Brief: Sustainability could have a big impact on business structures for dairy, states new RaboResearch

Reaching sustainability targets could be a big driver for these deals and others, per to the RaboResearch Global Dairy Top 20 report. Agreement activity among the top 20 dairy players was “limited,” explains the report. Danone is the one exception here, as the business divested its Russian business, and in addition offloaded its Horizon Organic and Wallaby brands to PE company Platinum Equity.

The report notes that “multiple possible deals” are on the horizon as large dairy firms reexamine priorities. In some cases shift focus back to “core businesses.” This inevitably means shedding parts of the business that are less profitable or don’t fit within “key strategic priorities.” For instance, Unilever made public earlier this year it was spinning off its ice cream business to “become a simpler, more focused company.”

The move could in addition “allow Unilever to accomplish its sustainability targets more easily by removing a significant portion of its dairy-related brands from its overall portfolio,” explains RaboResearch. Going to RaboResearch, it believes corporate sustainability targets “could play an increasing role in determining business structures” in the future. “We may see some companies choose to keep minor controlling interests as a way to achieve sustainability-related goals more easily by keeping parts of the business further from the core.”

Another notable agreement to watch will be Fonterra’s pivot back to its B2B elements and foodservice business, which may translate to the business shedding its consumer-facing businesses. General Mills has as well proposed a divestment of its Yoplait brand.

RaboResearch “estimates that other companies could announce similar, significant divestments in the coming years as the M&A landscape heats up again after a period of stagnation.”