Fonterra: A view of the dairy market in Asia

1. Fonterra: A view of the dairy market in Asia Bruce Donnison General Manager, Sustainability Confidential to Fonterra Go-operative Group 2 March 2011

2. About Fonterra Cooperative Group • Formed in 2001 with the merger of the New Zealand Dairy Board, New Zealand Dairy Group and Kiwi Co-operative Dairies • Largest milk processor and largest dairy exporter in the world • Annual revenues of NZ$16 billion • 15,000 employees • Sales network that reaches customers in more than 140 countries. • Cooperative structure – owned by 10,500 New Zealand dairy farmers • No matter where we are in the world, dairy is what makes us tick

3. Today’s presentation • The dynamics of the dairy market in Asia • How Fonterra operates in the Asian market • The importance of a sustainable approach • Nutritional innovation • Security of the supply chain • Delivering the nutritional needs of Asian consumers • The role of the Australian dairy supply chain

4. Fonterra Our Vision: To be the natural source of dairy nutrition for everybody, everywhere, every day

5. Total dairy market in Asia and Middle East • Total market AUD $9bn • Roughly twice the size of Australia • Growing at 4-5% per annum • Consumption will continue to rise

6. China also a major driver of growth Percentage of global imports – China – Mexico – US / Japan – Russia – EU China on track to exceed 1 million tonnes of dairy imports

7. Plenty of room for growth Per capita milk consumption • Low base per cap consumption • Huge populations with increasing incomes • Interest in healthy eating is growing • Milk is seen as a ‘gold standard food’ Latam average = 57 lts/capita Asia average = 11 lts/capita Source: Euromonitor, powder converted to its rate of 1kg = 8.33 lts. 2005 data

8. Fonterra’s approach in Asia

9. Sustainability is key to success All underpinned by a safe, secure, integrated supply chain

10. Delivering on nutritional needs in Asia • Leading adult dairy nutrition product in Asia • 286 million Chinese expected to suffer osteoporosis/low bone mass by 2020 • Anlene is high-calcium, clinically proven to prevent osteoporosis • Backed by continuous research and innovation • Leading product for pregnant women in Asia • Unique ingredient builds brain connections in infants • Supported by educational programs on maternity/infant nutrition • Science behind Anmum building broader paediatric product range

11. The role of the Australian dairy supply chain • Milk • Collection • 1.8 billion litres per annum • 50,000 on farm pick-ups p.a. • Sales and marketing • Research • Innovation • Product development • Storage and handling • 300,000 tonnes of Australian product per annum • On-farm • 1,500 farmer suppliers; 300,000 cows • 20% share Australian industry • Manufacturing • 12 sites nationally • Manufacture consumer and foodservice products ,and bulk ingredients All underpinned by our principles of sustainability

12. Summary • Fonterra is on a journey to deliver the nutritious dairy products the world needs in a sustainable way • Milk is a product of nature so this journey starts with clean water, green grass and healthy cows • Asian consumers have unique demands from dairy, the market is growing rapidly and is a key focus for us • We are committed to meeting demand from Asian consumers by: • Investing in R&D so they can enjoy the best of dairy • Ensuring a safe, secure supply chain to build confidence about where our products come from