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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
\dcf
…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