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

Presentation Overview
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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
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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
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Global trends are driving significant changes in dairy markets
Increased focus on sustainability
New technology & innovation
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Dairy consumption is highly correlated to development
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An example of this is the explosion in
China’s dairy commodity imports
Total China Dairy Commodity Imports
1,600 6,000
1,400
1,200
1,000
800
600
400
200
-
1996 1998
Dairy commodity imports from the US of
USD 510 million, or 268,000 metric tonnes
2000 2002 2004 2006 2008
000 Metric Tonnes USD millions
2010 2012
-
5,000
4,000
3,000
2,000
1,000
Source: Global Trade Atlas
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Dairy has moved from a highly regulated supply driven market to a demand led dynamic
Outlook to 2020 1
<1% 1%
Europe
4%
2%
MENA
10%
7%
7%
4%
India 2
China
4%
2-3%
ASEAN
1%
2%
ANZ
<1%
1%
Nth
America
2% 2%
LATAM
1.
2.
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
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Dairy prices are higher, with more convergence and volatility
Source: Fonterra analysis
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Growth in market based tools will continue to be important to manage dairy price volatility
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The baby-boomers are aging and embracing healthy aging via nutrition
Source: Percentages estimated from Fonterra/TNS research extrapolated by population growth rates
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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
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Food security is a major, global challenge for the
21 st century. Open markets to allow the free flow of food across borders will be essential
• 9 billion people by 2050
• 60% more food required
• Rapid urbanisation
• Arable land and water constraints
• Likely impacts of climate change
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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
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Summary
1. Macro Drivers
– Global trends are shaping the outlook for dairy markets
2. Changing Dairy Market Dynamics
- The shift from a supply led to a demand led dynamic
3. Future Challenges
– Ongoing price volatility and food security concerns will require market orientated solutions
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THERE IS A BRIGHT FUTURE FOR
SUSTAINABLE, EFFICIENT,
MARKET FOCUSED DAIRY
FARMERS
Section or end slide
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New Zealand cannot meet the significant opportunities for dairy alone
NZ
22 bn L by
2020 (2%
CAGR)
19
Bn
L
Globally
Traded
Dairy
Market
80 bn L by
2020 (4-6%
CAGR)
54
Bn L
Formal Dairy
Market
500 bn L by
2020 (3-4%
CAGR)
375 Bn L
Source: Fonterra analysis
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