Irish Dairy Board 2014

DEVELOPING NEW PRODUCTS AND MARKETS FERGAL MCGARRY

21ST October 2014

1. GROUP OVERVIEW

2. DAIRY MARKET OUTLOOK

3. INVESTING IN A SUSTAINABLE FUTURE

AGENDA

Irish Dairy Board 2014

TO MAXIMISE THE LONG-TERM VALUE OF IRISH DAIRY

PRODUCTS FOR THE BENEFIT OF MEMBER FARMERS, BY

ALIGNING AND CO-ORDINATING VALUE-CREATING ACTIVITIES

IN THE IRISH DAIRY INDUSTRY

Brian Cleary Bunmahon, Co. Waterford

Irish Dairy Board 2014

WHAT WE DO

RESEARCH & INSIGHTS

SECURING ROUTES TO MARKET

IRISH DAIRY

FARMERS

PROMOTING IRELAND’S GRASS-FED MESSAGE

LISTENING TO CUSTOMERS & CONSUMERS

MEMBER PROCESSORS

PACKING, PROCESSING, TRADING &

DISTRIBUTION

SALES, MARKETING & ADVERTISING

BRANDING & VALUE ADDED INGREDIENTS

Irish Dairy Board 2014 5

EXPORTING TO OVER 100 COUNTRIES WORLDWIDE

AFGHANISTAN

ALGERIA

ANGOLA

AUSTRALIA

AUSTRIA

BAHAMAS BAHRAIN

BARBADOS

BELGIUM

BERMUDA

BURKINA FASO

CANADA

CENTRAL AFRICAN REP.

CHAD

CHILE

CHINA

CONGO

COSTA RICA

CYPRUS

CZECH REP.

DENMARK

DOMINICAN REP.

EGYPT

EL SALVADOR

EQUATORIAL GUINEA

FRANCE

GABON

GAMBIA

GERMANY

GIBRALTAR

GREECE

GUINEA

HONG KONG

HUNGARY

INDIA

INDONESIA

IRAN

IRAQ

ISRAEL

ITALY

IVORY COAST

JAPAN

JORDAN

KENYA

KOREA REP. OF

KUWAIT

LIBERIA

MADAGASCAR

MALAWI

MALAYSIA MALDIVES

MALI

MALTA

MAURITANIA

MAURITIUS

MEXICO

MOROCCO

MOZAMBIQUE

NETHERLANDS

NIGERIA

NORWAY

PAKISTAN

PERU

PHILIPPINES

POLAND

PORTUGAL

QATAR

ROMANIA RUSSIAN FEDERATION

SAUDI ARABIA SENEGAL

SEYCHELLES SINGAPORE

SLOVAKIA

SOUTH AFRICA

SPAIN

SRI LANKA

SWEDEN

SWITZERLAND

TAIWAN

TANZANIA

THAILAND

TOGO

TRINIDAD & TOBAGO

TUNISIA TURKEY

USA

UAE

UK

VENEZUELA VIETNAM

ZAMBIA

ZIMBABWE

Irish Dairy Board 2014

IDB GOALS TO 2020: MOVING THE BUSINESS TRANSFORMATION TO TRANSFORMATIVE GROWTH & VALUE CREATION

• Continue to pay a leading product price, ensuring that average yearly returns out-perform those of a peer-group of leading European Dairy companies

• Create a robust and valuable diversified asset for the Irish dairy industry

• While growing the IDB’s turnover a minimum of 50% over the next 5 years generating consistent strong Trading EBITA

• Plan to grow IDB’s share of exportable milk pool from 60%

Irish Dairy Board 2014 Vanessa O’Connor

Upton, Co. Cork

2. DAIRY MARKET OUTLOOK

CHALLENGING TIMES…GDT

60.0

70.0

80.0

90.0

100.0

110.0

120.0

130.0

140.0

150.0

gDT Index

1. Global stocks were low

5. NZ strong milk flows

2. Strong buying by China

starts

3. NZ drought begins to

impact

4. EU milk output starts

recovery 6. Chinese buying slows as

stocks build

7. Global milk supply peaks

strongly

8. Global stocks replenished

9. Russian ban announced

GDT vs IDB PURCHASE PRICE INDEX (PPI)

60.0

70.0

80.0

90.0

100.0

110.0

120.0

130.0

140.0

150.0

gDT Index

PPI

1. Global stocks were low

5. NZ strong milk flows

2. Strong buying by China

starts

3. NZ drought begins to

impact

4. EU milk output starts

recovery 6. Chinese buying slows as

stocks build

7. Global milk supply peaks

strongly

8. Global stocks replenished

9. Russian ban announced

HOWEVER DESPITE MARKET UPS AND DOWNS

10

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

$5,500

5 J

an 2

01

0

6 A

pr

20

10

6 J

ul 2

01

0

15

Sep

20

10

2 N

ov

20

10

15

Dec

20

10

1 F

eb

20

11

15

Mar

20

11

3 M

ay 2

01

1

15

Ju

n 2

01

1

2 A

ug

20

11

20

Sep

20

11

1 N

ov

20

11

20

Dec

20

11

1 F

eb

20

12

20

Mar

20

12

1 M

ay 2

01

2

19

Ju

n 2

01

2

1 A

ug

20

12

18

Sep

20

12

6 N

ov

20

12

18

Dec

20

12

5 F

eb

20

13

19

Mar

20

13

1 M

ay 2

01

3

18

Ju

n 2

01

3

6 A

ug

20

13

17

Sep

20

13

5 N

ov

20

13

17

Dec

20

13

4 F

eb

20

14

18

Mar

20

14

6 M

ay 2

01

4

17

Ju

n 2

01

4

5 A

ug

20

14

GDT WMP Prices

…LONG TERM TREND IS POSITIVE

11

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

$5,500

5 J

an 2

01

0

6 A

pr

20

10

6 J

ul 2

01

0

15

Sep

20

10

2 N

ov

20

10

15

Dec

20

10

1 F

eb

20

11

15

Mar

20

11

3 M

ay 2

01

1

15

Ju

n 2

01

1

2 A

ug

20

11

20

Sep

20

11

1 N

ov

20

11

20

Dec

20

11

1 F

eb

20

12

20

Mar

20

12

1 M

ay 2

01

2

19

Ju

n 2

01

2

1 A

ug

20

12

18

Sep

20

12

6 N

ov

20

12

18

Dec

20

12

5 F

eb

20

13

19

Mar

20

13

1 M

ay 2

01

3

18

Ju

n 2

01

3

6 A

ug

20

13

17

Sep

20

13

5 N

ov

20

13

17

Dec

20

13

4 F

eb

20

14

18

Mar

20

14

6 M

ay 2

01

4

17

Ju

n 2

01

4

5 A

ug

20

14

GDT WMP Prices

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…AND THE OUTLOOK IS POSITIVE

• China buyers expected to return

• Russian situation should ‘stabilise’

• Marginal costs of milk production around the world are high – prices cannot remain low for too long without choking-off output

• Ireland has a low relative cost of production coupled with low levels of farmer debt

• Exceptionally good global production conditions unlikely to persist long term

While price volatility will remain global demand fundamentals remain strong: 1. Population growth 2. Emerging market economic growth 3. Urbanisation & Westernisation of diets 4. Increased focus on nutrition

Irish Dairy Board 2014

3. INVESTING IN A SUSTAINABLE FUTURE

David O’Reilly Virginia, Co. Cavan

Irish Dairy Board 2014

INVESTING IN A SUSTAINABLE FUTURE

14 14

2025

Brand Growth

In-market

NPD

2012

M&A & Route to Market

Cap Ex

€200m

2015

Continued investment to 2025

Irish Dairy Board 2014 15

Kerrygold brand retails at over €500 million annually €36 million brand investment in 2013

1. INVESTING IN BRANDS

USA • Kerrygold is No.1 imported

butter • Dubliner Cheese is No. 1

Cheddar • Double-digit growth

UK • Kerrygold highest market share

in 20 years • Pilgrims Choice is clear number 2

cheddar brand

GERMANY • Kerrygold is No. 1 butter • 55% branded share • 25% revenue growth year-on-

year

SOUTH AFRICA

• Kerrygold is No. 1 imported butter

CHINA • Entered mass market category in

October 2014

AFRICA • Top 3 brand position in whole

milk powder - Malawi, Angola, DRC and Congo.

2. INVESTING IN NEW PRODUCT DEVELOPMENT

Recent Highlights • Kerrygold Cream Liqueur hits

shelves in US

• Butter Rolls launch in Germany

• Skimed yogurt powder for Almased

• Chocolate powder for Nigeria

And the winner is… • Kildery Cheese wins Gold @

Global Cheese • Butterkase wins Silver @

Global Cheese • The Cheese Warehouse wins

4 @ Nantwich • Pilgrims Choice wins Gold &

Silver @ Natwich

NPD represents of total business turnover. 10%

CONSUMER FOODS

VALUE ADD FOOD INGREDIENTS

AFL Dairy Innovation Centre & Meadow Cheese Capacity Extension

€21m

€13m

€10m

€16m

€8m

€30m

4. CAP EXP – DELIVERING OPERATIONAL EXCELLENCE

Expansion of DPI facilities

Thiel expansion and Innovation Centre

New production line equipment and increased capacity

Manufacturing plant and trading hub

Kerrygold Centre of Excellence

€100m TOTAL APPROVED INVESTMENT FOR 2013-14

RECENT ROUTE TO MARKET M&A ACTIVITY 5. BUILDING ROUTES TO MARKET

ACQUISITION OF POWDER BLENDING BUSINESS FOODTEC

IDB ESPANA ACQUISITION & SUPPLY PARTNERSHIP WITH TELEPIZZA Acquisition includes the trade and assets of Luxtor S.A., a Spanish pizza cheese and cheese blends plant and Luxtor’s long term contract for the supply of cheese to Telepizza, the fifth largest pizza chain in the world.

FoodTec, a specialist powder ingredients business provides exciting opportunities to grow our blending business in collaboration with both existing and new customers across new products, technologies and processes.

Irish Dairy Board 2014

Investing in a Sustainable Future

We will continue to invest in Operational Excellence, our Brands, NPD, In-Market Expansion, Route to Market and our People so we can ensure the delivery of strong returns to the farmers we represent.

THANK YOU