private
label, acquiring an existing brand could open up the
market to Lactalis, a strategy similar to gaining a
foothold in Brazil.
Absolute Value Growth (US$ million rsp) 2015/2020

Lactalis % Company Share 2015
PASSPORT 26
MARKET ASSESSMENT
DAIRY
OILS AND FATS

BABY FOOD
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
BABY FOOD
Negative outlook in three of Lactaliss largest baby food markets

The Ebro Puleva acquisition gave Lactalis a significant presence in Spanish baby milk formula, where
previously it was almost entirely dependent on France in Western Europe. Parmalat, meanwhile, gave it a
toehold in the Venezuelan and Italian markets.
However, as of 2015, 66% of the companys sales takes place in France. While this reliance is down from
69% in 2009, the French market is still Lactalis's main market and is expected to contract by a CAGR of 1%
over the forecast period. Higher incidence of breastfeeding is weighing down on the outlook for baby milk
formula in France. Even toddler milk formula, typically the most resilient to breast is best campaigns, will
see contraction as in uncertain economic times parents are weaning their children entirely off milk earlier
rather than relying on toddler-positioned products. Spains decline will be even more significant than France
at a negative CAGR of 4% over 2015-2020.
Growth prospects in some of Lactaliss smaller markets, eg Algeria, are especially positive and its presence
should be strengthened especially in new north and east African markets.
Growth Prospects in Lactaliss Largest Baby Food Markets 2015-2020

12
8
150
100
0
50
-4
% CAGR 2015-2020
US$ million rsp
200
-8
France
Algeria
Spain
Lactalis Retail Value Sales 2015 (US$ million rsp)
Venezuela
Italy
% CAGR 2015-2020
PASSPORT 28
BABY FOOD
Target milk formula markets where already present in dairy

While China will overwhelmingly dominate growth in baby milk, Lactaliss prospects here are limited. The
acquisition by Nestl of Pfizers baby milk business combined with the strong presence of Mead Johnson
and Danone as well as strong local players make this a difficult market to enter.
Lactalis could however look to markets where it is already present and where the prospects for baby milk
are positive, including Vietnam and Indonesia, where the company already has a strong presence in oils
and fats as well as Saudi Arabia and Turkey with a strong presence in cheese. In each of these markets,
Lactalis could leverage its existing distribution network to expand in baby milk formula.
1,200
14
1,000
12
10
800
8
600
6
400
200
% company retail value share in

overall dairy 2015
Absolute value growth (US$ million rsp)

2015/2020
Top 10 Milk Formula Absolute Value Growth Markets (exc China) 2015/2020 and
Lactaliss Company Share in Overall Dairy 2015
0
Hong Kong,
China
Vietnam
Indonesia
Saudi
Arabia
Brazil
Milk Formula Absolute Value Growth (US$ million rsp) 2015/2020
Russia
Turkey
Venezuela
Algeria
Philippines
Lactalis % Company Share in Overall Dairy 2015
PASSPORT 29
MARKET ASSESSMENT
DAIRY
OILS AND FATS

BABY FOOD
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
BRAND STRATEGY
Few truly global brands in Lactaliss portfolio

Lactalis has followed a very intense acquisition strategy over
the 2010-2015 period and purchased a number of leading
national dairy players. As a result, it has ended up with a large
and fragmented brand portfolio, lacking truly global labels,
with the exception of Prsident, Parmalat and Galbani. This
situation stretches Lactaliss brand support marketing
resources across a number of markets, most of which are set
to see low growth.
Lactaliss Top 10 Packaged Food

Brands Performance 2015
2015 growth results also show slightly better performance for

brands with wider geographic reach and diverse consumer
bases such as Prsident. Brands reliant on struggling Spanish
and other Western European markets, such as Puleva and
Lactel, posted negative growth for the year.
The Prsident brand managed a CAGR of 5% over 20102015 and is by far the most successful brand for Lactalis.
Especially for cheese, brand recognition among consumers is
rather low as the average consumer is unlikely to recall more
than a handful of brand names. As such, Lactaliss success
for its Prsident brand is quite impressive. It should however
reduce its reliance on Western Europe which accounts for
over 50% of its sales and instead focus on increasing its
presence in higher growth markets for cheese in Latin
America and the Middle East and Africa.
Prsident
Parmalat
Eleg
Galbani
Quenaca
Batavo
Lactel
Beatrice
La Laitire
Pauls
Other
Notes:Share represents significance among total Lactalis
PASSPORT 31
BRAND STRATEGY
Parmalat shifts reliance to fast-growing regions

Parmalat rose to become Lactaliss second largest
brand by value sales in 2011 with the acquisition of
the formers eponymous parent company. The brand
derived virtually all of its sales from dairy and within
dairy, drinking milk products made up 71% of its total
sales in 2015. Yoghurt and sour milk drinks and
cheese accounted for the remainder of its sales.
Parmalat further strengthened its presence in Brazil
by taking under management some production units,
including trademarks, of LBR Lcteos Brasil SA.
This transaction, which finalised in January 2015,
the subject of which was a portfolio of assets in the
areas of UHT milk and local cheeses, enabled the
Parmalat Group to regain full title to the Parmalat
trademark throughout Brazil for the production and
distribution of UHT milk. As of 2015, therefore,
Parmalats reliance on the fast-growing Latin
American region increased to 50%, up from just 20%
in 2014.
Parmalat Global Brand Sales by Region

2011-2015
Western Europe
Latin America
North America
Middle East and Africa
Eastern Europe
At the same time, the brand reduced its reliance on

the declining Western European market, moving
away from this bleak future prospect which is key for
its global expansion strategy.
0%
20%
40%
60%
Share of global Parmalat sales

2015
2011
PASSPORT 32
MARKET ASSESSMENT
DAIRY
OILS AND FATS

BABY FOOD
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
OPERATIONS
Significant expansion of manufacturing capacity via acquisitions

The 2011 acquisition of Parmalat transformed Lactaliss production infrastructure. The Parmalat acquisition
added 68 production sites to Lactaliss existing 130 sites. Moreover, the Parmalat sites are in 16 countries,
12 of which are new to Lactaliss production network.
This expansion accelerates a process that has seen Lactalis work to develop its production infrastructure
through both acquisition and organic investment in recent years. Widespread economic difficulties have
underlined the importance of local production in terms of operational efficiency, and the growth in demand
for locally-produced dairy products is further enhancing the significance of a geographically extensive
network of production facilities.
Expansion strategies in the last two years have been mainly focused on increasing local production sites in
fast-growing emerging markets. In 2014, Lactalis bought Indias second largest milk supplier in south India
Tirumala Milk. The company processes and markets products including milk, butter, paneer and ice cream.
This gives Lactalis a first hold on part of the supply chain in India which strategically will become a very
important market.
2014 also saw the purchase of 11 dairy plants from Brf Brasil Foods and the UHT unit and cheese
operations of LBR Lcteos Brasil which will allow the company to expand significantly in this market and
capitalise on strong growth expected in Brazil as well as neighbouring countries such as Mexico.
In 2015, the company bought an 80% stake in Turkish dairy company AK Gida which will give it access to a
fast-growing dairy market but also give it a strategic position to expand into neighbouring markets.
Lactalis continued to increase its manufacturing capacity in Australia with the purchase of Harvey Fresh,
Longwarry Food Park and Fonterras yoghurt dessert business. While Australia is a strong dairy market,
this geographical expansion brings Lactalis closer to the fastest growing region for dairy, namely Southeast
Asia where consumers value high-quality dairy products from Australia.
PASSPORT 34
MARKET ASSESSMENT
DAIRY
OILS AND FATS

BABY FOOD
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
RECOMMENDATIONS
Focus on Latin America and global brand building

Latin America offers strong opportunities
Build more global brands, fewer national ones
Latin America offers great opportunities for Lactalis

Lactaliss acquisitive expansion has led to the
after its recent large investment in Brazil. The
development of a fragmented portfolio; a problem
opportunity here will be to build its yoghurt and
magnified by the addition of Parmalat's brands in
cheese brands as these are expected to post the
2011. Lactalis needs to find a way to integrate its
strongest growth in Latin America. With a population
portfolio in order to maximise investment in
of 200 million and a growing middle class, Brazil
marketing and production, potentially introducing
holds significant dairy consumption potential. The
one or more umbrella brands. The company lacks
main driver in terms of growth will be yoghurt as it is
strong global brands. Prsident, with its crossperceived as a healthy food. With the Greek yoghurt
trend also hitting this market, Lactalis should look into category penetration, as well as Galbani, may offer
the best opportunity to build this.
offering added-value products focusing on general
wellbeing.
Target Middle East and Africa region
Focus on expansion in yoghurt
Lactaliss largest growth generator to date is

cheese, which represents just under 50% of
company sales. Yet since most sales come from a
saturating Western Europe region, the company
should focus on expanding cheese sales in the
Middle East and Africa region which will post the
strongest growth for cheese over 2015-2020.
Fastest growing markets will be Kenya, Algeria,
Iran, Egypt and Saudi Arabia.
Lactalis has yet to build a coherent strategy and

strong presence in yoghurt, which offers significant
opportunities for generating growth in otherwise
mature dairy markets through adding value.
However, the acquisitions of Rachel's and
Parmalat, and the acquisition of Swedish
cooperative, Sknemejerier, provide a platform for
expansion in the UK, Canada and Sweden, markets
with significant growth potential in the category.
PASSPORT 36
FOR FURTHER INSIGHT PLEASE CONTACT

Lianne van den Bos
Senior Food Analyst
lianne.vandenbos@euromonitor.com
[
Related Analysis:
Cheese: Key Markets, Categories and Value Adding Trends - August 2014
Drinking Milk Products: Developing a 2-Tier Growth Strategy for Success December 2014
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PASSPORT 38

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LACTALIS GROUPE IN PACKAGED FOOD (WORLD)

SCOPE OF THE REPORT

2015 figures are based on part-year estimates.

Oils and Fats

PACKAGED FOOD: LACTALIS GROUPE

OILS AND FATS

Key company facts

Headquartered in Laval, Mayenne, in the southwest

% market value share

PACKAGED FOOD: LACTALIS GROUPE

SWOT: Lactalis, Groupe

Wider geographic reach

Its latest acquisitions in While the majority of

The company remains Due to the number of

Private label remains threat

PACKAGED FOOD: LACTALIS GROUPE

Key objectives and challenges

Adding value to staple categories

Acquisition has been the driving force behind

Given the maturity of dairy, Lactalis has looked to

Latin America has been a key focus for Lactaliss

Beating private label

Asia Pacific has not been a major focus for

Dairy categories are subject to high levels of

In 2014, Lactaliss acquisition of leading Brazilian

PACKAGED FOOD: LACTALIS GROUPE

OILS AND FATS

Lactaliss growth still outpacing overall packaged food growth

A: The 2011 Parmalat acquisition

B: Lactaliss sales growth falls

C: Over 2014-2015, Lactalis

PACKAGED FOOD: LACTALIS GROUPE

Close to US$2 bn worth of acquisitions for Lactalis over 2014/2015

PACKAGED FOOD: LACTALIS GROUPE

Lactalis regains global second position in dairy in 2015

Arla Foods Amba

Bright Food (Group) Co

Yakult Honsha Co Ltd

China Mengniu Dairy Co

PACKAGED FOOD: LACTALIS GROUPE

International expansion core theme in global dairy

Bright Food enters the global top 10 dairy list

Those companies with the strongest emerging

Bright Food (Group) Co Ltd entered the top 10 in

Parmalat acquisition did not open doors to

General Mills slips in global rankings and falls

Although the Parmalat acquisition has enhanced

With its strong reliance on slow-growing developed

PACKAGED FOOD: LACTALIS GROUPE

Dairy becoming a game of fewer players

Other multinationals have mainly tried to increase their

Market value share

A few of those local players, however, have grown sharply.

Global Dairy Market Consolidation

PACKAGED FOOD: LACTALIS GROUPE

OILS AND FATS

Heavy investment in emerging markets Brazil and Turkey

Middle East and Africa

Market size 2015 (US$ million rsp)

PACKAGED FOOD: LACTALIS GROUPE

Increased reliance on faster growing categories except baby food

Lactalis, Groupe: Packaged Food Presence 2015 and Growth Prospects

Yoghurt and sour milk

Oils and fats