THE TURKISH DAIRY INDUSTRY HASAN GİRENES – Yaşar Group, Turkey

1. THE TURKISH DAIRY INDUSTRYHASAN GİRENES – Yaşar Group, Turkey Turkey – Netherlands Business Forum 17 April 2012, Amsterdam

2. DAIRY FARMING in TURKEY

3. Investing in Turkey... “Turkey will be one of the best countries to invest in over the next three years” “If I was an investor with a huge sum of money with me, I would definitely invest half of my money in one of the emerging economies. For example, investing in a farm in Turkey, I would personally not even think for a minute.” Marc Faber – Investment Guru, December 16, 2010

4. Dairy Farming in Turkey • Blessed with one of the very best climates for dairy farming • Many large-scale dairy farms established or rapidly increased in scale • Many of state-owned farms being privatized • Joint ventures and foreign investors • Seasonal milk production: rises from January, decreases from June • Demand following an opposite trend to production • Production-demand imbalance: price instability WDS Report-2011

7. Dairy Population • Number of bovine animals: 11,4 million heads • Number of dairy cows : 4,2 million heads • Av. milk yield/year : 2.803 kg/cow • Breeders Ass. Members : 6.000 kg/cow • Modern farms : 10.000 – 12.000 kg/cow • Number of animals recorded in pedigree: • 2002: 178.000 heads • 2011: 2.682.000 heads • Number of sheep & goats: 29,4 million heads

8. Milk Production - 2011 (tons/year ) Total Milk Production 13.6 milliontons/year COW MILK • 12.480.416 - 91,7% SHEEP MILK • 816.832 - 6,0% GOAT MILK • 272.811 - 2,0% BUFFALOES MILK • 35.487 - 0,26% Consumed in Farm • 2.745.691 - 22% Animal Feeding & Loose Milk 2.496.083 - 20% Modern dairy establishments • 3.244.908- 27% Mandıras 3.993.733 - 32% Source: National Milk Council

9. The most dynamic countries are expected to be China (3,5%), TURKEY (3%) and Argentina (3%) in the next decade...

10. Comparison: Turkey / The Netherlands (2010) WDS Report-2011 • Milk production volumes are similar • Cow herd in TR is 2,5 times the size compared to ND; differences in average yield due to: • Fragmented production base • Cow genetics • Feeding patterns • Varying management systems

11. DAIRY MARKET in TURKEY

12. Dairy Processing • One of the world’s major milk processing countries • Rapid growth in capacity, technological infrastructure and number of modern dairy plants • Amount of milk collected by integrated dairy facilities in 2011: 7 mln tons • 1,2 mln tons processed to drinking milk • 519.000 tons to cheese • 1 mln tons to yoghurt • 459.000 tons to yoghurt drink

13. Drinking Milk Production (tons) Cheese Production (tons) Source: National Milk Council

14. Yoghurt Production (tons) Yoghurt Drink Production (tons) Source: National Milk Council

15. Dairy Consumption • Milk is consumed mainly as white cheese, yoghurt drink and yoghurt • 26 grams/capita/day of animal protein consumption: 51% from dairy products • Drinking milk consumption is low: 26 lt/year • Pastorised milk constitutes of 10% of processed milk • Demand for UHT milk and low fat milk is rising • 75 % of the milk consumed by children • Ready-to-drink flavored milk consumption growing with an annual av. of 20 % WDS Report-2011

16. THE ROADMAP for TURKISH DAIRY INDUSTRY

17. Strenghts & Opportunities • One of the largest markets in the region with a young population of 70mn • Rising incomes and changing consumer habits fuel domestic consumption • Favorable ecological conditions and climate; one of the world's strongest livestock sectors • Government made development of the sector a priority, ensuring continued levels of investment • Food industry is better developed than many neighbouringcountries, creating strong export opportunities • Good location for trading with EU and Middle East countries • Benefits from a large pool of cheap labour

18. Challenges and Critical Success Factors for Turkish Dairy Industry • Boosting supply for growing population combined with economic development: availability of sufficient milk • Fragmented production base • Land ownership and regulations • Feed price and water resources/availability • Logistics • Availability of cows/heifers • Quality issues (raw milk&processing) • Animal diseases • Stronger cooperation in the chain

19. YASAR GROUP

20. Profile • Initiation of today’s YAŞARdates back to 1945 • One of leading and most respected consumer products group in Turkey • 22 companies, 2 foundations, 18 facilities, 6,500 employees • Consolidated Revenue of TRY 2.03 bnin FY10 • Food &beverage net sales 1,5 bn TL • Core businesses “Food & Beverages” and “Coatings” • Well established and widely recognised leading brands: PINAR and DYO • Six companies listed on the Istanbul Stock Exchange with a combined market cap of TRY 1.5 bn** • Joined the UN Global Compact, world’s largest corporate citizenship initiative, in 2007 *EBITDA is operating profit before depreciation and amortisation expenses, and other non-cash/non-recurring income and expense items ** as at 31 May 2011

21. PINAR SÜT – Dairy Business • Founded in 1975 – two production plants • Production and sale of dairy products , fruit juices, mayonnaise, ketchups, powdered products • Introduced the concept of wholesome milk and dairy products in Turkey • Raw milk processing capacity:400.000 t/year • Net sales in 2010 : 577 million TL • Works with 250 farms based on contracted farming model • Market leader in milkand specialty cheeses • Exports to 20 countries with 29 million USD export earnings

22. Agribusiness Division of Yaşar Group • Founded in 1983 as a dairy feed company • Main activities: Feed production, dairy farming, turkey farming, fish farming and processing, plant nutrition • Net Sales : 150 million USD • Export value: 10 million USD

25. THE TURKISH DAIRY INDUSTRYHASAN GİRENES – Yaşar Group, Turkey Turkey – Netherlands Business Forum 17 April 2012, Amsterdam