SEVERAL Australian dairy companies have changed hands over the past year, with the swing towards mergers and acquisitions appearing to be a wide-reaching and global trend.
This is according to a recent Rabobank survey, which has shown that companies willing to acquire and embrace new businesses will remain well-positioned to survive.
Rabobank's senior dairy analyst Michael Harvey said 18 of the top 20 dairy companies are based in the Northern Hemisphere, which has seen modest growth within local markets.
"The landscape around dairy consumption in Europe and the United States has seen economic challenges ... and it is a mature market," Mr Harvey said.
This challenging retail environment has driven consolidation he said, but dairy companies have also begun to branch out for other opportunities.
"Those really strong dairy companies know that long-term growth opportunities are offshore ... mostly in Asia," he said.
He said mergers and acquisitions have become an attractive route to profitability.
And while Australia possesses geographical advantages in supplying Asia with dairy products, other companies have already begun to hone in on this market.
Canadian dairy giant, Saputo, is one of those businesses, marching up the list of the top 20 global dairy companies to eighth place, thanks to several recent acquisitions, including Australia's own Warrnambool Cheese & Butter (WCB) earlier this year.
"Logically, Australia is a target, because it's so close to Asia," Mr Harvey said.
Other foreign acquisitions in the past 12 months include the sale of United Dairy Power to a Hong Kong investor.
At the top of 20 global dairy companies list is Nestle, based in Switzerland, with a turnover of $US28.3 billion in 2013, followed closely by Danone and Lactalis, both established in France.
In the past 12 months, 14 of the top 20 companies merged, acquired, or established a joint venture.
"And it's not just dairy ... Australian assets are up in bright lights at the moment," Mr Harvey added.
He expected to see a continuation of mergers and acquisitions in the dairy sector over the next few years, while companies scramble to lock-in possible profit from Asian growth.
Dairy analyst Steve Spencer, of Fresh Agenda, said consolidation has been a growing trend in the sector, mostly because companies see it as an easy way to achieve growth, rather than develop organically.
Growing organically has also proven increasingly harder in a mature market, where milk consumption has levelled off or even dropped.
"It's a good thing in most cases, particularly if it makes the industry more competitive - and gives it more clout," Mr Spencer said.
However, he said Australia's competition laws were restricting companies from going down this path in some cases.
"We have been at a disadvantage, because of the way the law here is written and interpreted," he said.
"The competition regulator looks at the impact on regions, rather than the national footprint."
He said Murray Goulburn's efforts to acquire WCB were largely disadvantaged as a result of this.
"The laws in other countries permit a greater deal of flexibility in how regulators look at the position of industry, and the capacity of the industry to be more affective," Mr Spencer said.
In contrast, he said dairy co-operatives in the EU and US had been able to aggregate a larger share of the supply.
Another example was Fonterra, where it was permitted to amass and dominate the New Zealand dairy landscape.
"The Government has really looked at the issue from a national competition perspective," Mr Spencer said.
But there was a compromise, with laws put in place so the company was not able to abuse its position.
Mr Spencer admitted he did not expect to see this level of consolidation occur in Australia.
"In NZ, dairy is the only game in town ... it's a different story here," he said.
"Our farm sector wouldn't accept it."
In addition, there was not a "wholesale" belief that Australia's dairy co-ops would be the best performing model for farmers over time.
"That's because - for a long time - we had a lethargic MG," Mr Spencer said, adding that attitude was slowly changing.
He also said the opportunity to supply dairy commodities on 'wholesale' basis was gone.
"That ship has sailed," he said.
"And in that sense - consolidation of scale does not matter so much.
"We can't beat NZ. Dairy companies now have to find niche markets and more value."
Apart from consolidation in the sector, Mr Spencer also expected to see more vertical integration, where companies were aligning milk to the marketplace.
"This will be more important as we move forward," he said.
Just recently, FrieslandCampina Vietnam officially launched construction of a 'dairy zone' in Vietnam's Ha Nam Province.
FrieslandCampina is managing and executing direct investment in the public-private partnership project which will include three zones, each with about 50 farms.
The company will also provide financial assistance for farmers, technical advice, and the establishment of feed supply and milk quality systems.
The basis of the project will be built on family farms, providing employment, income and less reliance on imported milk.