Lactalis, the world’s largest dairy company, has recorded a “weak” profit performance last year, with pressure from private label significantly impacting volumes.
The company, which is privately owned and based in Laval, Pays-de-la-Loire, disclosed that its turnover increased by 4.3% in 2023, reaching €29.5bn ($31.4bn).
However, Chairman Emmanuel Besnier revealed yesterday (18 April) that consolidated net profit “remained weak”, totalling €428m, an 11% increase from the previous year. The profit for fiscal 2022 was €384m, marking a 14% decline year-on-year.
Lactalis stated that “2023 was marked by a change in consumer purchasing behaviour, reflected in a fall in sales volumes and a specific appetite for private labels – to the detriment of national brands (especially in Europe)”.
Despite these challenges, the company, which owns dairy brands such as Président and Galbani, noted that demand for its products “held up well thanks to their quality and affordable prices”.
While net profit diminished, it saw an increase as a percentage of Lactalis’ turnover, with the margin rising from 1.36% to 1.45%.
“This slight increase compared with 2022 was driven in particular by organic growth and the continued strengthening of Lactalis in North America,” the company highlighted.
Despite profit weaknesses, amid inflationary pressures and “unfavourable world prices”, Besnier stated that Lactalis “remained focused on achieving profitable and responsible growth in this difficult environment”.
He further commented: “The group intensified its efforts to develop its dairy product offer by innovating in buoyant markets and continuing to offer consumers high-quality products at affordable prices.
“True to our sense of purpose, we are resolutely looking to the future, driven by our collective passion for dairy products and the commitment to pass on our know-how.”
The year 2023 also saw Lactalis enter into a licensing agreement in Brazil, aiming to finalise the purchase of the Fonterra-Nestlé joint venture, Dairy Partners Americas, in compliance with regulatory approvals.
Furthermore, Lactalis expanded into the North American desserts category with the acquisition of Marie Morin Canada.
However, the company faced regulatory issues, including breaches of dairy codes in Australia, and more recently, similar issues have emerged in Italy and tax investigations in France.
Recently, Lactalis completed an M&A transaction in Portugal in March, acquiring cheese manufacturer Sequeira & Sequeira.
Lactalis reported that France remains its largest market, followed by the USA, Canada, Italy, and Brazil. The group employs over 85,500 dairy and cheese workers across 51 countries.
The company’s debt is just under €6bn, a decrease from €6.5bn in 2022, with Lactalis stating that the level “continues to fall”.
“In spite of a complex global backdrop of persistent inflation and economic slowdown, Lactalis leveraged its robust business model and iconic brands to maintain its growth trajectory,” the company asserted yesterday.
“In 2023, Lactalis continued to innovate and redoubled its efforts to meet the challenges of dairy processing by investing over €920m to develop new products, modernise its dairies and cheese dairies, and reduce its environmental impact.”