joint ventures with international partners represents one-third of the nation’s milk production...
TRANSCRIPT
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Joint Ventures with International Partners
November 7, 2005
Don Schriver
Executive Vice President
Dairy Farmers of America, Inc
1
Introduction
� DFA represents one-third of the nation’s milk production
� During fiscal 2004, DFA marketed 57.2 billion pounds of milk
� Largest dairy cooperative in the U.S.
� One of the largest milk marketers in the world
� More than 12,000 member farms
� DFA’s objective is to maximize value received by members for their milk
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Organizational Structure
Bottling & Manufacturing
Affiliates
Bottling & Manufacturing
Affiliates
FormulatedFormulated BordenBordenDairy Foods
Dairy Foods
Member Dairy Farms
Member Dairy Farms
Fluid Milk GroupFluid Milk Group� Market members’
milk at highest competitive price
Manufacturing GroupManufacturing Group� Balance seasonal milk production� Process members’ milk into value-added dairy
products with longer shelf-lives
� National network of affiliates and alliances
� 12,500 member farms
� 49 states
� Market 100% of milk through DFA
� 34% of U.S. milk supply
Seven AreasSeven Areas
� Products include shredded and packaged cheeses, processed cheese products and whey products
� 2004 sales of $1,362.6 million
� Manufactures and markets value added dairy products
� Manages DFA purchasing and logistics
� 2004 sales of $372.9 million
� Produces consumer packaged cheese products marketed under Bordenbrand name
� 2004 sales of $300.4 million
3
The DFA Footprint
Stremicks Heritage Foods
Wilcox Dairy Farms
Roberts Dairy
Hiland-Roberts Ice Cream Co.
Ideal American
National Dairy Holdings
Turner DairiesSouthern BelleHiland Dairy
Cheney
Salem
Roy
Riverside
Cedar City
Santa Ana
Omaha Iowa CityDes Moines
Kansas City
Norfolk
Evansville
CovingtonMemphis
Little Rock
Ft. Smith Chandler
Norman
Springfield
Fayetteville
Wichita
Miami
Winterhaven
Salt Lake City
N. Charleston
Cincinnati
Bristol
Cleveland
London
Madisonville
Roanoke
Minneapolis
Rapid City
Duluth
Farmington
Norwood
CedarburgRochester
Philadelphia
ArkportBinghamton
Concord
Hatfield
Lancaster
AlbanySodus
LaFargeville
Wolcott
Dallas
AustinConroe
Lafayette
Somerset
DairiConcepts
Keller’s Creamery
Pollock Bruce
Hummelstown
El Dorado Springs
Winnsboro
ChiliGreenwood
Harleysville
Melrose Dairy Proteins
Melrose
Portales
Winsted
Springfield
W. Middlesex
Monett
Zumbrota
Corona
Smithfield
Lovington
Plymouth
Winthrop
Springfield
Schulenburg
Ventura
Mechanicsburg
Sulphur Springs
Cabool
Turlock
Hughson
BeaverFt. Morgan
El Paso
Franklinton
Louisville
GoshenNew Wilmington
Middlebury Reading
DFA (Italian Cheese)
DFA (American Cheese)
DFA (Canning/Specialty)
DFA (Condensed/Butter/Powder)
Colorado Springs
Fulton
Baker
Hattiesburg
Mobile
Dothan
Southwest Cheese Co.
Clovis
Greensboro
Chattanooga
HP Hood
Barre Portland
AgawamSuffield
Winchester
Oneida
Vernon
Eagle Family Foods
PleasantonAllerton
Humboldt Creamery
Fortuna
Los Angeles
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Industry
254,523
170,500
80,469
71,650
31,627
26,380 23,448 21,760 17,416 17,372
-
50,000
100,000
150,000
200,000
250,000
300,000
European
Union
United
States
India Russian
Federat ion
New
Zealand
Poland Australia M exico Argent ina Canada
International Milk Production for 2004 (millions of pounds)
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International Alliances
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� Started in 2000, this joint venture combines DFA’s U.S. manufacturing capacity with Fonterra’stechnological innovations and advanced research and development
� Manufactures dairy and cheese ingredients for industrial customers, including McCormick, NestléUSA and Frito-Lay
� Venture also manufactures dried and grated Italian cheeses for the retail, food service and industrial markets
Int’l Alliances - DairiConcepts
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Fonterra - Highlights
� Leading multinational dairy company, owned by 13,000 New Zealand dairy farmers
� World's largest exporter of dairy products, exporting 95 percent of its production� Customers and consumers in 140
countries
� Ingredients business is the largest dairy ingredients operation in the world, manufacturing and marketing more than 1,000 ingredient products to the international food industry
� Credit rating of AA-
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Dairy Flavors•Supernatural 3X•Next Generation SN 5X•ALACO EMC 10X
Dairy Flavors•Supernatural 3X•Next Generation SN 5X•ALACO EMC 10X
Dairy Powders•Straight Cheese•Cheese Blends•Seasonings•Creams & Fats•Organics•Cultured
Dairy Powders•Straight Cheese•Cheese Blends•Seasonings•Creams & Fats•Organics•Cultured
Nutritional Powders
•Infant Formula•Nutritional Drinks•Retail Packaging
Nutritional Powders
•Infant Formula•Nutritional Drinks•Retail Packaging
Dairy Ingredients
•Proteins•Fats•Club Cheese
Dairy Ingredients
•Proteins•Fats•Club Cheese
Hard Italian• Grated Bulk Retail, Food Service•Bulk Natural Cheese
Hard Italian• Grated Bulk Retail, Food Service•Bulk Natural Cheese
DairiConcepts, LP – Business Overview
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DairiConcepts Governance
DairiConcepts Board of Directors
DFA Representatives Fonterra Representatives
Fonterra / DFA Oversight Board
DFA Representatives Fonterra Representatives
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DairiConcepts, LP – Plant Locations
Hummelstown, PA
Portales, NM
Greenwood, WI
Chili, WI
Bruce, WI
Pollock, SD
Winsted, MN
El Dorado Springs, MOSpringfield, MO
Allerton, IA
Dairy Ingredients Hard ItalianNutritional PowdersDairy FlavorsDairy Powders
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� Many of DairiConcepts’ products end up in
Convenience Food Applications� Snacks
� Ready Meals
� Sauces
� Soups
� Baked goods
DairiConcepts, LP
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� DairiConcepts also sells into two other
important segments� Nutritional and infant foods
� Prepared Dairy
DairiConcepts, LP
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DairiConcepts, LP
� DFA and Fonterra have committed significant amounts of capital to the joint venture – approximately $25 million from each partner
� DairiConcepts recently entered into a credit facility
� The financing is supported by the assets of DairiConcepts
� The partners do not guarantee the credit facility
� DairiConcepts annual sales are aproximately $400 million
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Int’l Alliances – Southwest Cheese Co.
� Several years ago, DFA began evaluating strategic alternatives to handle the rapid growth in milk production in the southwestern U.S.
� Annual cost of transporting milk out of the region conservatively estimated at $40 million
� Nearly all milk in the southwestern U.S. is marketed by the Greater Southwest Agency
� Identified Glanbia PLC as an ideal partner
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Glanbia PLC - Highlights
� International dairy, consumer foods and nutritional products company� Major international cheese
manufacturer
� Annual turnover exceeds €2.3 billion
� Employs 5,500 people
� Operations in Ireland, USA, UK
� Credit ratings of BBB- and Baa3
No. 1 – European Pizza Cheese Manufacturer
No. 1 – Cheese Manufacturer in Northwest USA
No. 2 – World producer of formulated milk products
No. 2 – USA producer of whey protein isolate
No. 2 – UK cheese producer / marketer
No. 3 – USA lactose producer
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Int’l Alliances – Southwest Cheese Co.
� In February 2004, Southwest Cheese Company announced commencement of construction of a $190 million cheese and whey manufacturing facility to be located in Clovis, New Mexico
� Once fully operational, it is anticipated that the new facility will generate sales of approximately $350 million per annum and will employ approximately 220 staff
� 7 million pounds of milk per day (line 1: 4 million, line 2: 3 million)
� 340 million pounds of cheese per year
� 640 and 40 pound block capacity
� DFA indirectly owns approximately 30% of the joint venture
CLOVIS, NEW MEXICOCLOVIS, NEW MEXICOCLOVIS, NEW MEXICOCLOVIS, NEW MEXICO
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Southwest Cheese Company, LLC
Southwest Cheese
Company
GlanbiaMilk
Member, LP
50% 50%
DFA SelectZia &
Lonestar
68%* 30%* 2%*
_______________________
* Estimated ownership percentage based on amount of milk supplied to joint venture
The Milk Member partners represent nearly 100% of the
milk in the region!
$35 mm
$35 mm
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Southwest Cheese Company Governance
� Six Person Board of Directors
� 3 Milk Members David Jones
Mike McCloskey
John Dunker
� 3 Glanbia John Moloney
Geoff Meagher
David Thomas
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Southwest Cheese Company, LLC
� 100% of the Milk in the Region
� 20 Year Product Sales Agreement
� 20 Year Milk Supply Agreement
� 10 Year Stand Still Agreement
� Proven Cheese Maker and Milk Marketers
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Southwest Cheese Company, LLC
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� Started in 1995, this cooperative of cooperatives was established to market NFDM
� DairyAmerica currently markets approximately 75% of US NFDM production
� In August, 2001 DairyAmerica entered into an exclusive export marketing agreement with Fonterra, New Zealand
� Benefits of the relationship:
� Producer access to expanded markets
� International producer relationships
� Increase returns to producers
� Expand product mix
� Reduce marketing expenses
� Share manufacturing knowledge
Int’l Alliances - DairyAmerica
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DairyAmerica Members
� 1995
� California Milk Producers
� Dairyman’s Cooperative Creamery Association
� Danish Creamery Association
� 1997
� San Joaquin Valley Dairymen
� 1998
� Land O’Lakes
� 1999
� United Dairymen of Arizona
� California Dairies, Inc
� 2000
� Agri-Mark
� Maryland & Virginia Milk Producers Cooperative Association
� O-AT-KA Milk Products Cooperative
� Dairy Farmers of America
� 2004
� Lone Star Milk Producers
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Governance Structure
� 26 Directors (staff & farmers)
� Officers
� President: Keith Murfield (UDA)
� Vice-President: Keith Gomes (CDI)
� Secretary: Richard Stammer (Agri-Mark)
� Treasurer: C. Richard Mosemann (MD & VA)
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2004 Exports by Region
100.0%284.9Total
5.0%14.3Cuba
19.6%55.8Nestle Worldwide
20.2%57.4Asia
55.2%157.4Mexico
% of salesPounds (mil.)
Over $950 million in sales on over 1 billion pounds of product annually.
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Ireland
Leadership Visits
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Leadership Visits
South America
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Thank You!