Dairy groups Friesland Foods and Campina are in talks over a possible merger, the companies said today (19 December).

The Dutch co-operatives said "exploratory" talks were being held but said the management of both companies support the idea of merger.

"The purpose of the exploratory talks is to determine whether the multinational Friesland Campina will generate additional added-value for its member dairy farmers through, amongst others, milk price, and facilitate milk volume growth in line with the anticipated growth of the new company," the dairy processors said.

Industry watchers have predicted consolidation in the dairy sector as commodity costs have soared this year.

In October, two of the UK's leading dairy co-operatives, First Milk and Milk Link, announced they were looking to merge.

Friesland Foods and Campina said their proposed merger would create "one of the leading global dairy companies". The combined turnover of two companies stands at EUR8.3bn (US$12bn).

"The diversity in product groups, geographical markets, strong brands, and global increase in scale for research, production, marketing and sales will turn Friesland Campina into a more competitive company," the companies said.

Friesland Foods and Campina, which have a combined 17,700 member dairy farmers, said "better anticipate and respond" to the "increasingly rapid changes" in the dairy sector, including fluctuations in dairy prices and higher global demand.