The UK dairy industry must consolidate to compete with the multi-billion-pound businesses increasingly dominating the sector, say industry leaders.

Speaking exclusively to The Grocer, Joop Kleibeuker, secretary-general of the European Dairy Association, predicted there would be no more than five to 10 major dairy companies in the world within a decade compared with the dozens currently in operation.

Those companies will capitalise on soaring global demand for dairy products and cash in on the bigger margins in the value-added sector, he added. But he is by no means a lone voice. If UK companies want to keep pace, they must increase merger and acquisition activity to gain the scale needed to compete, said Dairy UK director general Jim Begg.

“This will allow money to be spent more effectively on innovation – the lifeblood of any industry,” he stressed. “It will also make it easier to negotiate with customers in the UK and abroad.”

Dutch giants Friesland Foods and Campina announced their merger this year, pending European competition approval, in a move that creates a £7.3bn super co-op that will be the world’s fourth-largest dairy business. In January, a proposed merger between UK co-ops Milk Link and First Milk fell through when the two failed to agree terms.

“The UK industry has an island-like approach, which limits ambition,” said NFU dairy board chairman Gwyn Jones. “European processors know our markets well and are likely to become more active.”

Only two UK-based businesses feature on Rabobank’s Global Dairy Top 20. Anglo-Dutch food giant Unilever comes in at number 10, while Dairy Crest is in 19th place.

However, the UK should not be underestimated, argued Robert Wiseman, chief executive of Robert Wiseman Dairies. “UK businesses are more than capable of not only holding our own but making real progress,” he said.