Grupo Lala Buys NDH from DFA
Mexican dairy giant Grupo Lala has acquired Dallas-based National Dairy Holdings from Dairy Farmers of America, vastly expanding Lala’s presence in the United States and allowing DFA to invest in new strategic projects.
With 18 plants in 13 states, NDH is one of the largest U.S. milk processing companies and a leading producer of branded and private label dairy products. The company’s most recognized regional brands include Borden, Dairy Fresh, Velda Farms, Flav-O-Rich, Sinton’s, Cream O’Weber, Meyer Dairy, Dairymens, Coburg Dairy and Goldenrod.
“Acquiring National Dairy and its leading regional brands provides Lala a unique opportunity to further broaden the manufacturing and marketing of value-added dairy products in the United States,” said Eduardo Tricio, Lala chairman. “We look forward to working with National Dairy’s management and employees to deliver top-quality, innovative and nutritious products.”
Published reports indicated the purchase price was about $435 million.
“Lala brings a breath of resources and strong track record for understanding consumers’ needs, creating and manufacturing innovative products and marketing brands,” said Rick Beaman, NDH president.
NDH will operate as a wholly owned subsidiary of Lala; the existing management team will continue to lead day-to-day operations.
“The National Dairy sale is truly a win-win scenario, as Lala is gaining a company with strong performance in the U.S. market,” said Tom Camerlo, DFA board chairman. “DFA can continue to explore new investment opportunities on behalf of its members.”
Lala’s branded products have been quickly growing in popularity among U.S. Hispanics, while the acquisition of the Frusion and La Creme brands has bolstered its share of the drinkable yogurt and yogurt-based dessert categories, respectively. Lala first entered the U.S. market through co-packing arrangements with U.S. processors, then in early 2008 acquired a cultured plant in Omaha from Wells’ Dairy.
All-Channel Tracking Study Offers Insights, Exposes Challenges
Contributed by the Milk Processor Education Program
The Milk Processor Education Program, together with Prime Consulting, conducted an All-Channel Tracking Study of the milk industry in 2008. The goal of the study is to arm processors with useful knowledge that can be applied to individual business models and to help continue to drive milk sales. The research unveils a first time look into the 41.3% of milk sales that constitutes the “all-other” category, which has previously been unexplored.
The research focused on accessing all the major distribution channels: food/drug/mass; other retail channels (including club and convenience stores); foodservice (including restaurants and business/industry); and schools in terms of segment size, trends and projections. Together with Prime, MilkPEP analyzed data collected through an exclusive data sharing partnership with 12 processors and other key sources, resulting in the most comprehensive collection of information and projections ever developed for the milk industry. The focus was to quantify milk sales by channel and increase the industry’s knowledge of underlying trends.
Starting with an overview for 2008, milk sales topped 6.6 billion gallons, with food stores, drug stores and mass merchandisers constituting 58.7% of those sales according to Chicago-based Information Resources Inc. The other 41.3% historically has been identified as “all other.” The All-Channel Tracking Study focuses on this 41.3% of volume outside of IRI-tracked retail. MilkPEP and Prime have uncovered a number of areas for sales growth.
Some key findings came from the snapshot taken of food, drug and mass sales. There is a shifting of sales to supercenters like Wal-Mart, K-Mart and Target, which could suggest that value-conscious consumers perceive these outlets to have lower milk prices. However, grocery stores still account for 43.3% of category sales.
The school channel represents 7% of all milk sales. Currently the milk industry is only achieving 61% of potential sales. Key strategies to maximize school opportunities include the expansion of flavors and the addition of school breakfast programs. Currently, the average student consumes 3.7 milk servings a week. If breakfast is consumed at school, the extra 2.3 servings per student weekly would equate to 287.2 MM incremental gallons over a year, nationally. It’s also important for processors to meet demand for lower fat and sugar levels by providing improved formulations.
The convenience/small grocery channel constitutes 13.3% of milk sales, and represents one out of every seven gallons of milk purchased in the United States, yet C-stores and small groceries don’t receive much attention. Milk is experiencing a major threat from the proliferation of competitive single-serve beverages including energy drinks. Processors need an action plan to grow and defend this channel. Meanwhile, drug stores are doing a better job of capturing fill-in opportunities for gallons and half gallons.
Restaurants are a surprisingly small 5% of U.S. milk sales. Milk is available at nearly all 600,000 restaurants, but is oftentimes not on the menu or is not served cold. Milk usage varies from almost none to over 200 gallons per week in a single location. The data indicates a tremendous upside potential for milk.
A collection of business/industry foodservice outlets is actually made up of up to eight unique channels, representing 7.5% of sales. The volume is surprising, as is the growth projected over the coming three to five years. The channels include colleges/universities, corrections, vending, hospitals, travel and leisure, business and industry. Long-term care and senior living facilities are thought to represent a primary potential growth area.
The study identified several channels that represent the best prospects for sales growth in the coming years:
• Schools: Nearly 300 million gallons a year by increasing flavors, offering quality-tasting flavors and boosting consumption.
• C-stores: 40-60 million gallons a year, from solving out of stocks, running in-store promotions and maintaining or increasing shelf presence of single-serves.
• Foodservice: As our population ages, more people are residing in long-term care and senior living facilities.
• Limited-service restaurants: 20-40 million gallons of year from chains revamping milk, as have McDonald’s, Wendy’s and Subway.
Several of the processors who participated in the study are currently implementing changes in their markets. One of the key strategies has been to become more targeted on a particular area or channel.
MilkPEP has conducted a series of Webcasts for processors to learn more about the findings in each channel. The presentations are available at www.milkpep.org.
Milk Does It All
Drinktec 2009 offers a dairy technology award and a dedicated series of lectures on milk-based drinks.
Drinktec 2009 is not just for beverage manufacturers. Producers of liquid food, in particular from the dairy industry, will also find the right technology for making their products here because the two industries use similar machines and systems.
Many of the exhibitors presenting their products at Drinktec in Munich from Sept. 14 to 19 supply companies from both segments of the industry. Drinktec’s supporting program – including a session by Dairy Foods Product Development Editor Donna Berry – will provide information on the latest developments in the liquid dairy products sector.
Drinktec 2009 offers a complete overview of the current status of beverage and liquid food technology in 12 exhibition halls covering about 1.4 million square feet. The milk treatment and processing sector occupies a large area, displaying the complete range of process technology, including filling.
According to a survey carried out by Drinktec 2009, nearly 50% of the exhibitors represented at Drinktec are also aiming their product range at the milk and liquid food segments. “This shows that dairy products and liquid food are clearly gaining ground,” says Exhibition Director Petra Westphal. The proportion of visitors from the milk and liquid milk products sectors has increased correspondingly over the past few years, she says, so “the trend is also clearly upwards here.”
Against the backdrop of a globally growing market for milk drinks, Drinktec 2009 is dedicating a series of lectures to this topic. Well-known experts will present research findings and the latest developments in liquid dairy products, including Berry speaking on added value for milk, along with Dr. Lynn Moore of the Boston University School of Medicine; and Dr. Michael Erdl of Royal FrieslandCampina, among others.
“The time is now for milk processors all around the world to add value to baby’s first food, making it a beverage that should be consumed throughout all life stages. There’s been a steady progression away from broad, population-based guidelines to more finely tuned dietary recommendations focusing on life stage and gender. Today’s milk processors can use sound science to design dairy-based beverages that meet the needs of specific segments of the population,” Berry says in outlining her presentation, which will discuss the opportunities that exist to add value to milk.
“Milk is a natural powerhouse all on its own, so when you boost its nutritional profile through the addition of nutrients – vitamins, minerals, fiber, super fruits, essential fatty acids and more – you appeal to today’s consumers’ desire for convenient, natural, better-for-you products. Indeed, milk is the ideal carrier of all the extras that consumers are looking for in their beverages.
“Better yet, milk consumption can increase if the dairy industry innovates, if it turns milk into a beverage to better compete with sports drinks, energy beverages and the like. The fact is all types of consumer research show that consumers are increasingly looking for healthy, functional products that can assist them with achieving a specific lifestyle or physical or mental objective. And when the beverage is packaged as such, historical evidence indicates that consumers are willing to pay a premium for added benefits – for value.”
The market for milk drinks is certainly growing in Europe and the United States, but it is growing faster in the newly industrialized countries and Asia. According to a 2007 Nielsen study, the market for milk drinks has grown by 11% worldwide, a trend that is set to continue over the next few years. Asia-Pacific has seen another double-digit increase, of 13% in dairy and dairy substitute drinks, but in Europe, too, increases of 8% for drinks and 5% for yogurt are being achieved. Latin America – albeit from a lower base level – takes top position with growth rates of 23% for milk drinks and 13% for yogurt.
On Sept. 17, the first Dairy Technology Award will be presented at Drinktec. The award is being given in the following categories: process and automation technology; packaging and filling technology; environment and sustainability; process management and IT; logistics; and food safety.
Drinktec 2009, which takes place at the New Munich Trade Fair Centre, is expected to attract about 1,500 exhibitors from 60 countries, and 70,000 visitors from more than 160 countries.
More information is at www.drinktec.com.
June 1, 2009