Lactalis posted a “weak” profit performance last year as the world’s largest dairy company faced pressure on volumes from private label.

The privately-owned business, headquartered in Laval, Pays-de-la-Loire, reported turnover rose 4.3% in 2023 to €29.5bn ($31.4bn).

However, chairman Emmanuel Besnier said yesterday (18 April) consolidated net profit “remained weak”, coming in at €428m, albeit an increase of 11% from the prior 12 months. Profit stood at €384m in fiscal 2022, down 14% year-on-year.

Lactalis explained in a statement 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)”.

However, the Président and Galbani dairy brand owner said demand for its products “held up well thanks to their quality and affordable prices”.

While net profit dwindled, it rose as a proportion of Lactalis’ turnover, with the margin increasing from 1.36% to 1.45%.

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“This slight increase compared with 2022 was driven in particular by organic growth and the continued strengthening of Lactalis in North America,” it noted.

Despite the weakness in profits, the impact of inflation on consumers and “unfavourable world prices”, Besnier said Lactalis “remained focused on achieving profitable and responsible growth in this difficult environment”.

He added: “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.”

As well as inflation, 2023 marked a licensing agreement in Brazil as Lactalis sought to get a purchase deal for the Fonterra-Nestlé joint venture – Dairy Partners Americas – past regulators.

The company also acquired Marie Morin Canada, marking its entry into the North America desserts category.

However, Lactalis also came under the spotlight last year for dairy code breaches in Australia, a market where the company more recently announced a plant closure.

Such troubles have spilled over into 2024, as Lactalis was also fined in Italy for dairy code breaches and came under investigation in France over tax issues.

Meanwhile, the company secured an M&A deal in Portugal in March, snapping up cheese maker Sequeira & Sequeira.

Lactalis said yesterday France remains its largest market, followed by the US, Canada, Italy and Brazil. The group employs more than 85,500 dairy and cheese workers in 51 countries, it said.

The company’s debt stands a tad shy of €6bn, although Lactalis said the level “continues to fall”. The figure stood at €6.5bn in 2022.

“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,” yesterday’s statement read.

“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.”