NEW ZEALAND

DAIRY INDUSTRY
2013
January 2014
iFAB 2013 DAIRY REVIEW
January 2014 v1.00

iFAB 2013
The Food and Beverage Information Project
The Food & Beverage Information Project is the first
comprehensive overview of the state of New Zealand’s Food &
Beverage (F&B) industry. Part of the Government’s Business
Growth Agenda (BGA), it is an integrated programme of work
focusing on the six key inputs businesses need to succeed, grow
and add jobs; export markets, capital markets, innovation, skilled
and safe workplaces, natural resources and infrastructure.
Essentially, the BGA Export Markets goal will require lifting the
ratio of exports from today’s rate of 30% of GDP to 40% by
2025. This equates to doubling exports in real terms (or tripling
exports in nominal non-inflation adjusted terms). This in turn
equates to achieving a 7% per annum growth rate over the next
twelve years.
This five-year project analyses the main sectors in F&B, including
dairy, meat, seafood, produce, processed foods, and beverages,
as well as providing an overview of how the industry is fairing in
our major markets. It also conducts in-depth sector reviews on a
rotating basis. The information is updated annually and feedback
from users shows the project is acting as a vital tool for
companies looking to expand and grow exports.
Why Food & Beverage?
The Food & Beverage industry is vitally important to the New
Zealand economy. Food & Beverage accounts for 56% of our
merchandise trade exports and one in five jobs across the wider
value chain. In addition, F&B acts as a vital ambassador for the
country, being in most cases the first exposure global consumers
get to “Brand New Zealand.”
New Zealand’s F&B exports are growing strongly and the
country’s export performance is strong and improving relative to
peers. In the 15 years leading up to 2010, New Zealand's food and
beverage exports grew at a compound annual rate of 7% per
annum. So one way to look at the challenge is to ask – can we
continue to grow our food & beverage exports at the same rate?
To understand if this is possible we need to know what has been
driving our success.
What is the purpose of the food and beverage information
project? iFAB 2013
The project pulls together the available information on the food
and beverage industry into one place, in a form which is familiar
and useful to business. The reports contain analysis and
interpretation of trends and opportunities to materially assist
with business strategy and government policy.
The information will be of vital use to businesses, investors,
government, and research institutions as the industry expands
and diversifies. This industry view will be very useful to
government, enabling better dialogue and the opportunity to
address issues collectively.
What benefit will this bring to businesses?
The Project will have many uses for businesses. These include:
– As a base of market intelligence to enable business to be
much more targeted in their own market research
– Reviewing and informing offshore market development
(including export and investment) strategies
– Assisting in identifying areas of innovation and R&D for
the future
– Identifying strategic partners and collaborators
– Enabling a company to benchmark performance with that
of its competitors
– Monitoring industry activity
– Gaining a better understanding of their own industry
sector
– Identifying internal capability needs or external inputs
How will government use the reports?
This information will provide much greater insight into the
industry, which is useful for a range of policy development, from
regulatory frameworks to investment in science and skills and
facilitating access to international markets. In particular, a single
source of factual information will enable government agencies to
better coordinate their efforts across the system and be more
responsive to addressing industry issues.
OTHER RELATED iFAB REPORTS iFAB 2013

This analysis of the New Zealand dairy sector forms a part of the wider Food & Beverage Information Project

Other reports, including those from previous years, are available on the MBIE or Coriolis website…

http://www.med.govt.nz/sectors-industries/food-beverage/information-project/ http://www.coriolisresearch.com/reports/
www.foodandbeverage.govt.nz

4
NOTE ON DEFINITIONS iFAB 2013

The iFAB project splits the total New Zealand food & beverage industry into six separate sectors; to avoid
double counting, products and firms are only defined and counted in one; some firms may be in another report
DEFINED AS DAIRY DEFINED AS PROCESSED FOODS
WHAT: Products exclusively or predominantly made from milk; firms that WHAT: Products made from a mixture or combination of ingredients, rather a single
predominantly make these products ingredient; firms that predominantly make these products
Ingredients: Nonfat Milk Powder, Lactose, High OleicSafflower Oil, Soy Oil, Coconut Oil, Whey
Protein Concentrate. In addition, less than 2% of the following: Potassium Citrate, Calcium
Carbonate, Ascorbic Acid, Potassium Chloride, Magnesium Chloride, Ferrous Sulfate, Choline
Chloride, Choline Bitartrate, Ascorbyl Palmitate, Sodium Chloride, Taurine, m-Inositol, Zinc Sulfate,
Ingredients: Dried milk Mixed Tocopherols, Niacinamide, d-Alpha-Tocopheryl Acetate, Calcium Pantothenate, L-Carnitine,
Cupric Sulfate, Vitamin A Palmitate, Thiamine Chloride Hydrochloride, Riboflavin, Pyridoxine
Hydrochloride, Beta-Carotene, Folic Acid, Manganese Sulfate, Phylloquinone, Biotin, Sodium
Selenate, Vitamin D3, Cyanocobalamin, Calcium Phosphate, Potassium Phosphate, Potassium
Hydroxide, and Nucleotides (Adenosine 5’-Monophosphate, Cytidine 5’-Monophosphate,
Disodium Guanosine 5’-Monophosphate, Disodium Uridine 5’-Monophosphate)

EXAMPLES: Fluid milk, milk powder, infant formula base powder, cheese, butter, EXAMPLES: Chocolate, ice cream, retail-ready infant formula, frozen croissants, Milo
lactose, dairy casein & similar, Anlene and other similar dairy nutritionals
TRADE CODES: Primarily classified in the global Harmonised Standard trade codes TRADE CODES: Primarily classified in the global Harmonised Standard trade codes
as HS04 as HS 16-21
EXAMPLE FIRMS: EXAMPLE FIRMS:

THIS REPORT SEE RELATED REPORT

5
iFAB 2013
BENCHMARK – EXPORT GROWTH BY SECTOR iFAB 2013

In 2012 the value of New Zealand’s dairy exports shrunk slightly in US$ terms, a relatively poor performance
compared to many other food & beverage sectors
ANNUAL CHANGE IN EXPORT VALUE BY TYPE PERCENT CHANGE IN EXPORT VALUE BY TYPE
US$m; 2012 vs. 2011 %; US$m; 2012 vs. 2011

CORE F&B CATEGORIES

Beverage $117 Other Foods 23%

Processed Food $66 Pet & Animal Foods 14%

Seafood $51 Beverage 10%

Pet & Animal Foods $35 Seafood 4%

Other Foods $35 Processed Food 4%

Dairy -$23 Dairy 0%

Produce -$36 Produce -2%

Net
Meat -$180 Core F&B Meat -4%
+$67m

F&B RELATED CATEGORIES

Seed for sowing $30 Fertilisers 57%

Live Animals $27 Tobacco 48%

Tobacco $16 Supplements 33%

Supplements $3 Seed for sowing 28%

Fertilisers $3 Live Animals 15%

HBC/Household -$2 HBC/Household -1%

Net
Pharmaceuticals -$7 Related F&B Pharmaceuticals -3%
+$70m

Source: UN Comtrade database; Coriolis classification and analysis 7

DAIRY – SITUATION
New Zealand competes with other dairy cooperatives to supply bulk dairy ingredients to corporate consumer-
focused dairy manufacturers primarily in dry/tropical areas
New Zealand
New Zealand is the 9th largest milk producing country in the world
and accounts for 2.4% of global milk production. New Zealand
produces a similar amount of milk as other temperate countries its
size (e.g. Italy, the UK, France). However as it only has a small
population (similar to Singapore), it exports the excess.
The success of New Zealand in dairy is built around a natural
environment conducive to agriculture. New Zealand, surrounded by
the Pacific Ocean, has the light of Spain with the climate of Bordeaux.
This climate will also moderate the effects of global warming going
forward (relative to large continents). However this relatively remote
location means New Zealand exports transport friendly dairy
ingredients (e.g. milk powder) rather than perishable products.
About 88% of New Zealand milk supply is controlled by Fonterra, a
farmer-owned cooperative. Fonterra was formed in 2001 in a mega-
merger of dairy cooperatives and the export dairy board (a
government-mandated) monopsony.1
New Zealand continued to experience strong prices for its dairy
products. Global dairy prices remain high by historical standards in
US$ terms driven by growing demand in China, SE Asia and
NA/ME/CA2.
Competitors
As regional dairy collection is a natural monopsony, dairy farmers in
all developed countries control milk collection and primary processing
through farmer-owned cooperatives. Dairy co-ops transform their
farmers milk into bulk dairy ingredients or basic dairy products, sold
under the co-ops own brand or retailer store brands.
1. A monopsony is a monopoly on buying not selling; 2. North Africa Middle East, Central Asia; 3. BRIC = Brazil, Russia, India and China; 4 Fonterra also sells about NZ$1b worth of Anmum outside Australasia
iFAB 2013
New Zealand primarily competes with other dairy cooperatives from
developed Western countries to supply bulk dairy ingredients. South
America cooperatives are an emerging rival. While the BRIC3
countries are 4 of the top 5 milk producers in the world, they are not
yet major exporters as they effectively consume all they produce and
will do for the foreseeable future.
New Zealand does not directly compete with major corporate dairy
players (e.g. Nestle, Kraft, Abbott), who are in most cases its major
customers.
Consumers/Markets
Dairy consumption is flat in the developed world; developed
temperate countries (e.g. Canada, Japan) typically produce all the
milk they consume and use trade barriers to protect their dairy
farmers; therefore New Zealand has limited access to these markets.
Dairy consumption is growing in the developing world faster than
domestic production; in addition, dry and tropical countries are
unable to efficiently produce all the milk they consume, therefore they
import bulk dairy ingredients.
In most markets, developed or developing, corporate consumer-
focused dairy manufacturers buy ingredient dairy and transform
ingredients into defensible consumer dairy-based foods (e.g.
yoghurt).
In Australasia (AU/NZ), Fonterra and Goodman Fielder/Meadow
Fresh (but not other key NZ milk processor/exporters) sells
significant amounts of branded consumer dairy products to
consumers4.
8
DAIRY – SWOT ANALYSIS
The global competitive environment will likely become more competitive going forward
STRENGTHS
- Low cost pasture-based dairy production system
- National champion Fonterra with resources to address global markets and
opportunities
- High standards of food safety and animal welfare
- Regulatory credibility
- 130 years experience in exporting dairy
- Strong position in global dairy industry
- Growing market leadership position in Australasia/Oceania
OPPORTUNITIES
- Intensification through additional supplementary feed smoothing seasonal peak
increasing total milk production and improving return on assets
- Growing dairy product consumption in developing world; dry and tropical countries
not able to produce all the milk they consume
- Chinese dairy consumption per capita growing rapidly drawing in significant
imported dairy product (in the short to medium term)
- Asians more likely to be dairy intolerant, therefore different consumption patterns
(e.g. yoghurt drinks; infant formula)
- Ongoing dairy industry consolidation, particularly in South America
- Changing global weather patterns (also a threat)
- Further investment in in-market production
- Removal of dairy subsidies into Europe (may also be a threat)
Source: various company annual reports; various company websites; Interviews; Coriolis
iFAB 2013
WEAKNESSES
- All our eggs in one basket (Fonterra); Fonterra is limited in its ability to add value
due to the risks associated with competing with its own customers
- No rich dairy cultural heritage or tradition to draw from for new product
development (vs. France or Italy)
- Small milk producer in an absolute sense
- Limited defensibility of commodity and ingredient position
- Significant trade barriers limiting New Zealand access to North America and Europe
- Farmgate price mixes returns on milk with returns on Fonterra ownership leading to
dairy land price increases leading to decreased international competiveness
- Despite strong food safety systems & reputation, a number of recent high-profile
issues (e.g. whey, nitrates)
ISSUES/THREATS/RISKS
- Intensive feedlot dairy model (e.g. California) improving productivity faster than
pasture system (e.g. NZ/AU)
- Southern South America rapidly adopting the AU/NZ pasture system (e.g.
Argentina, Uruguay, Brazil)
- The boom/bust economic cycle expresses itself in China
- Experience of Japan & South Korea suggest Chinese growth has another 5-7 years
to run; after this point, China will be either self sufficient or a major exporter
- Announced EU regulatory changes coming into effect, leading to increased
production by some countries (e.g. Ireland) and decreased production by others
- Developing countries consumers, currently perceive dairy as healthy;
science/attitudes/opinions could turn negative
- Adoption of genetically modified animals or feed by poor countries changing
international competitive dynamics
- Non-dairy substitutes (e.g. soy) more suited to Asian tastes and physiology
9
DAIRY – POTENTIAL AREAS FOR INVESTMENT
Potential areas for new and/or external investment primarily transforming ingredients rather than producing
more ingredients
Farmers currently control about 92% of New Zealand dairy industry
limiting opportunities for external investment. Farmers own Fonterra,
Westland, Tatua and Dairy Goat Coop. “[Globally, dairy cooperatives
have] three main objectives: (1) maximise the milk price paid to
farmer members, (2) to process and market the milk collected every
day from member farms and (3) to maintain farmer control.”1
However the recent introduction of the Fonterra Shareholders’ Fund
does make participation in the success of Fonterra possible.
There are relatively low opportunities for new investment in
ingredient dairy (particularly milk powder). Globally milk
collection/disposal is dominated by farmer owned co-operatives
(typically marginal cost sellers). Processing of raw dairy into simple
ingredients is a relatively high capital, low return sector. New Zealand
already fully capitalised with ingredient dairy processing plants and
the existing co-ops continue to invest in new capacity to defend their
position. As one example, Fonterra recently opened Phase II of it’s
Darfield plant, a NZ$500m investment in the world’s largest milk
dryer.
The domestic New Zealand dairy market is small, saturated and low
growth. New Zealand already has high levels of dairy consumption
per capita and the market is dominated by two key players: Fonterra
and Goodman Fielder/Meadow Fresh, each with fluid milk core.
There is limited domestic product innovation and domestic
innovations are typically copied from other markets (e.g. yoghurt). In
addition, store brands are growing in most core dairy categories.
This is not to discount the potential for further investment,
particularly in export focused products. We believe there are three
1. F.A. Christiansen, Executive Director, MD Foods (now Arla), 1994; Source: Interviews; Coriolis
iFAB 2013
key opportunities for consideration:
1. Value-added dairy products
There are strong opportunities for growth and investment in value-
added dairy products, including infant formula and other dairy
nutritionals (e.g. nutritional shakes). In the past three years more
than NZ$700m in investment has been announced in infant formula,
“growing up” milk (GUMP) and other dairy nutritionals. Fonterra,
Westland, Synlait, Gardians/Sutton and New Image all now
manufacture infant formula and related dairy nutritionals. In addition,
three of the four largest dairy companies in China – Yili, Mengniu, and
Bright - have invested in value-added plants in New Zealand, as have
a wide range of other global dairy firms, including Friesland
(Netherlands), Vinamilk (Vietnam) and Kirin (Japan) as detailed on
page 46 of this report.
2. Export-oriented niche dairy
There are opportunities for growth in smaller segments of export
oriented specialty, niche dairy products that “fly under the radar”.
Examples of successful segments in this space include shredded
cheese (e.g. Grate Kiwi), single serve butter (e.g. Canary), and
premium specialty cheese (e.g. Whitestone).
3. Dairy-based processed foods & beverages
There are very strong opportunities for investment in processed foods
and beverages that contain significant dairy ingredients. Examples of
products with strong potential for further investment include
chocolate, frozen bakery (e.g. croissants) and dairy-derived
nutraceuticals. Further discussion of these opportunities occurs in
the related “Processed Foods” report in this series.
10
DAIRY – SUPPLY CHAIN iFAB 2013

New Zealand dairy products have a somewhat complex supply chain driven by the multiple-stage process of
turning raw milk into final products for consumers around the world
SIMPLIFIED MODEL OF NEW ZEALAND DAIRY SUPPLY CHAIN1
Model; ANZSIC codes as available; 2013

Dairy produce Distributor Su p er m a r k et s

For example, Fonterra w h o l esa l e w h o l esa l er & o t h e r r e t a il
requirement to on- ( F 3 6 0- 3 00)
sell milk to other
processors
F o o d s e r v ic e

Domestic
m a r k et

Dairy cattle Milk & cream In f a n t f o r m u l a

S e a f r e ig h t
farming processing manufacturing
Airfreight
( A 0 16 ) ( C 113 - 10 0 )
O t her food Processed
C h e e se & o t h e r manufacturing Foods
dairy processing
( C 113 - 3 0 0 ) Ic e c r e a m
manufacturing
I n t e r n a t io n a l
Ic e c r e a m m a r k et s
C h e e se & o t h e r
manufacturing Processed
dairy processing
( C 113 - 2 0 0 ) Foods

In f a n t f o r m u l a Su p er m a r k et s
manufacturing Processed & o t h e r r e t a il
Foods

O t her food Dairy F o o d s e r v ic e

manufacturing Processed w h o l esa l e2
Foods ( in - m a r k e t )

1. Non-dairy supply chain is covered in the processed foods section; 2. There may be one or more layers of wholesaling, depending on product or market; some wholesale functions may be captive inside retailers or
foodservice operators; Source: Coriolis 11
iFAB 2013
GLOBAL MILK PRODUCTION BY SPECIES iFAB 2013

Global milk production 740m tons of milk (83% cow milk, 13% water buffalo, 4% all other); total global
production has doubled in last fifty years; per capita consumption has been growing for the last decade
GLOBAL MILK PRODUCTION BY SPECIES 50 YEAR GLOBAL MILK PRODUCTION BY SPECIES 50y
Tonnes; million; 2011 Tonnes; million; 1961-2011 CAGR*
50y Camel 2%
700 Sheep 1%
CAGR Goat 2%
2% Buffalo 3%
600

500

400
Cow 1%
300

200
Water buffalo
100
96 13%
-

1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
Total = Goat 17 2%
Sheep, 10 , 2% 50 YEAR GLOBAL MILK CONSUMPTION PER CAPITA
739m tonnes Camel
2 0% Kilograms/person; 1961-2011
50y
Cow 615 83% 115
CAGR
-0.1%
110

10y
105
CAGR
1.1%
100

95

90

85

80
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
* CAGR = Compound Annual Growth Rate; Note: 2011 is latest data available for all countries globally in FAO AgStat as of October 2013; Source: UN FAO AgStat database; Coriolis analysis 13
 GLOBAL MILK PRODUCTION BY REGION iFAB 2013

New Zealand produces 2% of global milk; global production growth being driven by wider Asian region

GLOBAL MILK PRODUCTION BY KEY COUNTRIES & REGION 50 YEAR MILK PRODUCTION BY REGION
Tonnes; million; 2011 Tonnes; million; 1961-2011 50y
739 CAGR
0 Other
Other 25 SS Africa 2%
0%
SS Africa 52 NA/ME/CA 4%
Other S Asia 25 Germany
1% Netherlands
3% 4% France 50y
NA/ME/CA Poland 2%
3% UK
52 2% CAGR
2% 589
7% 2%
Spain 1% 0
18 169 S Asia 4%
Pakistan Italy Ireland 1%
2% 533 36
5%
0
13
16
470 4 SE Asia 5%
113
0
11 72 52 E Asia 5%
Other Europe 13
Europe, 231 , 31% 7% 1
395 46 18 2
1 26
0
9 11 43 82 C/S America 3%
S Asia 9
169 344 36 61
Ukraine 32 14
India 23% Total = 1% 07
7
0
7 12 27 Australasia 2%
17% 26
739m tonnes 28
0 13 68
75 24
Russia 4
19 97 N America 1%
4% 11 83
62

Turkey 65 89 101
2% 33 32 USSR/Russia -1%
E Asia, 52 , 7% North America, 97 , 13% 83
63
Australasia
Japan C/S America 27
SE Asia 4 1% 1% 82 4%
Other E Asia 11% USA 194 199 Europe 1%
China 184 178
0% 12% 153
6% Canada 139
Mexico 1%
Other
1% S America New Zealand
3%Argentina Brazil 2%
Other C America 2% 4% 1961 1971 1981 1991 2001 2011
1% Australia
1%

Note: 2011 is latest data available for all countries globally in FAO AgStat as of October 2013; Source: UN FAO AgStat database; Coriolis analysis 14
TOP 30 MILK PRODUCING COUNTRIES iFAB 2013

New Zealand is the ninth largest milk producing country in the world; it is the only major developed country
producer significantly increasing production
TOP 30 PRODUCERS OF MILK FROM ALL SPECIES 10 YEAR PRODUCTION GROWTH RATE CAGR
Tonnes; million; 2011 %; tonnes; 2001-2011

India 127 India 4.3%

USA 89 USA 1.7%
China 41 China 11.4%
Pakistan 37 Pakistan 3.4%
Brazil 32 Brazil 4.2%
Russia 32 Russia -0.4%
Germany 30 Germany 0.7%
France 25 France -0.1%
New Zealand 18 New Zealand 3.2%
Turkey 15 Turkey 4.7%
UK 14 UK -0.6%
Poland 12 Poland 0.5%
Netherlands 12 Netherlands 0.7%
Argentina 11 Argentina 1.4%
Italy 11 Italy -1.0%
Ukraine 11 Ukraine -1.9%
Mexico 11 Mexico 1.3%
Australia 9 Australia -1.5%
Canada 8 Canada 0.4%
Spain 8 Spain 0.4%
Japan 7 Japan -1.0%
Iran 7 Iran 2.0%
Uzbekistan 7 Uzbekistan 6.4%
Belarus 7 Belarus 3.0%
Ecuador 6 Ecuador 10.1%
Colombia 6 Colombia 0.0%
Egypt 6 Egypt 3.9%
Ireland 6 Ireland 0.3%
Kazakhstan 5 Kazakhstan 2.9%
Romania 5 Romania 0.8%

Source: UN FAO AgStat database; Coriolis analysis 15

iFAB 2013
 KEY PRODUCTION METRICS iFAB 2013

New Zealand is increasing milk production long term through (1) more cows on (2) more hectares (3) producing
more milk per cow; 6% of the country is currently farmed as dairy
TOTAL EFFECTIVE HECTARES IN DAIRY VS. % OF NZ AREA TOTAL DAIRY COWS
Ha; 81/82-10/11 Head; million; 81/82-10/11
1.8 29y
5.0
CAGR 29y
1.6 6.0% 4.5
1.7% CAGR
1.4 4.0 2.8%
5.0%
1.2 3.5
Hectare 1.0 4.0% 3.0
% of NZ
m area 2.5
0.8 3.0%
2.0
0.6
2.0% 1.5
0.4 1.0
1.0%
0.2 0.5
- 0.0% -
1981/82
1982/83
1983/84
1984/85
1985/86
1986/87
1987/88
1988/89
1989/90
1990/91
1991/92
1992/93
1993/94
1994/95
1995/96
1996/97
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11

1981/82
1982/83
1983/84
1984/85
1985/86
1986/87
1987/88
1988/89
1989/90
1990/91
1991/92
1992/93
1993/94
1994/95
1995/96
1996/97
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
AVERAGE KG MILKFAT PER COW TOTAL MILK PRODUCTION1
Kilograms/cow; 81/82-10/11 29y Tonnes; million; 1982-2011
200 CAGR
20
180
1.0% 29y
18
160
CAGR
16
3.4%
140 14
120 12
100 10
80 8
60 6
40 4
20 2
0 -
1981/82
1982/83
1983/84
1984/85
1985/86
1986/87
1987/88
1988/89
1989/90
1990/91
1991/92
1992/93
1993/94
1994/95
1995/96
1996/97
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11

1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Note: 2010/11 data latest available as of October 2013; 1. Uses CY data from UN FAO as DairyNZ data does not include town milk supply prior to 1998/99 season;
Source: DairyNZ New Zealand Dairy Statistics 2010-11; UN FAO AgStat database; MAF/MPI; Coriolis analysis 17
RATE OF IMPROVEMENT iFAB 2013

The efficiency of the New Zealand pastoral dairy system is improving, as are competing systems

93 YEARS GROWTH IN NEW ZEALAND BUTTERFAT PER COW MILK PER COW: NZ VS. SELECT PEERS CAGR
(kg/cow; 1917-2011) (t/cow; 1961-2011) (61-11)
200 10.0
USA 2.2%
R² = 0.94515 Obviously milk per cow is
180 9.0 only one variable in total
system competitiveness Denmark 1.7%
CAGR
160 (17-11) 8.0
0.9%

140 7.0

120 6.0 Australia 2.1%

100 5.0 Ireland 1.9%

Argentina 2.0%

80 4.0
New Zealand 0.6%

60 3.0 China 1.8%

Chile 0.7%
40 2.0

Brazil 1.3%
20 1.0

- -
1917
1921
1925
1929
1933
1937
1941
1945
1949
1953
1957
1961
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
2005
2009

1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
Source: UN FAO AgStat; Statistics NZ; Department of Statistics; DairyNZ; Coriolis analysis 18
PRICES iFAB 2013

The price of milksolids per kilogram has been growing at 4.6% over the past two decades while the price of
dairy farms per hectare has been growing at 9%
AVERAGE DAIRY COOP PAYOUT PER KG. MILKSOLIDS AVERAGE DAIRY LAND SALE VALUE PER HECTARE
NZ$; actual and inflation-adjusted; 91/92-10/11 NZ$; 1991-2012

$9.00
$35,000
Nominal Inflation adjusted
$8.00
19y $30,000
CAGR
$7.00 2.2%

$25,000
$6.00 21y
CAGR
9%
$5.00 $20,000
19y
CAGR
$4.00 4.6%
$15,000

$3.00

$10,000
$2.00

$1.00 $5,000

$- N/A
$-
1991/92
1992/93
1993/94
1994/95
1995/96
1996/97
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11

1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Source: DairyNZ; Quotable Value; Coriolis analysis 19
iFAB 2013
NUMBER OF FIRMS iFAB 2013

The number of dairy processing firms has grown, particularly since the melamine crisis in China in 2008

NUMBER OF DAIRY PROCESSING ENTERPRISES1 CHANGE IN NUMBER OF DAIRY PROCESSING ENTERPRISES

Enterprises; 2002-2012 CAGR; absolute change; periods as given

89
85
80
CAGR 10y 5.3% ABS 10y 36
73

58 58 59 58
57
53 52

CAGR 5y 8.6% ABS 5y 30

CAGR 1y 4.7% ABS 1y 4

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Note: 2012 data latest available as of October 2013; 1. Defined as C113-100 Milk & Cream processing and C113-300 Other dairy processing; Source: Statistics NZ business demographics database; Coriolis analysis 21
iFAB TOP TEN DAIRY FIRM TURNOVER FY12 iFAB 2013

Fonterra continues as the largest dairy firm in New Zealand by turnover in FY12

ANNUAL TURNOVER BY TOP 10 DAIRY FIRMS

NZ$m; FY2012

Fonterra 1 $19,769

Open Country 2 $641

Meadow Fresh 3 $546

Westland 4 $534

Synlait 5 $377

Tatua 6 $228

Miraka 7 $125

Dairy Goat 8 $118*

A2 9 $62

Lion Dairy 10 $28

Source: various company annual reports; NZCO; Coriolis estimates and analysis 22
iFAB TOP TEN DAIRY TURNOVER GROWTH FY12 iFAB 2013

In FY12 Miraka, Synlait & Dairy Goat led in absolute growth and Miraka, A2 & Dairy Goat led in rate of growth

CHANGE IN ANNUAL TURNOVER BY TOP 10 DAIRY FIRMS ANNUAL TURNOVER % GROWTH BY TOP 10 DAIRY FIRMS
NZ$m; FY2012 vs. FY2011 NZ$m; FY2012 vs. FY 2011

Miraka 1 $125 Miraka 1 ¥%

Synlait 2 $78 A2 2 48%

Dairy Goat 3 $30 Dairy Goat 3 34%

Tatua 4 $28 Synlait 4 26%

A2 5 $20 Tatua 5 14%

Westland 6 $19 Westland 6 4%

Lion Dairy 7 $0 Lion Dairy 7 1%

Meadow Fresh -$21 Fonterra -1%

Open Country -$38 Meadow Fresh -4%

Fonterra -$102 Open Country -6%

Source: various company annual reports; NZCO; Coriolis estimates and analysis 23
TOP TEN DAIRY FIRM TURNOVER iFAB 2013

Five year growth highlights robust growth of new market entrants, Westland & Dairy Goat Cooperative

5 YEARS ANNUAL TURNOVER BY TOP 10 DAIRY FIRMS 5y CAGR

NZ$m; FY2007-FY2012 (07-12)

Lion Dairy -9%

A2 N/C
$200 $228 Tatua 9%
$299 $377 Synlait N/C Dairy Goat 16%
$515 $534 Westland 13% Miraka N/C
$184
$- $567 $546 Meadow Fresh 4%
$501
$679 $641 Open Country 50%
$604
$143

$166
$233
$422
$204 $565
$112
$364 $497
$569
$289

$145 $19,871 $19,769 Fonterra 7%

$- $19,512
$295
$439
$84
$16,726
$16,035

$13,882

2007 2008 2009 2010 2011 2012

N/C = not calculable from data available; Source: various company annual reports; NZCO; Coriolis estimates and analysis 24
KEY PRODUCTION METRICS iFAB 2013

The dairy processing industry has not grown employment, suggesting productivity improvements

TOTAL EMPLOYMENT BY DAIRY PROCESSING ENTERPRISES CHANGE IN DAIRY PROCESSING EMPLOYMENT

Headcount; as of Feb; 2002-2012 CAGR; Absolute change; periods as given

12,620
11,960
11,640
10,950 10,870 10,810 10,890 10,750
10,440
9,910 9,950 CAGR 10y 1% ABS 10y 840

CAGR 5y 0% ABS 5y -120

CAGR 1y -1% ABS 1y -140

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Note: 2012 data latest available as of October 2013; 1. Defined as C113-100 Milk & Cream processing and c113-300 Other dairy processing; Source: Statistics NZ business demographics database; Coriolis analysis 25
EMPLOYMENT BY REGION iFAB 2013

Dairy processing employment growing in Waikato and Canterbury over last five years; flat to down elsewhere

DAIRY PROCESSING EMPLOYMENT BY REGION 5 YEAR CHANGE IN EMPLOYMENT BY REGION

Headcount; as of Feb; 2007-2012 CAGR; Absolute change; 2007-2012

10,870 10,810 10,890 10,750

10,440 Classified elsewhere -205
954 811 749
9,950 970 Classified elsewhere1
1,093 560 520 Northland
Northland -195
715 686 490

480 480 765 815 Auckland

890
920 Auckland -75
670 920
Waikato 535

3,030 3,045 Waikato

2,510 2,830
2,610 Bay of Plenty 10
2,565

HB/Gisb -36
410 Bay of Plenty
75 510 610 420
503 510 39 Hawkes Bay/Gisborne
50 55
95 60 Taranaki -47
1,870 1,570 Taranaki
1,180 1,823
1,913
1,850 W/M -230

Wellington/
1,060 1,190 1,040 830 M/N/T -12
800 Manawatu
1,080 104 Nelson/Tas/Marl
116 90 95 106 260 West Coast
240 230 240 240
96 West Coast 20
230
950 980 1,070 Canterbury
1,180 1,300
910
Canterbury 350
1,080 1,142 1,025
740 820 845 Otago/Southland
Otago/Southland -235
2007 2008 2009 2010 2011 2012

5y ABS
-120
1. Data is geographic level; classified elsewhere would include non-dairy processing activities (e.g. wholesaling); Source: Statistics New Zealand, Coriolis analysis 26
EMPLOYMENT BY FIRM iFAB 2013

Fonterra accounts for ~85% of industry employment; all other dairy firms account for 15%

DAIRY PROCESSING EMPLOYMENT BY KEY FIRM

Headcount; 2013

Meadow Fresh*, 930

Westland, 400

Tatua, 280

Open Country, 200

Fonterra, 9,000 Synlait, 171
Dairy Goat, 170
Lion Dairy, 100
Miraka, 78

* Includes dairy, meat, plant and allocated staff from HO, freight, supply chain, sales and merchandising staff; Source: SNZ business demographics; Kompass; various firm websites; published articles; Coriolis interviews &
analysis 27
iFAB TOP TEN NEW DAIRY INVESTMENT iFAB 2013

The top ten dairy investments that have emerged over the past few years total almost $2b

IDENTIFIED MAJOR INVESTMENTS IN NEW PLANT/EQUIPMENT

As of October 2013

Ra nk A nnou nc ed In v e s t m e n t F ir m F a c il it y Location O p e n e d /p l a n n e d

1 2010 $500 Fonterra World's largest 30 tonne an hour dryer Darfield Phase 1 : August 2012
Opened in two phases Phase 2: Sept 2013

2 Apr 2013 $250m Fonterra Evaluating extending plant and building Pahiatua -
another spray dryer

3 Dec 2012 $214m Yili Infant formula plant (47,000t, 100 Glenavy, Canterbury June 2014
people)

4 Feb 2013 $212m Yashili Processing plant (52,000t, 120 people) Pokeno Feb 2015

5 Jan 2013 $126m Fonterra New UHT plant (Milk and cream for FS), Waitoa, Waikato March 2014
90 new staff
6 2013 $103m + Synlait Dryer 3 (WMP, SMP, formulated) + new Dunsandel, Canterbury Aug 2015
$17m dry store (22,500m2) March 2014
7 June 2011 $100m Synlait New plant (Dryer 2, for IF and Dunsandel, Canterbury Sept 2011
Nutritionals)

8 Sept 2012 $100m Westland Three dryer powder plant, - consents Rolleston -
granted Feb 2012

9 July 2010 $90m Miraka Milk powder plant (35,000 WMP) Mokai, Taupo August 2011

10 April 2013 $67m Dairy Goat Second dryer (4x capacity), + canning Hamilton August 2014

Source: Coriolis from various published articles and annual reports 28

OTHER NEW DAIRY INVESTMENT iFAB 2013

A wide range of other dairy industry investments have been identified

IDENTIFIED MAJOR INVESTMENTS IN NEW PLANT/EQUIPMENT

As of October 2013

A nnou nc ed In v e s t m e n t F ir m F a c il it y Location O p e n e d /p l a n n e d

April 2013 $65m Tatua New specialty products drier planned Matamata 2015/2016 season
Sept 2012 - Westland Nutritional Products plant (wet mix) Hokitika April 2013
April 2013 - Paterson/Gardian New IF plant, (20,000.tpa, 11,500 cows) Balclutha, Otago Sept 2012
2011/2013 $53m Fonterra Further upgrades to dry distribution centre Whareroa, Taranaki 2012/August 2014
Oct 2012 $30m Fonterra Extension of Cream cheese mnfg. Te Rapa August 2013
May 2013 $27m Synlait Blending and consumer packaging 17,500MTpa Dunsandel, Canterbury June 2014
April 2013 $27m Miraka New UHT plant Mokai, Taupo Feb 2014
Nov 2012 $20m Open Country Plant upgrade (SMP, + Milk fats) Waharoa, Waikato June 2013
July 2010 - NZ Dairy Processing New UHT and dairy plant Tauranga
Jan 2011 $20m Westland Reverse osmosis plant Rolleston September 2011
2010 $20m Tatua New foods plant, specialty powders Matamata 2010/11 season
May 2013 $15m Synlait Upgrade to special drier, to produce lactoferrin in Dunsandel, Canterbury January 2014
spray dry form ; 23 MTpa
May 2013 $15m Synlait Ammix butter plant 25MTpa Dunsandel, Canterbury May 2015
June 2012 $11m Innovation Waikato Spray drier – pilot plant Hamilton June 2012
2011 $10m Tatua New permeate & hydrolstate plant Matamata August 2012
2013 - Kaimai Assets sold and company to convert to UHT milk Waharoa 2014

Source: Coriolis from various published articles and annual reports 29

iFAB TOP TEN DAIRY ACQUISITIONS iFAB 2013

All recent major acquisitions in the New Zealand dairy industry have involved foreign buyers or sellers

IDENTIFIED MAJOR ACQUISITIONS INVOLVING NEW ZEALAND DAIRY FIRMS

As of October 2013

Ra nk Acquirer Ta r g et Price Date Details

1 Bright Dairy (China) Synlait $82m July 2010 51% of Synlait

2 Southern Pastures
Limited Partnership
(Forsta AP-fonden,
Sweden)
3 Fonterra
CHH HBU & Rank Group ~$40-60m Aug 2013 Swedish Company investment includes 8 forestry converted dairy farms in
Property (Graeme Hart’s dairy (TBC) the Waikato 3,205ha
farms) Operated by Southern Pastures Management – supplying Fonterra
6% of Bega Cheese Australia A$46m Nov 2013 Acquired 6% of Australian cheese firm; “longstanding partnership”

4 Fonterra New Zealand Dairies $48.5m Sept 2012 Milk processing factory Studholme ,Waimate (former assets owned by
Nutritek Russia (in receivership) Nutritek), purchased out of receivership
5 Olam International NZ Farming Systems Uruguay $40m Nov 2012 Increased ownership from 78% acquired in 2010 to 90% allowing Olam to
(TBC) compulsorily acquire the rest (valued at $178m)
6 FrieslandCampina 7.5% of Synlait $24.15m July 2013 Netherlands coop invests in NZ dairy industry taking 7.5% of Synlait

7 Yili Oceania Dairy Ltd US$2.5m Dec 2012 Land use consent for the construction of a whole milk processing plant/IF
(TBC) ($214m, 100 jobs, 47,000 tpa), environmental consents and purchasing
rights on a 38 hectare site.
8 Synlait Milk Oceania Dairy Ltd - Feb 2011 Purchased supply contracts increasing farms from 105 to 135 in Waimate,
South Canterbury (agreement to acquire all assets based on land and
consents for plant failed).
9 Mengniu Yashili HK$12.5b June 2013 #2 Chinese dairy producer acquired #3 Chinese–owned infant formula firm;
(NZ$2b) including planned plant in Pokeno, Waikato
10 Pureland Dairy/ Kaimai assets - Sept 2013 Purchased by Pureland plans to export UHT milk
Yoomoo dairy
Source: Coriolis from various published articles and annual reports 30
FOREIGN INVESTORS iFAB 2013

New Zealand dairy companies have attracted significant foreign investment

FOREIGN INVESTMENT IN MAJOR NEW ZEALAND DAIRY FIRMS

As of October 2013

Date In v e s t o r Origin In v e s t m e n t Investor description

Oct 2013 SFL Holdings China Offer to buyout remaining shareholders in Private: Chinese diversified conglomerate
(Shanghai Pengxin Synlait Farms (awaiting OIO clearance)
74%, Maclean,Penno)
July 2013 FrieslandCampina Netherlands 7.5% of Synlait Milk Coop; #1 EU Coop; #5 dairy firm globally

June 2013 Mengniu China Yashili (including Pokeno IF plant plans) Listed; #2 dairy in China; #15 dairy firm globally; COFCO SOE 19%

Dec 2012 Yili China Building ~$214m IF plant in New Zealand Listed; #1 dairy in China; #12 dairy firm globally

Nov 2012 Olam Singapore 90% NZ Farming Systems Uruguay (18% to Listed; agribusiness and food ingredients conglomerate
78% in Aug 2010)
Sept 2010 Vinamilk Vietnam 19% of Miraka Listed; largest dairy company in Vietnam

July 2010 Bright China 39% of Synlait; diluted down from original Listed subsidiary of State Owned Enterprise
51%
May 2010 Freedom Foods Australia 18% of A2 Corp Listed; 82% Arrowvest; free-from & organic foods;

July 2008 Olam International Singapore 25% of Open Country Cheese Company (via. Listed; agribusiness and food ingredients conglomerate
Dairy Trust)
Nov 2007 Kirin Japan Lion Dairy (Yoplait factory in NZ) Listed; member Mitsubishi keiretsu; #2 Japanese brewer

June 2007 Mitsui & Co Japan 14% of Synlait; raised to 22%; now 8.4% Listed; trading company; member of Mitsui Group

Sept 2005 Goodman Fielder Australia NZDF; later traded for Mainland Listed; Australian baked goods & other foods company

Source: Coriolis from various published articles and annual reports 31

iFAB 2013
TOP 10 DAIRY FIRM PROFILES
1 2
FONTERRA CO-OPERATIVE GP
Theo Spierings
Chief Executive
DESCRIPTION: Fourth largest dairy company in the
world by turnover; first by milk intake
KEY PRODUCTS: Milk powder, butter, cheese,
yoghurt, formulas and other dairy products
OWNERSHIP: New Zealand; cooperative (10,578
farmer shareholders)
COMPANY NUMBER: 1166320
ADDRESS: 9 Princes Street, Auckland Central,
Auckland 1010
PHONE: +64 9 374 9000
WEBSITE: www.fonterra.com
YEAR FORMED: 2001
STAFF EMPLOYED: 17,000 (Global)
REVENUE: $19,769m (FY12), $18,643m (FY13)
COMPANY HIGHLIGHTS: Drought; precautionary
recall; plant expansions in NZ, New plants in Asia,
Investment of ~$1b in dairy farms in China
*Includes plant and allocated including HO staff, freight, supply chain, sales and merchandising staff; Source: Coriolis from various published articles and annual reports
iFAB 2013
3 4
OPEN COUNTRY GOODMAN FIELDER NZ WESTLAND
MEADOW FRESH DIV.
Steven Koekemoer Peter Reidie Rod Quin
Chief Executive Managing Director GFNZ Chief Executive
DESCRIPTION: A dairy ingredient manufacturer, 3 DESCRIPTION: Dairy division of major Australasian DESCRIPTION: Regional dairy cooperative based in
plants; capacity 900m l/year; 500 suppliers, exports food group (also includes meats businesses), milk West Coast region; expanding into Canterbury, 4%
to 45 countries and cultured foods plants in Palmerston North and milk supply
Christchurch, and a speciality cheese plant in Puhoi
Valley.
KEY PRODUCTS: Full range of Milk Powders KEY PRODUCTS: Milk, fresh and UHT, Cheese, KEY PRODUCTS: Milk powders, milk proteins,
(Standard and UHT), Milk Proteins, Milk Fats and Yoghurt, and other dairy products growing up milk powder, butter, base IF, bioactives,
Cheese ‘own made’ yoghurt “Easiyo”, other dairy products
OWNERSHIP: Private; AFFCO/Talley’s Group 54%; OWNERSHIP: Australia; listed on ASX/NZX; wholly OWNERSHIP: New Zealand; cooperative
Olam (Singapore) 25%; others owned subsidiary of Goodman Fielder Ltd (380+ farmers)
COMPANY NUMBER: 1911063 COMPANY NUMBER: 1715832 COMPANY NUMBER: 153032
ADDRESS: Unit L Building 4, 195 Main Highway, ADDRESS: 2/8 Nelson Street, Auckland, 1010 ADDRESS: 56 Livingstone Street, Hokitika, 7810 ,
Ellerslie, Auckland 1051 PO Box 90450, Victoria Street West, Auckland 1142 New Zealand
PHONE: +64 9 589 1372 PHONE: +64 9 301 6000 PHONE: +64 3 756 9800
WEBSITE: www.opencountry.co.nz WEBSITE: www.goodmanfielder.co.nz WEBSITE: www.westland.co.nz
www.meadowfresh.co.nz www.easiyo.com
YEAR FORMED: 2004/2007 YEAR FORMED: 1909/1968/1986/2005 YEAR FORMED: 1937
STAFF EMPLOYED: 200 STAFF EMPLOYED: Dairy & Meat Division 930* (GF STAFF EMPLOYED: 400
total NZ = 2,190)
REVENUE: $641m (FY12) REVENUE: Dairy NZ$546m (FY12) [ex- REVENUE: $534m (FY12) $535 (FY13)
Intercompany] NZ Total NZ$1,088m (FY12)
COMPANY HIGHLIGHTS: Company has increased COMPANY HIGHLIGHTS: Meadow Fresh formed as COMPANY HIGHLIGHTS: Commissioned a
number of suppliers to 600 and will process 947m part of a brand swap in 2005 (ex Mainland Nutritional wet products plant in Hokitika during
litres of their own milk for 2013/2014 season. Products). Export expansion plans from CHCH in 2013 and gained resource consents for new Rolleston
Focused on high quality ingredients is providing UHT could significantly increase production plant
steady growth and profitability.
33
TOP 10 DAIRY FIRM PROFILES iFAB 2013

5 6 7 8
SYNLAIT MILK LIMITED TATUA CO-OPERATIVE DAIRY MIRAKA DAIRY GOAT CO-OPERATIVE

John Penno Paul McGilvary Richard Wyeth Dave Stanley

Managing Director Chief Executive Chief Executive Chief Executive

DESCRIPTION: Synlait Milk is a Canterbury based DESCRIPTION: Specialist dairy ingredients and food DESCRIPTION: New Zealand dairy processing plant DESCRIPTION: Manufacturer of goat milk infant
dairy manufacturer focussed on supplying higher products manufacturer, 190ML of milkpa exports processing 240m litres of milk pa from 96 suppliers, formula and other dairy goat milk based nutritionals
value dairy products to leading milk-based health 94% of its products, exports to 60 countries manufacturing products for export to China and
and nutrition companies Vietnam

KEY PRODUCTS: Infant and adult nutritional KEY PRODUCTS: specialist ingredients (Caseinate, KEY PRODUCTS: WMP, SMP, Standard and UHT KEY PRODUCTS: Infant formula
formulations, Milk powders (WMP, SMP) functional whey proteins, AMF), nutritionals, whipped cream,
food ingredients, and specialised products specialty cheeses

OWNERSHIP: New Zealand; listed on NZX; Bright OWNERSHIP: New Zealand; cooperative OWNERSHIP: Wairarapa Moana Incorp 27%; OWNERSHIP: New Zealand; cooperative (65
(China) 39% ; Mitsui (Japan) 8%; Friesland (108 farmers) Tuaropaki Kaitiaki 27%; Vinamilk Vietnam Dairy farmers)
(Netherlands) 7.5% Products 19%

COMPANY NUMBER: 1600872 COMPANY NUMBER: 173822 COMPANY NUMBER: 2244299 COMPANY NUMBER: 421398

ADDRESS: 1028 Heslerton Road, Rakaia, Rd 13 , ADDRESS: State Highway 26, Tatuanui, Waikato ADDRESS: 108 Tuwharetoa Street, Taupo, 3330 , ADDRESS: 18 Gallagher Drive
New Zealand New Zealand Hamilton

PHONE: +64 3 373 3000 PHONE: +64 7 889 3999 PHONE: +64 7 376 0075 PHONE: + 64 7 839 2919

WEBSITE: www.synlait.com WEBSITE: www.tatua.com WEBSITE: www.miraka.co.nz WEBSITE: www.dgc.co.nz

YEAR FORMED: 2000/2005 YEAR FORMED: 1914 YEAR FORMED: 2009 YEAR FORMED: 1984 (Inc. 1989)

STAFF EMPLOYED: 130 (FY12), 171 (FY13) STAFF EMPLOYED: 280 STAFF EMPLOYED: 78 STAFF EMPLOYED: 170

REVENUE: $377 (FY12) $420 (FY13) REVENUE: $228m (FY12) REVENUE: $125m (‘FY12) $164m (FY13) REVENUE: $118m (FY12), $130m* (FY13)

COMPANY HIGHLIGHTS: Went public in July 2013
$120m capital raising it restructure debt and reinvest;
upgraded plant to produce spray dry lactoferrin
COMPANY HIGHLIGHTS: Plans for a new speciality
products drier worth $65m
COMPANY HIGHLIGHTS: New dairy plant
operating in Taupo with 36,000t WMP; New UHT
plant to be built to process Shanghai Pengxin farms
COMPANY HIGHLIGHTS: Revenue exceeded
$100m for first time in FY12; building second dryer
with 4x capacity for $67m; 14 new suppliers for
13/14 season; CEO stepping down March 2014 after
20 years; being replaced by Tony Giles

* Estimate; Source: Coriolis from various published articles and annual reports 34
TOP 10 DAIRY FIRM PROFILES iFAB 2013

9 10
A2 CORPORATION LION DAIRY & DRINKS NZ

Geoff Babidge Peter Kean

Managing Director MD - Lion Dairy & Drinks

DESCRIPTION: Genetic testing for A2 gene, related DESCRIPTION: New Zealand operations of licensed
IP and retailing of A2 brand dairy products manufacturer of Yoplait brand in Australasia, NZ is
regional division of large dairy, beverages company.

KEY PRODUCTS: Milk, infant formula, other dairy KEY PRODUCTS: Yoghurt

OWNERSHIP: New Zealand; listed on NZX; 17% OWNERSHIP: Japan; Kirin Holdings; listed on
Freedom Foods (Australia) TYO:2503 (via. National Foods Au )

COMPANY NUMBER: 1014105 COMPANY NUMBER: 1035697

ADDRESS: PO Box 109 349, Newmarket 1149, ADDRESS: 27 Napier Street, Freemans Bay,
Auckland Auckland 1011

PHONE: +61 2 9697 7000 PHONE: +64-6-355 1155

WEBSITE: a2corporation.com WEBSITE: www.yoplait.co.nz/

www.lionco.com/brands/dairy-and-drinks/

YEAR FORMED: 2000 YEAR FORMED: 2000

STAFF EMPLOYED: 70 (worldwide) STAFF EMPLOYED: 50 (plant), 49 (HO) = 99

REVENUE: NZ$62m (FY12), NZ$94.3m (FY13) REVENUE: $28m (FY12)

COMPANY HIGHLIGHTS: UK JV launched Robert COMPANY HIGHLIGHTS: Since 2011 known as Lion
Wiseman; launched A2 Platinum into Chinese
market; $20m capital raising; moved to NZX ;
contracted Synlait to manufacture a2 IF; new milk
processing plant in Sydney, AU (2012)

Source: Coriolis from various published articles and annual reports 35

OTHER DAIRY FIRM PROFILES iFAB 2013

Ownership
Company MD/CEO Business description Company # Formed Revenue Staff Address Website

CANARY ENTERPRISES Derek Bartosh Portion controlled butter Private 2001 $15- 30 33 Kaimiro Street www.canarybutter.co.nz
Director 1116438 20m* PO Box 20241, Te Rapa
Hamilton

BALLANTYNE FOODS Andrew Ballantyne Canned butter factory in Private 1936 BF $6m n/a Allen Street www.ballantyne.com.au
NZ BUTTER CANNERS Director Morrinsville factory (NZ Butter 2367708 (AU) (FY12) Morrinsville
Canners) is 50% owned by 1980 $31
Fonterra (NZ) (07)

KLONDYKE FRESH Nigel Gormack Fluid milk manufacturing plant Private 2003 $8- 35 19 Klondyke Drive, www.klondykefresh.co.nz
Director in Christchurch 1409139 12m* Hornby, Christchurch

THE GRATE KIWI Michael Laird Processor & repacker of bulk Private 1990/ TBD 40 67-69 Druces Rd www.kiwicheese.co.nz;
CHEESE CO. Director cheese into large catering packs 1790551 2006 Manukau Auckland
GKC 2013 of cheese; store brand cheese (DIFL 30%)

MILLIGANS FOOD Bruce Paton Milk Powders, Cheese, Cheese Private 1896/ $20-25 21-50 1 Chelmer Street, www.milligans.co.nz
GROUP Managing Director Sauce, Butter, AMF, WPC, WPI, 565193 1993 (CE) Oamaru, 9400
Ice Cream, Syrups, Flour,
Bakery Products, Mayonnaise

BLUE RIVER DAIRY Keith Neylon Sheep: Cheese, milk powder, Private 2013 $10- 25 111 Nith Street, www.blueriverdairy.co.nz
Director ice cream (canning plant), 4583083 15m* Invercargill, 9810
starting sheep IF

EPICUREAN DAIRY Angus Allan Gourmet soft cheeses, Private 2009/ $7- n/a 119 Lansford Crescent, www.epicdairy.com
Director smoothies, yoghurt and 3734658 2012 10m* Avondale, Auckland 1026 www.thecollectivedairy.com
haloumi

GREEN VALLEY Bruce Pulman Organic milk & cream, yoghurt Private (HEB 2003 $2-5m n/a 206 Bell Road www.gvd.co.nz
DAIRIES Director & butter Contstruction) Mangatawhiri, North www.marphona.co.nz/
1280111 Waikato 2471

WHITESTONE CHEESE Bob Berry Specialty cheeses (blue, brie, Private 1966/ $5-10m 60 3 Torridge St, Oamaru www.whitestonecheese.co.nz
Managing Director feta, camembert, hard) butter 147247 1987 9400
Simon Berry
CEO

* Estimate based on number of employees and type of business activity; Source: Coriolis from various published articles and annual reports 36
OTHER DAIRY FIRM PROFILES iFAB 2013

Ownership
Company MD/CEO Business description Company # Formed Revenue Staff Address Website

KAIMAI CHEESE CO Jiahui Miao Soft and hard cheese Private 2005 $2-5* 15 Hawes Street, Waharoa, www.kaimai.co.nz
CEO manufacturer, inc. brie, blue, (Singapore) Waikato acquired Te Mata in 2009
camembert Pureland Dairy Oct 2013 sold assets for cheese
and converting to UHT

BIOFARM Catherine Tait- Organic yoghurt, butter and Private 1993 $2-5* n/a 118 Te Matai Road, www.biofarm.com
Jamieson milk products 577954 Palmerston North
Director

YASHILI NZ DAIRY William Zhao In progress dairy/infant formula Public (China) 2012 $0 n/a 666 Great South Road,, www.yashili.hk
GM New Zealand plant in Pokeno; parent recently 3922659 Level 2, Building 10, www.mengniuir.com
acquired by Mengniu Ellerslie, Auckland, 1051

Inner Mongolia YILI n/a Purchased land to build a IF Public (China) n/a $0 n/a Morven, South Canterbury
Industrial Group Co. plant in Morven 90%, Hohhot
Invest (10%)

* Estimate based on number of employees and type of business activity; Source: Coriolis from various published articles and annual reports 37
iFAB 2013
DAIRY EXPORTS BY REGION iFAB 2013

Over the past decade New Zealand dairy exports have achieved strong growth driven primarily by the
developing world; however they are down in the last year
10 YEAR NEW ZEALAND DAIRY EXPORT VALUE BY SUPER-REGION 10 Year
US$m; 2002-2012 CAGR Absolute
$10,249 $10,226 TOTAL 13% +$7,085m

$2,813
$3,174 E Asia 20% +$2,653m
10y $7,995
CAGR
13% $7,445

$1,201 $2,135
$6,345
$1,888
$5,735 $1,805 SE Asia 12% +$1,223m
$980
$1,634 $481
$1,241 $1,592 $372 Indian Sub 17% +$293m
$4,639
$4,239 $1,431
$270
$3,875 $773
$397 $1,915
$772 $229 $1,119 $1,945 NA/ME/CA 19% +$1,609m
$3,341 $1,315
$747 $896
$2,966 $1,019 $226 $1,309
$572 $787 $403
$169 $259 SS Africa 26% +$342m
$521 $772 $140 $1,025 $380
$201
$695 $112 $779 $307
$581 $627 $1,005 $963 C/S America 8% +$467m
$92 $492 $927 $212 $862
$80 $95 $151 $784
$381 $90
$336 $67 $485 $514 $434 $586 $520 Australia/ Pacific Is. 11% +$289m
$38 $422 $441 $334 $445
$396 $224 $234 $254 $311 $465
$156 $163 $826 $720
$645 $611 $720 $541 $805 N. America 6% +$358m
$447 $477 $545 $598
$413 $471 $452 $453 $490 $504 $502 $416 $467 $545 $438 Europe 1% +$25m

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: UN Comtrade database; Coriolis analysis 39
EXPORT DOLLARS iFAB 2013

China continues to be the number one dairy export market

TOP 25 DAIRY MARKETS BY EXPORT VALUE

US$m; 2012

China $2,142
USA $686
Japan $395
Saudi Arabia $385
United Arab Emirates $375
Malaysia $371
Venezuela $367
Philippines $364
Indonesia $355
Algeria $329
Australia $326
Egypt $287
Singapore $252
Thailand $235
Sri Lanka $209
Viet Nam $204
Taiwan $203
Iran $177
Mexico $171
Rep. of Korea $159
Nigeria $139
*Hong Kong SAR $138
Germany $113
Bangladesh $105
Peru $96

*Hong Kong Special Administrative Region (SAR); Source: UN Comtrade database; Coriolis analysis 40
EXPORT DOLLAR GROWTH iFAB 2013

China & Middle East driving dollar value growth

TOP 25 DAIRY MARKETS BY CHANGE IN EXPORT VALUE

US$m
5 YEAR CHANGE; 07-12 1 YEAR CHANGE; 11-12
China $1,839 China $365
United Arab Emirates $299 Hong Kong SAR $56
Egypt $172 United Arab Emirates $54
Algeria $162 Egypt $54
Venezuela $106 USA $50
Malaysia $100 Peru $49
Hong Kong SAR $99 Indonesia $42
Singapore $99 Libya $37
Iran $98 Germany $32
USA $98 Nigeria $30
Indonesia $97 Viet Nam $27
Saudi Arabia $93 Iran $18
Bangladesh $87 Belgium $17
Peru $78 Pakistan $12
Nigeria $76 Chile $12
Australia $72 Oman $10
Rep. of Korea $64 South Africa $8
Taiwan $56 Azerbaijan $7
Japan $49 Malaysia $5
Libya $48 Guyana $5
Viet Nam $47 Papua New Guinea $5
Sri Lanka $40 Senegal $3
Thailand $40 Jordan $3
Sudan $38 Canada $3
Germany $36 Ukraine $3

Source: UN Comtrade database; Coriolis analysis 41

EXPORT DOLLAR DECLINE iFAB 2013

Mexico, Denmark & Thailand leading declining markets by value

BOTTOM 25 DAIRY MARKETS BY CHANGE IN EXPORT VALUE

US$m
5 YEAR CHANGE; 07-12 1 YEAR CHANGE; 11-12
Net
-$1 Neth. Antilles -$81m -$6 Mauritius
-$1 Seychelles -$8
-$2 Tajikistan -$9 Bahrain
-$2 Poland -$9
-$2 Ghana -$12 Italy
-$2 Jamaica -$13
-$3 Kuwait -$19 Sudan
-$3 Argentina -$19
-$3 Pakistan -$20 Morocco
-$4 Brazil -$21
-$6 El Salvador -$22 Japan
-$26
-$8 Oman
-$26 Singapore
-$9 United Kingdom
-$35
-$10 Guatemala -$37 Syria
-$11 Panama -$41
-$16 Dominican Rep. -$45 Taiwan
-$18 Philippines -$49
-$27 Syria -$54 Sri Lanka
-$38 Italy -$58
-$50 Canada -$64 Algeria
-$63 Belgium -$67
-$67 Cuba -$79 Thailand
-$70 Denmark -$95
-$179 Mexico -$110 Denmark

Source: UN Comtrade database; Coriolis analysis 42

PERCENT GROWTH iFAB 2013

Strong growth rates coming out of Uruguay, Iraq & Africa

TOP 25 DAIRY MARKETS BY CAGR PERCENT CHANGE IN EXPORT VALUE

US$m; %
5 YEAR CAGR; 07-12 1 YEAR CHANGE; 11-12

Mongolia 162% Uruguay 900%

Iraq 161% Iraq 387%
Ukraine 146% Tanzania 369%
Côte d'Ivoire 137% Libya 245%
Sierra Leone 78% Sierra Leone 240%
Macao SAR 77% Suriname 221%
Mozambique 76% Mozambique 201%
Libya 68% Kazakhstan 167%
Uruguay 63% Macao SAR 152%
Romania 57% Kiribati 145%
Suriname 49% Chile 122%
China 48% Tunisia 108%
Turkey 46% Niue 106%
Bangladesh 42% Dominica 104%
Peru 40% Peru 101%
Senegal 40% Nepal 84%
Madagascar 39% Djibouti 83%
Myanmar 38% Hong Kong SAR 68%
United Arab… 38% Spain 64%
India 33% Seychelles 62%
Djibouti 33% Pakistan 56%
Haiti 33% Guinea 51%
Chile 32% El Salvador 42%
Bahrain 30% Guyana 41%
Hong Kong SAR 29% Germany 40%

Source: UN Comtrade database; Coriolis analysis 43

PERCENT DECLINE iFAB 2013

Argentina & Eastern Europe stand out in declining markets

TOP 25 DAIRY MARKETS BY CAGR PERCENT CHANGE IN EXPORT VALUE

US$m
5 YEAR CAGR; 07-12 1 YEAR CHANGE; 11-12
-20% Congo -53% Italy
-22% Dominican Rep. -53% Cambodia
-25% Seychelles -53% Tuvalu
-26% United Rep. of Tanzania -54% Syria
-26% Italy -54% Bolivia
-28% Cuba -55% Dominican Rep.
-29% Bolivia -68% Benin
-29% Gabon -70% Marshall Isds
-31% Switzerland -70% Switzerland
-34% Tajikistan -72% India
-38% Denmark -72% Cuba
-100% Ecuador -81% Gabon
-100% Uganda -82% Liberia
-100% Gibraltar -83% Congo
-100% Belarus -89% Honduras
-100% Cayman Isds -90% Gambia
-100% Croatia -92% Palau
-100% Malta -94% Denmark
-100% Cyprus -95% Tajikistan
-100% Albania -97% Mauritania
-100% Bulgaria -100% Slovenia
-100% Comoros -100% Chad
-100% Neth. Antilles -100% Lithuania
-100% Zambia -100% Zambia
-100% Argentina -100% Argentina

Source: UN Comtrade database; Coriolis analysis 44

BENCHMARK – EXPORT GROWTH VS. COMPETITORS iFAB 2013

New Zealand’s dairy export performance in a difficult year globally was good relative to key competitors other
than the United States (discussed next page)
TOTAL DAIRY EXPORT VALUE IN 2012: NZ VS. COMPETITORS
US$m; 2012; 2012 vs. 2011

EXPORT VALUE 2012 1 YEAR $ CHANGE IN VALUE 1 YEAR % CHANGE IN VALUE

Germany $10,509 USA $269 USA 6%

New Zealand $10,226 Australia $9 Canada 2%

France $8,001 Canada $5 Australia 0%

Netherlands $7,815 Japan -$11 New Zealand 0%

USA $4,991 New Zealand -$23 France -5%

Denmark $2,685 Denmark -$162 Denmark -6%

Ireland $2,470 Argentina -$188 Germany -6%

Australia $2,440 France -$403 Netherlands -10%

Argentina $1,390 Ireland -$421 Argentina -12%

Canada $215 Germany -$666 Ireland -15%

Japan $39 Netherlands -$865 Japan -22%

Source: UN Comtrade database; Coriolis analysis 45

FOCUS – NZ VS. USA iFAB 2013

The United States is growing dairy exports in a range of traditional New Zealand markets as New Zealand
reorients to China
DAIRY EXPORT VALUE: NZ VS. USA TOP 15 US DAIRY EXPORT MARKETS BY 1Y VALUE GROWTH VS. NZ
US$m; 2011-2012 US$m; 2012 vs. 2011

-$400 -$200 $- $200 $400 $600

-$23 Mexico
$10,249 $10,226 China

New Zealand Lactose primarily

for infant formula
Philippines

Canada

Algeria

Brazil

Peru NZ
+$269
$4,991 Chile USA
$4,722
Australia

Iran

Morocco

Singapore

Colombia

Saudi Arabia
2011 2012 2011 2012
NET Other
New Zealand USA

Source: UN Comtrade database; Coriolis analysis 46

iFAB 2013
DAIRY – EXPORTS BY TYPE iFAB 2013

New Zealand dairy exports have achieved strong overall growth in the past decade

10 YEAR NEW ZEALAND DAIRY EXPORT BY CATEGORY/SUPER-CATEGORY (HS4/6 LEVEL) 10 Year

US$m; 2002-2012 CAGR Absolute
$10,249 $10,226 TOTAL 13% +$7,259m
$330 $420 Other 6% +$177m
$613
$717 Caseins 4% +$244m
$40
$50 All lactose 11% +$32m
$1,078
10y $7,995 $1,171 All cheeses 8% +$626m
CAGR
13% $7,445 $282
$476
$345 $33 $1,968 $1,606 Butter & fats 13% +$1,118m
$6,345 $696 $1,023
$53
$295 $5,735 Whey & natural 45% +$586m
$557 $601
$621 $1,135 milk cons.
$233
$70 $1,545
$528
$4,639 $963 $40
$4,239 $192 $1,213 $856 $419
$3,875 $213 $484
$34 $880
$3,341 $296 $463 $507
$35 $803 $950 $4,222 $4,243 Whole Milk 20% +$3,543m
$2,966 $278 $467 $455 Powder (WMP)
$22 $758
$243 $483 $353
$688 $699 $3,066
$473 $17 $661
$18 $561 $322 $2,513
$545 $636 $299 $2,041
$550 $119 $1,859
$487 $20 $1,395
$15 $1,120 $1,277
$700 $931 Skim Milk Powder 11% +$808m
$1,274 $1,253
$949 $880 $829 $1,023 (SMP)
$445 $462 $472 $477 $657
$40 $39 $55 $55 $53 $72 $104 $89 $127 $167 $165 Fluid milk & cream 15% +$126m
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: UN Comtrade database; Coriolis analysis 48

EXPORT DOLLARS iFAB 2013

Whole and skim milk powder continue to be New Zealand’s two largest dairy exports; however there is a strong
group of other emerging dairy products
EXPORT VALUE OF TOP 22 DAIRY PRODUCTS (HS6 LEVEL) EXPORTS IN 2012
US$m; 2012

Whole Milk Powder $4,243

Skim Milk Powder $1,253
Butter $916
Cheese, cheddar, etc. $799
Other milk fats and oils $680
Natural milk constituent nes $513
Casein $407
Caseinates/other derivatives $310
Fresh cheese $185
Buttermilk powder, other fermented $129
Grated or powdered cheese $97
Processed cheese $88
Whey & modified whey $87
UHT milk, other whole fluid $86
High fat fluid milk $74
Lactose 99% $50
Sweetened WMP $30
Dairy spreads $9
Yogurt $8
Low fat fluid milk $5
Sweetened condensed $4
Blue-veined cheese $2

Source: UN Comtrade database; Coriolis analysis 49

EXPORT DOLLAR GROWTH iFAB 2013

In 2012, casein and cheese grew export value, while butter and other fats were down

ANNUAL CHANGE IN EXPORT VALUE OF TOP 22 DAIRY EXPORTS

US$m; 2012 vs. 2011

Casein $97
Cheese, cheddar, etc. $94
Fresh cheese $26
Natural milk constituent nes $24
Bulk Infant Formula; other sweet WMP $20
WMP $20
Whey & modified whey $19
Lactose 99% $10
Caseinates/other derivatives $7
Yogurt $5
Sweetened condensed $4
Buttermilk powder, other fermented $3
UHT milk, other whole fluid $2
Low fat fluid milk $2
Blue-veined cheese $0
Dairy spreads -$5
High fat fluid milk -$6
Processed cheese -$8
Grated or powdered cheese -$18
SMP -$20
Other milk fats and oils -$141
Butter -$216

Net
-$81m
Source: UN Comtrade database; Coriolis analysis 50
PERCENT GROWTH iFAB 2013

In 2012, sweetened condensed milk, bulk infant formula and yogurt grew at the fastest rate

ANNUAL PERCENT GROWTH IN TOP 22 DAIRY EXPORTS

US$m; 2012 vs. 2011

Sweetened condensed 3,344%

Bulk IF; other sweet WMP 209%
Yogurt 201%
Low fat fluid milk 52%
Casein 31%
Whey & modified whey 28%
Lactose 99% 25%
Fresh cheese 16%
Cheese, cheddar, etc. 13%
Blue-veined cheese 9%
Natural milk constituent nes 5%
UHT milk, other whole fluid 3%
Buttermilk powder, other fermented 2%
Caseinates/other derivatives 2%
WMP 0%
SMP -2%
High fat fluid milk -7%
Processed cheese -8%
Grated or powdered cheese -16%
Other milk fats and oils -17%
Butter -19%
Dairy spreads -34%

Source: UN Comtrade database; Coriolis analysis 51

$/KG iFAB 2013

In 2012 blue vein cheese, bulk/base infant formula, sweetened condensed milk and caseins lead in terms of
export dollars per kilo
VALUE PER KILOGRAM OF TOP 22 DAIRY EXPORTS
US$m; 2012

Blue-veined cheese $13.82

Bulk IF; other sweet WMP $10.60
Sweetened condensed $10.29
Caseinates/other derivatives $9.73
Casein $8.03
Whey & modified whey $6.00
Natural milk constituent nes $5.73
Yogurt $4.80
Processed cheese $4.04
Grated or powdered cheese $3.85
Fresh cheese $3.68
Cheese, cheddar, etc. $3.61
Butter $3.32
WMP $3.31
Other milk fats and oils $3.23
SMP $3.17
Dairy spreads $3.09
Buttermilk powder, other fermented $3.00
Lactose 99% $2.41
High fat fluid milk $2.27
Low fat fluid milk $1.28
UHT milk, other whole fluid $0.89
Wt. Average
$3.47
Source: UN Comtrade database; Coriolis analysis 52
$/KG CHANGE iFAB 2013

In 2012 sweetened condensed milk and bulk/base infant formula achieved good price increases, while fats and
casein were down strongly
ANNUAL CHANGE IN VALUE PER KILOGRAM OF TOP 22 DAIRY EXPORTS
US$m; 2012 vs. 2011

Sweetened condensed 837%

Bulk IF; other sweet WMP 375%
Yogurt 111%
Lactose 99% 44%
Caseinates/other derivatives 43%
Whey & modified whey 40%
Blue-veined cheese 13%
Low fat fluid milk 7%
UHT milk, other whole fluid 2%
Grated or powdered cheese -9%
Fresh cheese -21%
High fat fluid milk -27%
SMP -29%
Processed cheese -34%
WMP -42%
Buttermilk powder, other fermented -43%
Natural milk constituent nes -47%
Cheese, cheddar, etc. -48%
Dairy spreads -88%
Butter -96%
Casein -98%
Other milk fats and oils -165%

Source: UN Comtrade database; Coriolis analysis 53

iFAB 2013
DAIRY – INDUSTRY ORGANISATIONS iFAB 2013

As a major dairy producer, New Zealand has a strong range of dairy industry organisations

KEY DAIRY INDUSTRY ORGANISATIONS

2013

Representing Funding Website/notes

DairyNZ Farmers - Levy and other funding www.dairynz.co.nz
- Govt co-funded research program (e.g. Merger of Dairy InSight and Dexcel
Primary Growth Partnership $170m)

Processors & - Membership Fees www.dcanz.com

exporters

Farmers & - Membership Fees www.fedfarm.org.nz/industry/dairy

sharemilkers

NZ Large Herd Large farmers - Conference fees www.largeherds.co.nz

Association

Source: Coriolis analysis 55

DAIRY – INDUSTRY SCIENTIFIC RESEARCH iFAB 2013

New Zealand has strength in dairy research across a range of research institutes

KEY DAIRY RESEARCH BODIES IN NEW ZEALAND

2013

Focus & activities

- www.riddet.massey.ac.nz
Riddett Institute - Hosted by Massey University in partnership with University of Otago, The University of Auckland, Plant and Food
Research, AgResearch
- National Centre of Research Excellence (CORE)
- Research in food industry in particular the dairy industry
- www.fonterraresearch.com
- Fonterra Research Centre
- Dairy centre and pilot plant in Palmerton North

AgResearch - Foods & Bio-based Products; food composition and function, The role of foods in human health and wellbeing

- Industry good activity

- Research farms, feed, farm systems, animal sciences

Source: Coriolis analysis 56

METHODOLOGY & DATA SOURCES
Data was from a variety of sources, and has a number of identified limitations
This report uses a range of information sources, both qualitative and
quantitative.
The numbers in this report come from multiple sources. While we
believe the data are directionally correct, we recognise the limitations in
what information is available. In many cases different data sources
disagree (e.g. Statistics New Zealand vs. FAO vs. UN Comtrade).
Many data sources themselves incorporate estimates of industry
experts (e.g. FAO AgStat). As one example, in many cases, the value
and/or volume recorded as exported by one country does not match
the amount recorded as being received as imports by the counterparty
[for understood reasons]. In addition, in some places, we have made
our own clearly noted estimates.
All trade data analysed in all sections of the F&B Information project are
calculated and displayed in US$. This is done for a range of reasons:
1. It is the currency most used in international trade
2. It allows for cross country comparisons (e.g. vs. Denmark)
3. It removes the impact of NZD exchange rate variability
4. It is more comprehensible to non-NZ audiences (e.g. foreign
investors)
5. It is the currency in which the United Nations collects and
tabulates global trade data
iFAB 2013
The opinions expressed in this report represent those of the industry
participants interviewed and the authors. These do not necessarily
represent those of Coriolis Limited or the New Zealand Government.
Coriolis has not been asked to independently verify or audit the
information or material provided to it by or on behalf of the Client or any
of the data sources used in the project. The information contained in
the report and any commentary has been compiled from information
and material supplied by third party sources and publicly available
information which may (in part) be inaccurate or incomplete. Coriolis
makes no representation, warranty or guarantee, whether express or
implied, as to the quality, accuracy, reliability, currency or completeness
of the information provided in the report.
If you have any questions about the methodology, sources or accuracy
of any part of this report, please contact project lead Tim Morris at
Coriolis, on +64 9 623 1848
57
TRADE CODES iFAB 2013

Project defines the following trade codes as dairy

GLOBAL HARMONISED SYSTEM (HS) TRADE CODES DEFINED AS DAIRY

HS2002

HS Code Short Description Longer official description

040110 Low fat fluid milk Milk not concentrated nor sweetened < 1% fat
040120 UHT milk, other whole fluid Milk not concentrated nor sweetened 1-6% fat
040130 High fat fluid milk Milk and cream not concentrated nor sweetened < 6% fat
040210 SMP (skim milk powder) Milk in powder/granules/other solid form, fat content by wt. not >1.5%
040221 WMP (whole milk powder) Milk in powder/granules/other solid form, unsweetened, fat content by wt. >1.5%
040229 Bulk IF (infant formula); other sweet WMP Milk in powder/granules/other solid form, sweetened, fat content by wt. >1.5%
040291 Unsweetened condensed Milk & cream, concentrated (excl. in powder), unsweetened
040299 Sweetened condensed Milk & cream, concentrated (excl. in powder), sweetened
040310 Yogurt Yogurt
040390 Buttermilk powder, other fermented Buttermilk/curdled milk & cream/kephir & other ferm./acidified milk & cream, whether or not concentrated/sweetened/flavoured/cont. fruit/nuts/cocoa
040410 Whey & modified whey Whey & modified whey, whether or not concentrated/sweetened
040490 Natural milk constituent nes Milk prods. of nat. milk constituents, whether or not sweetened, n.e.s.
040510 Butter Butter
040520 Dairy spreads Dairy spreads
040590 Other milk fats and oils Fats & oils derived from milk, other than butter & dairy spreads
040610 Fresh cheese Fresh (unripened/uncured) cheese, incl. whey cheese, & curd
040620 Grated or powdered cheese Grated/powdered cheese, of all kinds
040630 Processed cheese Processed cheese, not grated/powdered
040640 Blue-veined cheese Blue-veined cheese
040690 Cheese, cheddar, etc. Cheese (excl. of 0406.10-0406.40)
170211 Lactose 99% Lactose & lactose syrup, cont. by wt. 99%/more lactose, expressed as anhydrous lactose, calc. on the dry matter
170219 Lactose, other Lactose & lactose syrup, cont. by wt. >95% but <99% lactose, expressed as anhydrous lactose, calc. on the dry matter
350110 Casein Casein
350190 Caseinates /other derivatives Caseinates & other casein derivatives.; casein glues

Source: United Nations codes; Coriolis definitions in conjunction with project steering group 58
GLOSSARY OF TERMS iFAB 2013

This report uses the following acronyms and abbreviations

A $/ A U D Australian dollar N /C Not calculable

A BS Absolute change N .H Northern Hemisphere
A N Z S IC AU/NZ Standard Industry Classification NZ New Zealand
AU Australia N Z $/ N Z D New Zealand dollar
Australasia Australia and New Zealand R&D Research and Development
b Billion S A s ia South Asia (Indian Subcontinent)
C A GR Compound Annual Growth Rate S E A s ia South East Asia
C/S America Central & South America (Latin America) S .H Southern Hemisphere
C RI Crown Research Institute SS Africa Sub-Saharan Africa
CY Calendar year (ending Dec 21) T /O Turnover
E Asia East Asia U S /U S A United States of America
E B IT D A Earnings before interest, tax, depreciation and U S $/ U S D United States dollar
amortization
FA O Food and Agriculture Organisation of the UN UK United Kingdom
FY Financial year (of firm in question) US United States of America

GBP British pounds YE Year ending

JV Joint venture Y TD Year to date
m Million Sou r c es

n /a Not available/not applicable AR Annual report

N A /M E/C A North Africa / Middle East / Central Asia Ce Coriolis estimate
N. America North America (USA, Canada) Ci Coriolis interview
N e c /n e s Not elsewhere classified/not elsewhere specified
59
Coriolis is a boutique management consulting
firm that focuses on food, consumer
packaged goods, retailing and foodservice.
Coriolis advises clients on strategy,
operations, organization, and mergers and
acquisitions. We develop practical, fact-based
insights grounded in the real world that guide
our clients decisions and actions. Founded in
1999, Coriolis is based in Auckland, New
Zealand and works on projects across the
Asia Pacific region.
WHAT WE DO
We help our clients assemble the facts
needed to guide their big decisions. We make
practical recommendations. Where
appropriate, we work with them to make
change happen.
HOW WE DO IT
Our style is practical and down-to-earth. We
try to put ourselves in our clients’ shoes and
focus on actions. We listen hard, but we are
suspicious of the consensus. We provide an
external, objective perspective. We are happy
to link our fees to results.
WHO WE WORK WITH
We only work with a select group of clients
we trust. We build long term relationships
with our clients and more than 80% of our
work comes from existing clients. Our clients
trust our experience, advice and integrity.
Typical assignments for clients include…
FIRM STRATEGY & OPERATIONS:
We help clients develop their own strategy for
growing sales and profits. We have a strong
bias towards growth driven by new products,
new channels and new markets.
MARKET ENTRY
We help clients identify which countries are
the most attractive – from a consumer, a
competition and a channel point-of-view.
Following this we assist in developing a plan
ABOUT CORIOLIS’ SERVICES
for market entry and growth.
VALUE CREATION
We help clients create value through revenue
growth and cost reduction.
TARGET IDENTIFICATION
We help clients identify high potential
acquisition targets by profiling industries,
screening companies and devising a plan to
approach targets.
DUE DILIGENCE
We help organisations make better decisions
by performing consumer and market-focused
due diligence and assessing performance
improvement opportunities.
EXPERT WITNESS
We provide expert witness support to clients
in legal cases and insurance claims. We assist CORIOLIS LIMITED
with applications under competition/fair PO BOX 90-509
trade laws and regulations. AUCKLAND, NEW ZEALAND
T: +64 9 623 1848
READ MORE ON OUR WEBSITE. www.coriolisresearch.com
60