UK dairy company Express Dairies Plc confirmed this week that they are in preliminary talks regarding a possible bid from the continent. It is understood that the Scandinavian-based maker of Lurpak foods, Arla Foods Amba, is preparing a cash offer.
A recent report from market analysts Euromonitor International, noted that consolidation in the dairy products market has become necessary in order to increase market share and optimise presence in a highly competitive and uncertain market environment.
The report writes that the fragmented world dairy products market, with its strong regional players, sees 2.6 per cent separating Arla, who holds 1.5 per cent of the market, and global leader Nestlé SA with 4.1 per cent.
Under the proposed merger Arla would increase world dairy product share by 0.5 per cent, enough to see it move from 9th to 6th on 2000 world ranking figures, putting it in direct competition with Italian-based Parmalat SpA.
Eric Combelles, Food Account Managerm Euromonitor International commented: "The UK market is facing increasing pressures resulting from the foot and mouth crisis and the fierce competition for supermarket contracts which have lead to declining prices and limited scope for increased volume consumption for fresh/pasteurised milk, causing serious problems for leading milk manufacturers."
Over the review period 1996 - 2000, overall value growth was limited to 1.5 per cent at current rsp, corresponding to a 0.5 per cent decline at constant 1996 prices. This, the report claims, is a testament to the maturity of core sub-sectors, clearly illustrated in fresh/pasteurised milk. Essentially a commodity product, value decline in fresh/pasteurised milk has stemmed from a high penetration of private label and use as a loss leader in grocery multiples, with only limited scope for increased volume usage.