The last year has witnessed a period of increasing consolidation on the part of global food and drinks manufacturers. With market growth limited across many sectors of the industry, an increasing number of suppliers are now looking to consolidate their activities around a handful of core brands and sectors. This in turn has led to divestments, some of which have affected the global top 100 ranking.
Elsevier Food International, Vol. 9, Number 2, May 2007
Jonathan Thomas

Within the last year, food industry giants such as Unilever, Heinz, Cadbury Schweppes, Campbell Soup and Sara Lee have all either sold off businesses or are thought to be in the process of doing so. One of the more noteworthy examples of late has been Unilever, which announced the sale of its frozen foods business during the first part of 2006. This part of Unilever has an annual turnover worth up to €2 billion and includes well-known brands such as Iglo and Birds Eye, although the company has stated that it will retain the Italian part of the business. Unilever, which initially intended to sell the frozen foods business as a whole, instead announced last March the sale of its Dutch-based frozen snacks subsidiary Mora.

Divestments
Further down the list, Cadbury’s sale of its European Beverages interests to a private consortium, a move that fetched over £1.2 billion. Although Cadbury is still making acquisitions in areas such as confectionery, it is likely to drop down the list as a result of this divestment. Elsewhere, Campbell Soup Company has recently announced that it may sell off its UK and Irish businesses (which have sales worth around US$490 million), whilst Sara Lee is believed to be considering selling off its coffee and meat operations.
During March 2006, HJ Heinz announced the sale of its European Seafood business to Lehman Brothers Merchant Banking, in a deal worth around €425 million. This included well-known brands such as John West, Petit Navire and Mareblu. However, this is not likely to change the company’s position in the ranking to any significant degree, since it has been partially offset by Heinz’s recent acquisition of HP Foods from eleventh-placed Danone. This was formally cleared by UK competition authorities in 2006 and considerably strengthens Heinz’s position in the European sauces market.

M&A activities
In spite of this consolidation process, the global food and drink industry has still witnessed a number of sizeable mergers and acquisitions, the effects of which are likely to be felt within the global ranking. The French drinks group Pernod Ricard made a successful bid for the UK-based Allied Domecq in 2005, thereby becoming the world’s second largest supplier of wine and spirits. As a result, Allied Domecq will shortly disappear off the ranking and Pernod Ricard’s position will improve.
More recently, the French company Lactalis has acquired Galbani, thereby overtaking Arla Foods as Europe’s largest dairy group. As a result, Lactalis is likely to see its turnover increase to around €7 billion. Arla itself was recently considering a merger with dairy rivals Campina, which would have created a company with revenues worth in the region of €10 billion. However, the proposed deal fell through during the second half of 2005.

Strong internal growth
Nestlé remains the global leader, with food and drink sales worth more than US$68 billion in the year ending December 2005. This represents an increase of over four per cent compared with the
previous year, which can partly be attributed to recent acquisition activity such as Valio in Finland and Wagner, Germany’s second largest supplier of frozen pizza. PepsiCo has assumed second place in the ranking, with its sales increasing by almost a quarter to more than US$36.56 billion.

PepsiCo has outraced Archer Daniels Midland and Altria/Kraft (third and fourth places respectively) to notched second place in the Top 100. PepsiCo's ironic food brands such as Pepsi, Tropicana and Gatorade, helped boost 2005 sales to reach around US$36.56 billion.

Much of this was due to strong internal growth, especially in more health-oriented market segments such as non-carbonated drinks and rice snacks. In third position is Archer Daniels Midland, with sales worth almost US$36 billion. The company remains one of the world’s leading suppliers of wheat, oilseeds and corn, and also has interests in areas such as cocoa processing.
Kraft, which had held second position in the ranking for a while, now lies in fourth place with sales worth more than US$34 billion. In recent years, the company has sold off its sugar confectionery interests to Wrigley, as well as its smaller yoghurts and desserts businesses. Other companies listed within the top ten include Tyson Foods, Cargill, Coca-Cola and Mars, most of which experienced an upturn in sales within the last year.
 
Major movers
A number of major movements have occurred lower down the list. The Dutch-based Vion Food Group has entered the list, having experienced a rapid increase in turnover during its last financial year. The company, which was formerly known as Bestmeat, now ranks as one of Europe’s leading suppliers of pork and beef products, and forms a subsidiary of Sovion, a meat processing company. Vion came into being via the merger of four Dutch and German companies, and now appears set for further growth in turnover.
In the alcoholic drinks market, the Belgian brewer InBev has advanced up the ranking from 28th position to number 15. In the year ending December 2005, the company’s sales increased by almost 66 per cent to US$14.5 billion. This was mainly due to the successful acquisition of the Brazilian-based AmBev, which had previously been the world’s fifth largest brewer and occupied 61st position in the ranking. As a result, AmBev no longer appears on the list.

Filing for Chapter 11
Another company that has fallen off the ranking is the US-based Interstate Bakeries Corporation. Although it remains one of the largest wholesale bakers in the US, the company has seen its turnover fall to below US$1 billion and filed for Chapter 11 bankruptcy protection in 2004. As a result, the company has since closed a bakery and announced plans toconsolidate its distribution activities as part of its restructuring efforts.
Other major movers in the ranking have included Oetker of Germany, which advanced up the list from 74th position to 66th. Although the company recently sold its mineral water business, it has also acquired the Onken dairy group, as well as some former Unilever operations in the pizza and snacks markets.
Molson Coors has also risen up the list, and now has sales worth in excess of US$5.5 billion, whilst the Dutch-based CSM has fallen from 70th position in the ranking to 84th. This is primarily due to the recent sale of its sugar confectionery business to a private equity group, and the company is now focusing upon bakery ingredients and sugar.

Jonathan Thomas is principal market analyst at Leatherhead Food International (www.leatherheadfood.com). The GFM database is among LFI’s services, and focuses on market sector reports. Continually updated, the GFM database also provides company information such as the annual top 100 ranking. Further details can be found a www.globalfoodmarkets.com