Other reasons behind rising food prices include the recent shift in agricultural production towards biofuels, as well as environmental factors. The recent drought in Australia and parts of China have resulted in the lowest global wheat stocks for around 30 years, whilst the global shortage has led to many of the leading producer countries to place curbs on

FOOD 100 TOP  

their wheat exports. Drought and increasing  desertification has also resulted in shortages of  other commodities (the dairy sector  representing one example), whilst elsewhere in  the world, flooding has also affected the global food supply.

Nestlé pulls further away  In spite of  pressures in the supply chain, the largest food  producers have consolidated their position in  Leatherhead Food International’s top 100  ranking. The list is headed once more by the  Swiss multinational Nestlé, which saw its food  sales increase by almost 18 per cent in the year  ending December 2007. This equates to revenue  worth around US$83.6 billion, and can mainly  be attributed to the company’s efforts to  strengthen its position in the growing market  for healthy foods. This was evidenced by its  US$600 million acquisition of the Jenny Craig  business in 2006, which has since become part  of Nestlé’s Nutrition, Health & Wellness unit.  More recent acquisition activity suggests that  Nestlé is likely to pull away from its leading  competitors at the head of the ranking still  further. During 2007, the company acquired  Gerber Foods for US$5.5 billion (a move which  will dramatically expand its presence in the  baby foods market), whilst its purchase of  Novartis Medical Nutrition later in the year  gave it leadership of the global medical foods  category.

Healthy choice  In second position is  PepsiCo. During the financial year 2007, its  food sales increased by more than 12 per cent  to over US$39.4 billion. Again, much of this  was the result of acquisition activity – within  the last year, PepsiCo claims to have spent  around US$1.3 billion on acquisitions. Many of  these were in growth market sectors, the best  example of which is probably juice drinks.  Towards the end of 2006, the company acquired  The Naked Juice Company (a US-based supplier  of super-premium juices), whilst in 2007 it  acquired an 80 per cent stake in Sandora,  leader of the growing Ukrainian market.  Both Nestlé and PepsiCo have maintained their  leading positions in recent years as a result of  their strategy of expanding in high-growth  sectors. In both instances, this has largely been  in the area of healthy/better-for-you products –  in the case of PepsiCo, this has also resulted in  the development of newer lines such as ricebased  snacks, oat-based cereals and vitaminenhanced  water drinks. PepsiCo has also been  addressing consumer health concerns by  introducing ‘Smart Spot’ labels for many of its  leading products. These inform consumers how  the products can contribute towards developing  a healthier lifestyle. 

Focus on core strengths   Some of the  other leading suppliers within the global top 10  include Kraft Foods, The Coca-Cola Company  and Unilever, whilst companies in the  commodities sector (such as Cargill and Archer  Daniels Midland) rank a little lower. Like their  competitors, Kraft, Coca-Cola and Unilever have  all been pursuing strategies generally aimed at  consolidating or increasing their presence in  core or high-growth sectors, whilst health  remains a major driving factor in new product  development.  Like PepsiCo, Coca-Cola has also been  expanding into new areas, with 2007 having  witnessed the acquisition of firstly FUZE  Beverage (a supplier of enhanced fruit juice  drinks and teas), followed by Glaceau, owner of  the Vitaminwater brand. Coca-Cola spent  around US$4 billion acquiring Glaceau, which is  to continue operating as a standalone company.  

Swiss multinational Nestlé again tops the list. Food sales increased by almost 18 per cent in 2007 largely due to the company’s efforts to strengthen its position in the growing market for healthy foods.

Meanwhile, Kraft appears set to strengthen its  position as leader of the world biscuits market  should its anticipated acquisition of Danone’s  interests in this area take place. This deal,  which was first mooted in 2007, would add  major brands such as Tuc and LU to the Kraft  stable.

Although Danone (which currently occupies  tenth slot in the ranking with food sales worth  almost US$20 billion) appears set to exit from  the biscuits category, it looks to be on the verge  of acquiring the Dutch firm Novartis, in a deal  worth over €12 billion. Should this go ahead as  expected, Danone would assume leadership of  the global baby foods market, including brands  such as Milupa, Cow & Gate and Nutricia. Prior  to its interest in Novartis, Danone’s interests in  the baby foods sector were chiefly confined to  France and the Benelux countries.

Brewers go for stronger mix  The  growing consolidation within the global  brewing industry is evidenced by the rise of  many brewers up the rankings. Within the last  year, the turnover of 11th-placed InBev rose by  more than eight per cent, compared with a 6.2  per cent increase for Heineken, which is now in  13th position. One statistic worthy of note is  the fact that six out of the ten companies  ranked between 11 and 20 in the list compete  within the alcoholic beverages market.  This consolidation process appears set to  continue, given the recent successful bid for  Scottish & Newcastle by Heineken and  Carlsberg. This deal, worth around £7.8 billion,  was accepted in the early part of 2008, as a  result of which Scottish & Newcastle is to be  divided between its two former rivals. Carlsberg  appears set to assume full control of the Baltic  Beverages Holding (BBH) joint venture it had  previously operated in partnership with Scottish  & Newcastle. BBH and its Baltika brand occupy  a leading position in the growing Russian beer  market. Elsewhere in the global brewing  industry, SABMiller (which occupies 12th place  in the ranking) has now acquired ownership of  the Dutch company Grolsch.  Further down the ranking, some of the major  movers include Wrigley, Pilgrim’s Pride and  LVMH. Within the last year, Wrigley’s turnover  increased by around 15 per cent to over  US$5.38 billion, as a result of which it has  advanced to 54th place on the list. Elsewhere,  the US-based chicken producer Pilgrim’s Pride  saw its revenue increase by more than 45 per  cent to US$7.59 billion, and it has now entered  the top 40. Much of this was due to the firm’s  acquisition of Gold Kist, which was completed  at the end of 2006.

New faces  Within the last couple of years, a  number of companies have now entered the top  100. One noteworthy example is the Austrianbased  energy drinks supplier Red Bull, global  volume sales of which are now in excess of  three billion cans per annum. The company  hopes to double this figure to six billion cans  by 2010. In 2006, its revenues were worth in the  region of US$3.31 billion, and the company  now lies in 84th position. Other recent entrants  have included Ebro Puleva, which now  represents one of Spain’s leading food and  drinks suppliers and occupies a leading position  in sectors such as rice and pasta.

Fall in the ranks  A few dairy companies  (namely Nordmilch, Dairy Crest and  Fromageries Bel) have dropped out of the  ranking as other firms have overtaken them,  although it should be noted that further  consolidation is forecast for the global dairy  industry in the face of increasing pressure and  shrinking margins. As evidence of this, two  Dutch multinationals - Royal Friesland and  Campina - entered into merger talks at the end  of 2007. Should this go ahead, it would create a  new entity with an annual turnover of around  € 8.3 billion, made up of 17,000 member  farmers.  Within the next year, Cadbury also appears set  to fall down the ranking. The company is  seeking to divest its beverages operations at  present, an area of the business which achieved  sales worth around £2.87 billion in 2007. Also  likely to be affected is the Italian firm Barilla  (which currently occupies 59th position), which  has recently announced the impending sale of  the Kamps bakery business it acquired  in 2002. •