Top Manufacturers: Constant Consolidation

The food manufacturing industry is rapidly consolidating with large companies eating the small and medium sized ones. The figures tell the story: as recently as in 2000, food revenues from the world's top ten companies were worth $220 billion. This figure has now risen to over $260 billion.
Elsevier Food International, Vol. 5, Number 3, September 2002
Jonathan Thomas

In the recent years, the leading manufacturers have strengthened their position within the global food industry, largely as a result of the wave of mergers and acquisitions that have taken place. Currently the world's top ten companies account for some 24 per cent of total global sales of processed foods, which is estimated over $1,100 billion. This gives some indication of the strength of the leading companies from the list. Moreover, the last few years have seen a number of formerly sizeable food and drink manufacturers swallowed up by even larger rivals.

Mergers and Acquisitions
One of the most notable acquisitions has been Kraft's purchase of Nabisco. Prior to 2000, Nabisco had annual sales worth around $8 billion, ranking just outside the world's top 20 food groups. However, it was bought by Kraft in a deal worth around $19 billion during the middle part of 2000, increasing Kraft's turnover by over 20 per cent in the process. Kraft has now added a number of major biscuit and cracker brands to its portfolio, neatly complementing its cheese interests. It is significant to note that Kraft has also acquired a number of smaller firms since its purchase of Nabisco.
Another absentee from the list is Bestfoods, which was bought by fifth-placed Unilever in 2000. This deal was worth over €30 billion and added around €2 billion to Unilever's turnover as well as brands such as Knorr soup and Hellmann's mayonnaise. Since then, a number of the former Bestfoods brands (most notably Batchelors and Oxo) have been sold on to Campbell Soup Company, another of the US's leading food groups. The former Bestfoods Baking Division has been sold to George Weston, the Canadian food processor and distributor. George Weston is one of three Canadian companies in the list, ranking below McCain Foods and Maple Leaf Foods.

Further Major Developments
During 2001, the number of major acquisitions has shown no sign of slowing. Quaker Oats -another company with food sales worth over $5 billion - was purchased by PepsiCo, a move that cost nearly $14 billion. In the process, PepsiCo overtook both Cargill and Unilever to become the world's fourth largest food group, as well as diversifying into new product areas such as breakfast cereals and pasta.
Other major developments that have occurred within the last year are Kellogg's merger with Keebler, and the General Mills acquisition of Pillsbury Foods. Formerly the second largest manufacturer of biscuits and crackers in the US, Keebler, was bought by Kellogg's for $3.6 billion, the largest deal in Kellogg's history.
General Mills is now set to advance higher up in the list, having acquired Pillsbury Foods for $7 billion from Diageo. At present, Diageo occupies tenth slot, having repositioned itself as a manufacturer of premium alcoholic drinks. The other major deal that occurred in 2001 was Sara Lee's $2.8 billion acquisition of Earthgrains, a US baker. This created a bakery group with revenues worth around $3.4 billion. More recently, two of the world's leading confectionery manufacturers have made major acquisitions. Nestle has purchased Garoto, the leading Brazilian chocolate confectionery producer, for a sum worth around $420 million. This deal increases Nestle's share of the sizeable Brazilian chocolate market to over 50 per cent, and is likely to consolidate the company's position as the world's leading food group. Nestle's UK-based rival, Cad bury Schweppes, acquired the Turkish company Kent Gida at the start of 2002. Cadbury Schweppes currently ranks just outside of the top 20 food groups, although a future rise looks likely, given that the company is set to make further acquisitions, in soft drinks as well as in confectionery.

Joining Forces
In addition to merger/acquisition activity, it should also be noted that several of the world's leading food groups also operate joint ventures, spanning a number of markets across the globe. One notable example is Cereal Partners Worldwide (CPW), a joint venture between General Mills and Nestle that operates in around 80 countries. Under the terms of this arrangement, breakfast cereals from General Mills are marketed under the Nestle brand. CPW achieved sales worth around $880 million in 2001. General Mills also operates Snack Ventures Europe (SVE) with PepsiCo, which incorporates major snack food brands such as Doritos and Fritos.
Further joint ventures appear likely in the world food and drink industry, largely so that manufacturers can enter developing markets and share marketing and technological expertise. However, it is significant to note that a proposed joint venture between Coca-Cola and Procter & Gamble was abandoned during 2001.

Brewers on the Move
During the last year, a number of companies have improved their position in the top 100 list, while others have fallen. One of the major movers has been the Dutch brewer Heineken, whose turnover rose from around €7 billion in 2000 to over €9 billion in 2001, propelling the company from outside the top 30 to 20th place. Heineken is one of a number of brewers in the list, alongside names such as Anheuser-Busch, Philip Morris (until very recently), lnterbrew and the Japanese pair of Kirin and Asahi.
It is also worth mentioning the rise in turnover experienced by Heinekens Danish rivals, Carlsberg. This company saw its sales increase by almost a third, and moved up into the top 5C as a result. Another brewer that has moved up the list significantly is AmBev, the Brazil-based Companhia de Bebidas das Americas. AmBev, which controls almost three-quarters of the Brazilian beer market, recorded an increase of sales of over 32 per cent, and now occupies 77th position, compared with 91st in 2001. Brewing is one industry that has witnessed a considerable level of consolidation in the last few years, a trend that seems set to continue given the recent purchase of the Miller Brewing business (currently occupying around four per cent of the global beer market) by South African Breweries (SAB). SAB currently lies in 61st position on the list, although it is seeking to grow via acquisition, and its position may improve as a result.

Rising up the Rankings
Another company that rose up the rankings during 2001 was the Scandinavian meat producer, Danish Crown. Its food sales increased from $4.3 billion to just over $5 billion, taking it inside the top 40. Danish Crown is a leading player in the country's sizeable pig industry, with a share of almost 75 per cent. The company has also recently entered into a strategic partnership with Swedish Quality Meats (SQM). This latest increase in turnover has made Danish Crown Denmark's leading food producer, ahead of Aria Foods, which currently occupies 44th position. Aria Foods was created in 2000 by the merger of Aria and MD Foods, two leading Scandinavian dairies. At present, its food sales are worth just over $4.5 billion.
The US dairy co-operative Land O'Lakes Inc. has also experienced a move up the rankings, from 72nd to 64th place. Its food sales are now worth over $3.5 billion, compared with around $3.1 billion the previous year. Another US-based company to experience a rise in turnover was International Multifoods, which supplies the foodservice industry. During 2001, the company's food sales experienced a rise of almost 13 per cent. The Canadian company, Maple Leaf Foods, also improved its position during 2001. This company saw sales of its pork and poultry products increase by almost 21per cent to over $3 billion, resulting in a move from 80th to 72nd position.
Numico has also risen up the list within the last year. Sales of its range of baby foods and nutritional products rose by over 11 per cent, and were worth over $4 billion at the end of 2001. Nurnicos rise was particularly impressive given its disposal of its dairy and drinks operation, which occurred during the year. This division was sold to fellow Dutch company Friesland Coberco, for around €664 million. Friesland Coberco currently ranks just outside the top 50, with food sales worth $3.8 billion.

On the Slippery Slope
There have also been a few major falls within the last year. The Japanese company Suntory slipped from 17th position to 29th, having experienced a fall in revenue of almost 30 per cent. In a similar vein, UK-based sugar producer Tate & Lyle saw its food sales drop from almost $7.3 billion to $5.4 billion during 2001. Consequently, the company fell from 22nd position to 36th.