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International Dairy Outlook 2020: A Fonterra View

International Dairy Outlook 2020: A Fonterra View. International Dairy Outlook 2020: A Fonterra View. Confidential to Fonterra Co-operative Group. February 2013 . Presentation Overview. Global trends are driving significant changes in dairy markets.

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International Dairy Outlook 2020: A Fonterra View

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  1. International Dairy Outlook 2020: A Fonterra View International Dairy Outlook 2020: A Fonterra View Confidential to Fonterra Co-operative Group February 2013

  2. Presentation Overview

  3. Global trends are driving significant changes in dairy markets Rise of emerging markets & urbanisation driving strong demand for dairy nutrition Higher prices, increased convergence, more volatility, less regulation

  4. Global trends are driving significant changes in dairy markets Social demographics - leading to greater focus on nutrition of paediatrics and health aging (e.g. Aging in OECD & China) Rising incomes and busy lifestyles - convenience foods

  5. Global trends are driving significant changes in dairy markets Increased focus on sustainability New technology & innovation

  6. Dairy consumption is highly correlated to development

  7. An example of this is the explosion in China’s dairy commodity imports Dairy commodity imports from the US of USD 510 million, or 268,000 metric tonnes Source: Global Trade Atlas

  8. Dairy has moved from a highly regulated supply driven market to a demand led dynamic Outlook to 20201 7% 1% <1% 10% 4% 7% Europe China 1% <1% 4% Nth America 2-3% India2 4% 2% ASEAN 2% 2% MENA 2% 1% LATAM ANZ Demand Volume Demand Growth Supply Volume Supply Growth • Current volumes are represented by the area of the circles displayed. Growth rates represent forecast compound annual growth rates. • Although strong growth in demand is expected in India, the ability to supply is likely to remain limited. In the 12 months to May 2012, Fonterra exported 22,300 MT of product to India and total imports represented approximately 0.2% of consumption. • Source: Fonterra estimate

  9. Dairy prices are higher, with more convergence and volatility Source: Fonterra analysis

  10. Growth in market based tools will continue to be important to manage dairy price volatility

  11. The baby-boomers are aging and embracing healthy aging via nutrition Source: Percentages estimated from Fonterra/TNS research extrapolated by population growth rates

  12. The benefits of protein are increasingly recognised for healthy aging.Demand for dairy protein is growing Potential impact of high protein diet and exercise Potential impact of high protein diet Source: Based on Breen and Phillips 2011

  13. Food security is a major, global challenge for the 21st century. Open markets to allow the free flow of food across borders will be essential • Arable land and water constraints • Likely impacts of climate change • Rapid urbanisation • 9 billion people by 2050 • 60% more food required

  14. A greater focus is being placed on sustainability to ensure future food production • A challenge to do more with less • An opportunity for dairy’s nutritional density to gain greater recognition

  15. Summary

  16. THERE IS A BRIGHT FUTURE FOR SUSTAINABLE, EFFICIENT, MARKET FOCUSED DAIRY FARMERS Section or end slide

  17. New Zealand cannot meet the significant opportunities for dairy alone Formal Dairy Market Globally Traded Dairy Market 500 bn L by 2020 (3-4% CAGR) NZ 80 bn L by 2020 (4-6% CAGR) 375 Bn L 22 bn L by 2020 (2% CAGR) 54Bn L 19 Bn L Source: Fonterra analysis

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