Post on 01-Jan-2017
This information was prepared by Coriolis solely for the use of our client; it is not to be relied on by any third party without prior written consent.
Food & Beverage Information Project 2011Sector Stream – Dairy
Final ReportOctober 2011; v1.21
www.foodandbeverage.govt.nz
Coriolis is a strategic management consulting andmarket research firm
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We address all the problems that are involved in growth: strategy,marketing, pricing, innovation, new product development, new markets,organisation, leadership, economic competitiveness.
We bring to our clients specialised industry and functional expertise.We invest significant resources in building knowledge. We see it as ourmission to bring this knowledge to our clients and we publish much of itfor the benefit of others.
A hallmark of our work is rigorous, fact‐based analysis, grounded inproven methodologies. We rely on data because it provides clarity andaligns people.
However, we deliver results, not reports. To that end, we work side byside with our clients to create and implement practical solutions.
The Coriolis name
The coriolis force, named for French physicist Gaspard Coriolis (1792‐1843), may be seen on a large scale in the movement of winds andocean currents on the rotating earth. It dominates weather patterns,producing the counterclockwise flow observed around low‐pressurezones in the Northern Hemisphere and the clockwise flow around suchzones in the Southern Hemisphere. To us it means understanding thebig picture before you get into the details.
PO Box 90‐509, Victoria Street West, Auckland 1142, New ZealandTel: +64 9 623 1848 www.coriolisresearch.com
The objective of this report is to provide a factual source of high quality information on the current situation in the New Zealand dairy sector for four audiences:
‐ Investors (domestic or international)‐ Industry participants (firms & individuals)‐ Government (across all roles and responsibilities)‐ Scientific researchers (academic, government & firm)
It creates a common set of facts and figures on the current situation in the industry.
It draws conclusions on potential industry strategic directionsand highlights opportunities for further investment.
It forms a part of the wider Food & Beverage Information Project and will be updated annually.
TABLE OF CONTENTS
Section Page
Contents 4
Glossary of terms 5
Methodology & data sources 6
F&B IP Overview 7
Summary & conclusions 9
Sector overview 15
Milk powder 45
Appendices 58
GLOSSARY OF TERMS
PAGE 5
This report uses the following acronyms and abbreviations
A$/AUD Australian dollar N.H Northern Hemisphere
ABS Absolute change NZ New Zealand
ANZSIC AU/NZ Standard Industry Classification NZ$/NZD New Zealand dollar
AU Australia R&D Research and Development
Australasia Australia and New Zealand S Asia South Asia (Indian Subcontinent)
b Billion SE Asia South East Asia
CAGR Compound Annual Growth Rate S.H Southern Hemisphere
C/S America Central & South America (Latin America) SS Africa Sub‐Saharan Africa
CRI Crown Research Institute T/O Turnover
CY Calendar year (ending Dec 21) US/USA United States of America
E Asia East Asia US$/USD United States dollar
EBITDA Earnings before interest, tax, depreciation and amortization
UK United Kingdom
FAO Food and Agriculture Organisation of the UN YE Year ending
FY Financial year (of firm in question) YTD Year to date
£/GBP British pounds Sources
JV Joint venture AR Annual report
m Million Ce Coriolis estimate
n/a Not available/not applicable Ci Coriolis interview
NA/ME/CA North Africa / Middle East / Central Asia K Kompass
Nec/nes Not elsewhere classified/not elsewhere specified Ke Kompass estimate
METHODOLOGY & DATA SOURCES
- This report uses a range of information sources, both qualitative and quantitative.
- The numbers in this report come from multiple sources. While we believe the data are directionally correct, we recognise the limitations in what information is available. - In many cases different data sources disagree (e.g.
Statistics New Zealand vs. FAO vs. UN Comtrade). - Many data sources incorporate estimates of industry
experts. - As one example, in many cases, the value and/or volume
recorded as exported by one country does not match the amount recorded as being received as imports by the counterparty [for understood reasons].
- In addition, in some places, we have made our own clearly noted estimates.
- Coriolis has not been asked to independently verify or audit the information or material provided to it by or on behalf of the Client or any of the data sources used in the project.- The information contained in the report and any
commentary has been compiled from information and material supplied by third party sources and publicly available information which may (in part) be inaccurate or incomplete.
- Coriolis makes no representation, warranty or guarantee, whether express or implied, as to the quality, accuracy, reliability, currency or completeness of the information provided in the report.
- All trade data analysed in all sections of the F&B Information project are calculated and displayed in US$. This is done for a range of reasons:1. It is the currency most used in international trade2. It allows for cross country comparisons (e.g. vs. Denmark)3. It removes the impact of NZD exchange rate variability4. 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
- 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.
- If you have any questions about the methodology, sources or accuracy of any part of this report, please contact Tim Morris, the report’s lead author at Coriolis, on +64 9 623 1848
PAGE 6
Data was from a variety of sources, and has a number of identified limitations
Structure of the New Zealand Food & Beverage Information Project(2011)
F&B INFORMATION PROJECTThe New Zealand Food & Beverage Information Project is designed to be the foundation of facts and figures on which a range of audiences can build
PAGE 7 Note: Every year two subsectors are completed in more detail. Seafood and Nutraceuticals in 2011
Dairy Sector
Meat Sector
ProduceSector
Seafood Sector
NutraceuticalsSector
Processed Foods Sector
Beverages Sector
Investor’s Guide
Global Markets
Overview
Sectors
Markets
FirmsInvestors Government
Industry Snapshot
High Potential Market Profiles
Structure of the New Zealand Food & Beverage Information Project(2011)
DAIRY SECTOR ANALYSISThis analysis of the New Zealand dairy sector forms a part of the wider Food & Beverage Information Project
PAGE 8
FirmsInvestors Government
Dairy Sector
ProduceSector
Seafood Sector
NutraceuticalsSector
Processed Foods Sector
Beverages Sector
Investor’s Guide
Global Markets
Overview
Markets
Sectors Meat Sector
Industry Snapshot
High Potential Market Profiles
TABLE OF CONTENTS
Section Page
Contents 4
Glossary of terms 5
Methodology & data sources 6
F&B IP Overview 7
Summary & conclusions 9
Sector overview 15
Milk powder 45
Appendices 58
DAIRY – SITUATION
New Zealand
- New Zealand currently “on a high” in dairy
- Surging US$ prices
- Growing demand in China, SE Asia and NA/ME/CA1
- However likely inflating a bubble that will ultimately pop
- New Zealand is the 8th largest milk producing country in the world and accounts for 2.6% of global milk production
- New Zealand produces a similar amount of milk as other temperate countries its size (e.g. Italy, the UK, France)
- Small population; exports the excess
- New Zealand exports transport friendly dairy ingredients (e.g. milk powder)
- 95%+ of New Zealand milk supply is controlled by Fonterra, a farmer‐owned cooperative; Fonterra was formed in 2001 in a government sanctioned mega‐merger of dairy cooperatives and the government‐mandated export dairy board monopsony2
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
- New Zealand competes with other dairy cooperatives to supply bulk dairy ingredients
- Competitors are primarily cooperatives in developed Western countries; South America cooperatives are an emerging threat
- 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
- New Zealand does not directly compete with major corporate dairy players (e.g. Nestle, Kraft, Abbott)
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 these markets are closed to New Zealand
- 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
- Corporate consumer‐focused dairy manufacturers buy ingredient dairy and transform ingredients into consumer dairy‐based foods (e.g. yoghurt)
- In Australasia (AU/NZ), Fonterra (but not other key NZ milk processor/exporters) sells significant amounts of branded consumer dairy products to consumers4
PAGE 10 1. North Africa Middle East, Central Asia; 2. A monopsony is a monopoly on buying not selling; 3. BRIC = Brazil, Russia, India and China; 4 Fonterra also sells about NZ$1b worth of Anmum outside Australasia
New Zealand competes with other dairy cooperatives to supply bulk dairy ingredients to corporate consumer‐focused dairy manufacturers primarily in dry/tropical areas
Key metrics #(2010)
CAGR(00‐10)
CAGR(09‐10)
ABS(09‐10)
Turnover NZ$18,800m N/A 6% +$1,100
Exports US$7,836m 12% 40% +$2,231
Enterprises 240 3% 2% +15
Employment 11,690 1% 3% +330
Turnover per employee
$1.6m N/A1 N/A1 N/A1
DAIRY – QUANTITATIVE SCORECARD The New Zealand dairy sector has performed well in the last year driven by surging prices in Asia
PAGE 11 1. Cannot be calculated due to Statistics NZ data issues; will be calculated in future years; 2. Of which 9,700 are in New Zealand; Source: various company annual reports; various company websites; Kompass; Coriolis analysis
Key firms Employ(#; 10)
Turnover(NZ$m; 10)
Fonterra
GF Meadow Fresh
Open Country
Westland
Tatua
Synlait
15,6002
1,000
196
350
194
160
$16,726m
A$441m
$497m
$422m
$166m
$150m
Key markets %(2010)
US$m(2010)
CAGR(00‐10)
CAGR(09‐10)
ABS(09‐10)
East Asia
SE Asia
S Asia/Ind. Sub
NA/ME/CA
SS Africa
S America/Other
Europe
North America
Australia/PI
26%
20%
5%
17%
4%
10%
6%
6%
6%
$2,059
$1,585
$397
$1,309
$306
$779
$448
$504
$450
16%
11%
18%
18%
27%
9%
3%
3%
13%
75%
42%
76%
28%
44%
33%
11%
‐10%
49%
+$884
+$469
+$171
+$284
+$94
+$195
+$43
‐$56
+$148
Key competitorscountry Key firms
Australia
California
Germany
Netherlands
France
Denmark
Murray Gouldburn (coop)
Cal Dairies Coop
Other coop
Nordcontor Co‐operative
Other coop
Friesland Co‐operative
Sodiaal
Other coops
Arla Coop
Key products US$m(2010)
CAGR(00‐10)
CAGR(09‐10)
ABS(09‐10)
Whole milk powder
Skim milk powder
Butter
Cheese
Casein
Whey
UHT milk
Lactose
Other
$3,072
$1,023
$1,545
$1,023
$476
$419
$127
$33
$117
16%
14%
12%
8%
0%
35%
16%
8%
8%
64%
23%
63%
20%
‐10%
19%
43%
‐17%
36%
+$1,197
+$194
+$596
+$168
‐$51
+$66
+$38
‐$7
+$31
DAIRY – SWOT ANALYSISThe global competitive environment will likely become more competitive going forward
PAGE 12 Source: various company annual reports; various company websites; Interviews; Coriolis
Strengths Weaknesses
‐ Low cost pasture‐based dairy production system
‐ National champion Fonterra with resources to address global markets and opportunities
‐ Growing market leadership position in Australasia/Oceania
‐ 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 (~2.6% global production)
‐ 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
Opportunities Issues/Threats/Risk
‐ 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
‐ 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 10 years to run; after this point, China will be either self sufficient or a major exporter; Chinese milk/cow almost at NZ levels
‐ 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
Situation creating opportunity Resulting potential strategic direction Opportunity Challenges
‐ New Zealand exports transport friendly dairy ingredients (e.g. milk powder) to corporate consumer‐focused dairy companies in other countries
‐ These companies then transform ingredients into consumer ready products adding up to 10x value to raw ingredients in the process
‐ Free trade deals removing punitive tariffs improving economics of NZ production (vs. in market)
1. Vertical integration of NZ milk production into downstream users of milk ingredients
‐ Acquire in‐market buyers of NZ ingredients; link into domestic production
‐ Create integrated supply chain with NZ production
‐ Fonterra unwilling to compete with own customers
‐ Significant capital required for in market acquisition
2. Existing NZ firms make final product in New Zealand and export
‐ “Made in NZ’ a strong positioning statement in some markets
‐ Does not work for highly perishable short shelf life products (e.g. non‐UHT fluid milk, yoghurt)
‐ Tariffs and trade barriers remain on many products into many countries
‐ Significant capital required for investment in plant & equipment
3. Current buyers of NZ ingredient exports manufacture in NZ instead
‐ Targeted program to attract new greenfields investments by existingusers of NZ dairy ingredients
‐ Reliant on single supplier (Fonterra)‐ Relative attractiveness of NZ vs.
other potential sites (e.g. Singapore)
‐ While the dairy industry is consolidated in developed markets, it is fragmented in developing ones
4. NZ firms participate in and drive consolidation in dairy industry in developing countries
‐ Acquire multiple smaller dairy companies in growing markets
‐ Consolidate and implement best practice
‐ Significant risk‐ Fonterra unwilling to compete with
own customers‐ Farmer owners of New Zealand co‐
operatives unwilling to either fund or allow in outside capital
‐ Developing countries are rapidly growing dairy production (e.g. BRIC1 are 4 of top 5 dairy producing countries)
‐ These countries will emerge as major competitors to NZ in ingredient dairy over the next 15 years
5. Apply NZ skills and capital to assist development
‐ Investment by NZ based skills and capital in growth markets
‐ Risk‐ Mixed transferability of NZ pastoral
dairy ecosystem
6. Move into more defensible products and categories
‐ Develop capabilities around defensible dairy/dairy‐derived products (e.g. infant formula)
‐ Competition from existing players with strong market position
‐ Lack of required IP and/orcapabilities
DAIRY – POTENTIAL STRATEGIC DIRECTIONSResearch suggests six potential “big picture” strategic directions for the New Zealand dairy industry
PAGE 13 Source: Interviews; Coriolis
DAIRY – POTENTIAL AREAS FOR INVESTMENT
- Farmers control 97% of New Zealand dairy industry limiting opportunities for external investment- Farmers own Fonterra, Westland and Tatua- “[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”
- 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 and saturated with
ingredient dairy processing plants
- Poor financial performance to date of post deregulation new market entrants in milk powder & other primary ingredient- Majority share in Open Country acquired by Talley family
following poor performance; Olam (Singapore) also a shareholder (threatened to quit due to low returns)
- Majority share in Synlait acquired by Shanghai Bright following failed public listing
- Oceania Dairy assets purchased by Synlait- Arapuni still “in development”- Maori‐owned Miraka recently opened
- Domestic dairy market is small, saturated, and low growth- High levels of dairy consumption per capita- Dominated by two key players: Fonterra and Goodman
Fielder/Meadow Fresh, each with fluid milk core- Limited domestic product innovation; domestic innovation
typically copied from other markets (e.g. yoghurt)- Growing store brands
- Opportunities for growth in smaller segments of export oriented specialty, niche dairy products that “fly under the radar”- Shredded cheese (e.g. Grate Kiwi, Milligans)- Single serve butter (e.g. Canary)- Premium specialty cheese (e.g. Whitestone)
- Strong opportunities for growth and investment in processed foods that contain significant dairy ingredients (discussed in processed foods document)- Chocolate- Infant formula- Frozen bakery (esp. croissants)- Dairy nutraceuticals (e.g. colostrum)
PAGE 14 Source: Interviews; Coriolis
Potential areas for new and/or external investment primarily transforming ingredients rather than producing more ingredients
TABLE OF CONTENTS
Section Page
Contents 4
Glossary of terms 5
Methodology & data sources 6
F&B IP Overview 7
Summary & conclusions 9
Sector overview 15
Milk powder 48
Appendices 61
Total global milk production by country/region(t; m; 2009)
DAIRY – GLOBAL PRODUCTIONNew Zealand is the 8th largest milk producing country and accounts for 2.6% of global milk production; it produces a similar amount of milk as other temperate countries its size (e.g. Italy, the UK)
PAGE 16 Note: Total may not add due to rounding; 2009 is latest available 8/2011; effectively manufacturing milk; excludes on farm/home production (e.g. India); Source: UN FAO AgStat; Coriolis analysis
Germany 5% France
4%
United Kingdom 2%
Poland 2%Italy 2%
Turkey 2%
Netherlands 2%
Ukraine 2%
Other Europe 11%
Russia 6%
USA 15%
Canada 1%New Zealand 2.6%
Australia 2%
Brazil 5%Argentina 2%
Other S America 4%
Mexico 2%
Other C America 1%
China 6%
Japan 1%
Other E Asia 0%
SE Asia 1%India 8%
Pakistan 2%
Other S Asia 0%
NA/ME/CA 7%
SS Africa 3% Other 0%
Europe38%
South America10%
East Asia8%
TOTAL = 583m tonnes
S. Asia/Indian Sub.10%
Total global milk production by region(t; m; 1961‐2009)
DAIRY – GLOBAL PRODUCTIONDairy production surging outside traditional European/Western countries
PAGE 17 Note: Total may not add due to rounding; 2009 is latest available 8/2011; Source: UN FAO AgStat; Coriolis analysis
‐
100
200
300
400
500
600
1961 1970 1980 1990 2000 2009
Europe
USSR/Russia
USA/Canada
New ZealandAustralia
S. America
C. America
E. AsiaS.E. Asia
S. Asia
NA/ME/CA
S.S. Africa
42% 41% 42%37% 38%
32%
20% 23% 21%
23%
7%
6%
21% 17% 16%
16%
17%
16%
2%2%
2%
2%
2%
3%
2%2%
1%
1%
2%
2%
5%5%
6%
7%
9%
10%
1% 2%2%
2%
3%
3%
1% 2% 2%3%
4%
8%
0% 0% 0%0%
0%1%
4% 3% 4%6%
9%10%
1% 1% 2% 2%6% 7%
2% 2% 2% 2% 3% 3%
1961 1970 1980 1990 2000 2009
% of global milk production by region(t; m; 1961‐2009)
14%
42%
DAIRY – RATE OF IMPROVEMENTThe efficiency of the New Zealand pastoral dairy system is improving at a relatively stable rate; competitors are also improving
93 years growth in New Zealand butterfat per cow(kg/cow; 1917‐2010)
Milk per cow: NZ vs. select peers(t/cow; 1961‐2009)
PAGE 18 Source: UN FAO AgStats; Statistics NZ; Department of Statistics; DairyNZ; Coriolis analysis
‐
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
19611964196719701973197619791982198519881991199419972000200320062009
R² = 0.9444
‐
20
40
60
80
100
120
140
160
180
200
1917192219271932193719421947195219571962196719721977198219871992199720022007
USA
Denmark
Australia
IrelandArgentina
New ZealandChina
Brazil
CAGR(17‐10)0.8%
2.2%
1.8%
2.2%
1.8%1.9%
0.4%1.8%
1.3%
CAGR(61‐09)
ChinaLast 10 years
6.2%
All our science, all our effort, all our research, all our investment just keeps
us on this line
Obviously milk per cow is only one variable in total
system competitiveness
124 165 275
636
958
1973 1981 1991 2001 2007
19,396
15,313 16,757
14,000
12,000
1973 1981 1991 2001 2007
6,400 5,600
4,200
2,500 1,974
1973 1981 1991 2001 2007
5,917 7,002
8,407 9,482
10,179
1973 1981 1991 2001 2007
2,908 2,943 2,980 3,689 3,802
1973 1981 1991 2001 2007
6.1 6.7 7.9
13.1
15.8
1973 1981 1991 2001 2007
4.7 6.5
9.7
15.1
18.1
1973 1981 1991 2001 2007
EXAMPLE: Changing variables in milk production: California vs. New Zealand(1973‐2007)
DAIRY – SOME COMPETITORS IMPROVING FASTERNew Zealand’s key dairy competitors are not standing still; they continue to improve, often at a faster rate
PAGE 19 Source: SNZ (various); CDA; USDA ERS; Coriolis analysis
# of dairy farms(actual)
108 148 158 254
347
1973 1981 1991 2001 2007
Cows/farm(actual)
Milk/cow(l; actual)
Milk production(l; b)
CAGR(73‐07)‐3.4%
‐1.4%
3.5%
6.2%
0.8%
1.6%
2.9%
4.1%
Question: Can you project these variables in 2025?
Total global milk production by top ten firm by milk intake(t; m; 2009)
DAIRY – MILK SHARE BY FIRMThe global dairy industry is highly fragmented with thousands of small firms, primarily farmer‐owned cooperatives, supplying regional markets
PAGE 20 Source: International Farm Comparison Network; UN FAO AgStat; Coriolis analysis
Comments/Notes
‐ Treat data as directional/indicative; note data issue discussed below
‐ Data for companies listed here will include double counting as it is their milk intake, including milk bought from others
‐ Corporate dairy firms primarily buy milk from cooperatives; they do not as a rule own farms
‐ For example: Nestle, Danone and Kraft all buy lots of milk from Fonterra
‐ NOTE: Data is milk intake not sales; Nestle’sdairy sales are twice those of Fonterra’s (as the things Nestle makes its milk into are worth more than the things Fonterra makes its milk into)
3.5%
2.9%
2.6%
2.0%
1.8%1.7%
1.5%1.4%1.3%1.3%
TOTAL = 583m tonnes
1,000’s of smaller dairy firms around the world, mostly co‐
operatives of farmers80%
Top 1020%
Top 76 global dairy firms ranked by dairy products turnover(US$; 2008 or as available)
DAIRY – TOP FIRMS BY TURNOVERFonterra is a very large dairy company on global standards; other NZ dairy firms more typical of global mean
PAGE 21 Source: Company annual reports; company reports; and Coriolis analysis
$‐
$5
$10
$15
$20
$25
$30
Nestle
DanoneFriesland FoodsLactalisDean FoodsFonterraArla FoodsMeiji Dairies
Kerry Group
Morinaga
Unilever
Parmalat
BongrainAbbottHum
ana Milchunion
Kraft FoodsSaputoLand O
'LakesSodiaalNordm
ilchSchreiberMengniu Dairy
Snow Brand M
ilkYakultMuller
Inner Mongolia Yili
Glanbia
Fromageries Bel
Irish Dairy BoardPrairie Farm
sBM
SDairy CrestTineValioKrogerLeprinoEntrem
ont AllianceAgropurMurray G
oulburnDarigoldHP HoodGreat Lakes Cheese
California DairiesDFANational Dairy
Emmi
Associated Milk Producers
Milcobel
Foremost Farm
sPfizer W
yethPascualHochw
aldTnuva (Israel)Robert W
iseman
Granarolo
Milchw
erke KolnEvenMilchunion Hocheifel
Bright DairyLakeland Dai riesFirstM
ilkDairygoldCapsaLactogalGLAC
3A Milklink
BayernlandDarygoldMlekpol
Eurial PoitouraineBerglandm
ilchUnited Dairy Farm
ersAllgäulandDO
C KaasMlekovita
Non‐co‐opco‐op
All of our work to date suggests there is a very long tail of small dairy companies
around the world (primarily cooperatives)
Simplified model of New Zealand dairy supply chain1(model; ANZSIC codes as available))
DAIRY – SUPPLY CHAINNew 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
PAGE 22 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
Milk & cream processing(C113‐100)
Dairy produce wholesale(F360‐300)
SeafreightAirfreight
Supermarkets & other retail
Foodservice
Dairy wholesale2(in‐market)
Supermarkets & other retail
Foodservice
Internationalmarkets
Domesticmarket
Dairy cattle farming(A016)
Distributorwholesaler
Ice cream manufacturing(C113‐200)
Cheese & other dairy processing(C113‐300)
Infant formula manufacturing
Other food manufacturing
Ice cream manufacturing
Cheese & other dairy processing
Infant formula manufacturing
Other food manufacturing
For example, Fonterra requirement to on‐sell milk to other processors
ProcessedFoods
ProcessedFoods
ProcessedFoods
ProcessedFoods
Number of enterprise units in the dairy industry in New Zealand(enterprises; 2000‐2010)
DAIRY – # OF ENTERPRISESThe number of enterprises involved in the New Zealand dairy industry is growing
PAGE 23 Source: SNZ business demographics (detailed industry for enterprise units); Coriolis analysis
Milk processing(C113‐100)
(00‐10)3%
(09‐10)2%
CAGR
5% 22%13 14 17 16 16 18 12 11 12 18 22
45 43 36 35 40 39 45 46 4654
56
113106 122
136
150162 161
172 178163
162
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Cheese/other dairy (C113‐300)
2% 4%
Dairy wholesale (F360‐300)
4% ‐1%
171163
175
187
206
219 218
229236 235
240
Processing and manufacturing
Comments
‐ Dairy wholesaler growth likely a mixture of small wholesalers (e.g. imported cheese) and captive regional wholesale functions of larger groups (e.g. regional milk wholesale/ distribution in Southland)
‐ Recent surge in milk processing enterprises interesting
Notes/Definitions
‐ An “enterprise” is a reporting entity for GST purposes; large companies such as Fonterra will contain multiple GST reporting entities
‐ Dairy wholesalers may include distributor contractors
Number of persons employed in the dairy manufacturing industry in New Zealand1(people; 2000‐2010)
DAIRY – EMPLOYMENTThe number of people employed in the dairy industry is growing again following a restructuring in 06/07
PAGE 24 1. Uses persons employed by enterprise unit; Source: SNZ business demographics (detailed industry for enterprise units); Coriolis analysis
1,940 2,320 2,420
990 600
3,470
1,660 1,510 930
1,670 1,760
7,460 7,860 7,460 9,890 10,970
8,390 10,870
9,260
8,910
8,650 8,910
1,180
1,210 1,930
1,370 1,100
1,070
1,090
930
1,000 1,040
1,020
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
10,580
11,39011,810
12,25012,670
12,930
13,620
11,700
10,84011,360
11,690
Milk processing(C113‐100)
(00‐10)1%
(09‐10)3%
CAGR
‐1% 5%
Cheese/other dairy (C113‐300)
2% 3%
Dairy wholesale (F360‐300)
‐1% ‐2%
Comments
‐ 2006‐2007 reduction is likely a reduction in the number of undefined/unallocated many offshore Fonterra employees out of the dataset (ie. no longer employees of a directly resident NZ firm)
Notes/Definitions
‐ Excludes farmers
‐ 2005 looks anomalous; likely SNZ classification issue
% of employment by firm employment size in the dairy manufacturing industry in New Zealand1(people; 2000‐2010)
DAIRY – EMPLOYMENT BY FIRM SIZELarge firms are not growing their share of dairy industry employment; relative growth appears to be coming from growing mid‐sized firms
PAGE 25 Source: SNZ business demographics (detailed industry for enterprise units); Coriolis analysis
Comments
‐ Large firms appear to be achieving productivity increases
‐ Growth in mid‐size firms hopeful; suggests 2002 drop represents firms moving into large category
Notes/Definitions
‐ Data excludes wholesaling (F360‐300) as data not available but includes ice cream (C113‐200), inseparable at source
1 to 9
(00‐10) (09‐10)
Absolute
+0.4% +0.1%10 to 49 +0.1% ‐0.2%50 to 99 +1.3% +2.5%
100+ ‐1.8% ‐2.4%
1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%3% 3% 3% 3% 3% 3% 4% 5% 5% 3% 3%5% 6% 5% 2% 2% 2% 2% 2% 2% 4% 6%
92% 91% 91% 94% 94% 94% 94% 92% 92% 92% 90%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Southland2%
Otago7%
Canterbury10% West Coast
2%Nelson/Tas/Marl
1%Wellington
3%
ManawatuWanganui8%
Taranaki14%
H.B./Gisb.0%
Bay of Plenty5%
Waikato26%
Auckland11%
Northland4% Classified
elsewhere7%
Number of persons employed in the dairy manufacturing in New Zealand by region(people; 2010)
DAIRY – EMPLOYMENT BY REGIONDairy industry employment is spread across the regions; however the Waikato and Taranaki stand out for absolute numbers
PAGE 26 Note: Uses persons employed by enterprise unit; Source: SNZ business demographics; Coriolis analysis
Comments/Notes
‐ Clearly proportional to cow numbers
‐ Also proportional to # of plants and average plant capacity
Notes/Definitions
‐ Does not include farmers
‐ Statistics New Zealand calculates its statistics based on the predominant business activity of the enterprise
‐ A firm that is defined as “beverage manufacturing” at the enterprise level may have a subsidiary at the geographic level that is classified as “grape growing”
‐ Data here is “geographic” units not “enterprise” units (pages prior)
‐ “Classified elsewhere” is the difference between geographic unit employees and enterprise unit employees; it represents firm subsidiaries not involved in “beverage manufacturing,” for example those classified as “grape growing” or “beverage wholesaling”
‐ Nelson/Tas/Marl = Nelson/Tasman/ Marlborough
‐ H.B/Gisb. = Hawkes Bay / Gisborne
‐ Wellington region includes north to the Kapitiand Masterton districts
Total = 11,690
South Island~24% of allocated
370 389 378 338 348 332 362 339 365 375 263 235 400 620 710 800 880 770 775 410
795 798 835 780
885 930 1,245 1,200 1,090 1,100
1,070 1,120 1,210 140 160
170 208 230 240
240 240 230
246 233
213 355
225 223 216 230
211 146 126
125 129 850
820 810 890 340 330 340 300
320
340 350 762
855 825 830 835 980 1,055 1,000
1,000
1,110 935
2,026 1,856 1,879
1,889 1,882 1,788 1,674 1,874 1,862
1,192 1,569
80 80 95 105 105 100
120 127 112 74 34
625 590 575 535 488 490
480 463 538 545 550
1,950 2,030
2,190 2,293 2,728 2,510 2,930 2,770
2,835 2,790 3,050
1,060 1,090
1,200 1,220
1,260 1,430 1,290 1,300 910 1,180
1,220 710
588
648 623
593 647 765 740
495 515 510
724
1,397 1,310
1,456 1,600 1,773
2,293
526
567 953
839
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Number of persons employed in the dairy manufacturing industry in New Zealand(people; 2000‐2010)
DAIRY – EMPLOYMENT BY REGIONThe dairy industry is creating employment, but only in a handful of regions
PAGE 27 Source: SNZ business demographics detailed industry for enterprise units; Coriolis analysis
Comments
‐ Covers before and after creation of Fonterra
‐ Only Waikato, Otago and Canterbury creating large numbers of new jobs
‐ 2006‐2007 reduction in number of undefined/unallocated likely redefinition of many offshore Fonterra employees out of the dataset (ie. no longer employees of a directly resident NZ firm). Do not read too much into the decline.
‐ Dairy employment down across 7 of 13 regions over period
Notes/Definitions
‐ Classified elsewhere is implied difference between enterprise employment and geographic employment (at point‐in‐time of count). See note previous page
‐ Nelson/Tas/Marl = Nelson/Tasman/ Marlborough
‐ Wellington region includes north to the Kapitiand Masterton districts
10 yearAbsoluteChange(00‐10)+1,100
Southland
Otago
Canterbury
West CoastNelson/Tas/MarlWellington
Taranaki
Hawkes Bay/GisborneBay of Plenty
Waikato
Auckland
Northland
Classified elsewhere10,580
11,39011,810
12,25012,670
12,930
13,620
11,700
10,840
11,36011,690
‐107
+563
+375
+93‐84
‐500
‐457
‐46‐75
+1,100
+160
‐200
+115
Manawatu +173
Fonterra 9,100 78%
GF Meadow Fresh 1000 8% Open Country 196
2%Westland 350 3%
Tatua 194 2%Synlait 160 1%
Other 690 6%
Number of persons employed in the dairy manufacturing industry in New Zealand by key firm(people; 2010)
DAIRY – EMPLOYMENT BY FIRMFonterra accounts for ~80% of industry employment; all other dairy firms account for 20%
PAGE 28 Note: Uses persons employed by enterprise unit; Source: SNZ business demographics (detailed industry for enterprise units) and (detailed industry for geographic units); Kompass; various firm websites; published articles; Coriolis analysis
Total = 11,690 (page prior)
Comments/Notes
‐ Fonterra total is New Zealand employees, not global (excluding TipTop, listed under processed foods)
‐ Open Country includes Dairy and Cheese
Aggregate dairy industry turnover/total income(NZ$m; nominal, non‐inflation adjusted; 1998‐2010)
DAIRY – INDUSTRY AGGREGATE TURNOVERThe dairy industry has been growing at 8% per annum over the past five years
PAGE 29 1. Uses last available 10 years (99‐09); Source: SNZ Annual Enterprise Survey (supplementary table [table 08 or 4.08]); various company annual accounts; Coriolis analysis
Comments
‐ Are we reaching the peak of the cycle?
Notes/Definitions
‐ Dairy farming uses SNZ Annual Enterprise Survey (AES) supplementary table 4 (various years)
‐ 2009 is the most recent available; 2010 likely available Oct 2011
‐ Dairy processing not available in SNZ data (dairy industry aggregated with meat) due to confidentiality issues surrounding Fonterra data (which is strange as Fonterra publishes annual accounts)
‐ Dairy processors given here is Coriolis from published annual accounts (and Coriolis estimates for missing years); pool is: Fonterra, Meadow Fresh, Open Country, Westland, Tatua, Synlait, NZDL and Dairy Goat Co‐op
‐ Dairy processors will include non‐NZ sales of non‐NZ products by NZ resident firms (e.g. Fonterra in Chile)
‐ Will include some amount of double counting (e.g. Fonterra on‐selling milk to Open Country)
‐ Dairy processors only; does not include ice cream or small specialty cheese firms
Dairy processing
Dairy farming
(05‐10)
8%
8%1
(09‐10)
6%
N/A
CAGR
$‐
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Dairy farmingMilk processing
Turnover of select large dairy industry firms(NZ$m; 2002‐2010 as available)
DAIRY – TURNOVER OF KEY FIRMSWhile Fonterra still accounts for the bulk of New Zealand dairy industry turnover, the second tier firms are showing strong growth
PAGE 30 Source: various companies annual financial statements (as filed with NZ Companies Office or available company website); Coriolis analysis
Comments
‐ Data is as filed with New Zealand Companies Office or financial report as available on companies websites or Coriolis estimates from available data
$‐
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
2002 2003 2004 2005 2006 2007 2008 2009 2010
Revenue(NZ$; m; FY10)
DAIRY – FIRM PROFITABILITY BENCHMARKINGFinancial performance of key firms varies
PAGE 31 Note: EBITDA is as given or calculated as OPBIT + depreciation; data should be treated as directional; Source: various annual reports as published; Coriolis analysis
EBITDA(NZ$; m; FY10)
EBITDA/Revenue(%; FY10)
Total assets(NZ$; m; FY10)
EBITDA/Total assets(%; FY10)
$16,726
$497
$422
$166
Fonterra
Open Country
Westland
Tatua
$1,506
$11
$20
‐$2
9%
2%
5%
‐1%
$14,169
$362
$335
$123
11%
3%
6%
‐1%
DAIRY – FIRM PROFITABILITY BENCHMARKINGNew Zealand firms perform below global peers on return on sales and return on assets; Fonterra performance in line with European co‐op (Arla & Campina)
PAGE 32 Key: darker = Co‐Op; Lighter = corporate; Note: EBITDA is as given or calculated as OPBIT + depreciation; we are not accountants; data should be treated as directional; firms chosen by Coriolis from past research with additions and subtractions suggested by NZ firm interviewees; Source: various annual reports as published; Coriolis analysis
38%
24%
12%
12%
8%
7%
18%
6%
14%
9%
5%
2%
‐1%
Nestle
Mead Johnson Nutrition Co
Saputo
Kerry Group
Arla
Campina
Danone
Dean Foods Company
Kraft Foods
Fonterra
Westland
Open Country
EBITDA/Revenue(%; FY10)
38%
33%
21%
14%
12%
12%
11%
8%
7%
11%
6%
3%
‐1%
EBITDA/Total assets(%; FY10)
New Zealand
International
Salmon
Salmon
Salmon
Salmon
Average15%
Average4%
Average17%
Average5%
Tatua
Co‐Op
Benchmarking value added: key New Zealand firms vs. select global dairy companies(% of sales; FY10)
DAIRY – VALUE ADDEDPeers indicate there may be more opportunities to add value
PAGE 33 Note: we are not accountants; data should be treated as directional; Source: various annual reports as published; Coriolis analysis
Notes/Definitions
‐ To economists value‐added is the “difference between the cost of materials purchased by a firm and the price for which it sells those goods”; this is almost/ effectively gross profit (which is what we use here) [or effectively what firms pay GST on]
‐ Gross profit itself is then paid out as a return on labour (wages), other non‐COGS and a return on capital (EBITDA)
‐ Gross domestic profit (GDP) is a measure of the gross value added; when we propose increasing New Zealand’s GDP, we are effectively proposing to increase the amount of value added
‐ Saputo (used page prior) not enough data in Annual report for this calculation
40%
20%
35%
24% 22%28%
23%19% 18% 20%
7%1%
24%
38%
18%
12%14%
7%
8%
6%5%
‐1%
9%
2%
63%
58%
53%
37%36%
31%
22%19%
16%
3%
New Zealand
International
EBITDA
Wages & other value
added
36%
25%
Source: Source: various company annual reports (AR) ; various company websites (ws) ; Kompass (K) ; interviews (Ci) ; Coriolis analysis and estimates (Ce)
The New Zealand dairy industry is dominated by Fonterra; there are five other firms with dairy turnover over $100m (Goodman Fielder, Open Country, Westland, Tatua and Synlait)
Key firms in the New Zealand dairy sector(2010 or as available)
Turnover % Export Employees OwnershipYear
founded Notes
Milk processing/diversified dairy
$16,726m(2010)
95%(AR)
NZ 9,50015,600 (ws)20,000 (K)
NZ; co‐operative(11,000 farmers)
2001 www.fonterra.comFormed in industry mega‐merger in 2001
A$441m(2010)
1,000(dairy only)
Subsidiary of Goodman Fielder(Public: ASX)
~1986 www.goodmanfielder.com.au/index.php?q=node/53Formerly NZDF; brand swap with Font; Incl. Huttons KiwiNat Foods likely long‐term ownerAcquired SunLatte in 2005
$497.3m(2010)
196(Ci)
NZ/Singapore(52% Talleys; 25% Olam; others)
2001 www.opencountry.co.nz3 plants; capacity 800m l/year; exports to 45 countries35.5% owned by AFFCO itself 52.8% owned by Talleys
$421.6m(2010)
85%(article)
350(K)
NZ; co‐operative(380+ farmers)
1934 www.westland.co.nzOwns Easiyo
$166.4m(2010)
96%(article)
194(article)
NZ; co‐operative(112 farmers)
1914 www.tatua.com
Synlait $150m(2009e)
160(article)
China/Japan/NZ; mixed(Bright; Mitsui; others)
2000 www.synlaitmilk.comAdding capacity to plant in DunsandelPurchased assets of Oceania Dairy ($95m plant not built)
DAIRY – KEY FIRMS
PAGE 34
Source: Source: various company annual reports (AR) ; various company websites (ws) ; Kompass (K) ; interviews (Ci) ; Coriolis analysis and estimates (Ce)
New Zealand also has a strong second tier of dairy firms
Secondary firms in the New Zealand dairy sector(2010 or as available)
Turnover % Export Employees OwnershipYear
founded Notes
Butter
Ballantyne foods $31m(2007)
TBD NZ/Australia; mixed (Ballantyne family)
1936 (AU)1980 (NZ)
http://www.ballantyne.com.au/Moved canned butter factory to New Zealand in 1980; Morrinsville factory is 50% owned by Fonterra
$4‐5m(Ce)
20(K)
New Zealand; private(Bartosh family; others)
2001 www.canarybutter.co.nzFormed in 2001 to manufacture portion pack butter
Other dairy products
$21.8m(2010)
40(K)
Japan; Listed(Kirin)
www.natfoods.com.au; http://lnnf.com.auwww.kirinholdings.co.jp/english/Primarily Yoplait yoghurt in New Zealand
$14m(Ke)
50(K)
New Zealand; private(Patton family)
1896 www.milligans.co.nzRange of dairy products including Frosty Boy
$8‐12m(Ce)
35(ws)
New Zealand; private(Gormack family; others)
2003 www.klondykefresh.co.nzFluid milk manufacturing plant in Christchurch
DAIRY – SECONDARY FIRMS
Others (est. under $10m) Proposed or in progress
PAGE 35
Source: Source: various company annual reports (AR) ; various company websites (ws) ; Kompass (K) ; interviews (Ci) ; Coriolis analysis and estimates (Ce)
There is also a group of smaller specialty cheese firms
Secondary firms in the New Zealand cheese sector(2010 or as available)
Turnover % Export Employees OwnershipYear
founded Notes
Cheese
$10m(2008)
40(K)
Michael Laird 70%DIFL 30%
www.kiwicheese.co.nz; www.difl.co.nzFocus on foodserviceRecent JV with GF/Meadow Fresh
$10m(Ke)
35(K)
New Zealand; private(Robert (Bob) Berry)
whitestonecheese.co.nz
$8m(article)
70(article)
New Zealand; mixedDIFL 24%; Wyatt Creech 6%; others
www.kaimai.co.nzwww.dairyexporter.co.nz/article/36225.htmlwww.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10691110Closed in 2011 the recently acquired (2009) Te Mata cheese factory
CHEESE – OTHER FIRMS
Others (est. under $5m)
PAGE 36
Recent major dairy industry transactions(2005‐2010)
DAIRY – FONTERRA TRANSACTIONSFonterra is expanding rapidly overseas …
PAGE 37
Date Acquirer Target Price Details
May 2010 DairiConcepts (Fonterra and Dairy Farmers of America JV)
Swiss Valley Farms (USA) N/A ‐ Bought a stake in a Midwest cheese company US hard Italian cheese business of co‐operative Swiss Valley Farms (SVF)
‐ Includes a plant in Minnesota
March 2010
Fonterra Full ownership of Saudi dairy plant $45m ‐ Dairy manufacturing plant was a joint venture with Saudi company in Saudi Arabia, Fonterra bought the whole business. Plant supplies Anchor and Anlene milk powder and cheese to the Middle East
Jan 2009 Fonterra License to produce SKI brand yoghurt in Australia
N/A ‐ Acquired from National Foods the licence to manufacture, market and sell Nestle's Ski yoghurt brand in Australia‐ Combined with other Nestle yoghurt deal, this investment increased Fonterra market share in Australian yoghurt
from 1% to 30% (by value)
2009 Fonterra Sold shares in Britannia New Zealand Foods
‐ Fonterra JV with Britannia Industries (India), Fonterra sold 49% stake to Britannia Industries‐ Fonterra exits from India
Sep 2008 Fonterra Fresh yoghurt business of Nestle in Australia
N/A ‐ Acquisition of Nestle's yoghurt and dairy dessert business in September 2008 (but not Ski brand)
2008 Fonterra Purchased remaining shares in Soprole
‐ Ownership increased from 57% to 99.8%‐ Soprole is a leading Chilean branded dairy products company, selling yoghurt and a variety of other dairy
products‐ Soprole sales were $583m in 2007‐ Soprole accounts for 50% of Chilean dairy exports
2007 Fonterra Norco Milk N/A ‐ Bought Australian milk company to expand access to NSW and Queensland
2005 Fonterra Acquired Kapiti Fine Foods $50‐60m ‐ Bought gourmet ice cream, cream, liquid milk and cheese company including production facilities
2005 Fonterra Bought Fresh ‘n Fruity yoghurtbusiness
$754m ‐ Bought manufacturing and brand from New Zealand Dairy Foods‐ Includes Anchor brand‐ Sold Kiwi Meats and Meadow Fresh brands after the purchase, retained Mainland cheese
2005 Fonterra and Campina (Europe)
Created JV pharmaceutical lactose company (DMV Fonterra Excipients)
$115m ‐ Plants in New Zealand, Germany and Holland‐ Pharmaceutical grade lactose is used in the production of pills and as a carrier for inhalation of drugs for instance
as used in asthma inhalers
2005 Fonterra National Foods (Australia) Unsuccessful ‐ Highly public but ultimately unsuccessful bid to purchase National Foods‐ Sold previous 19% stake in company for $269m
Source: various companies annual financial statements (as filed with NZ Companies Office or available company website); various press releases and news articles; Coriolis analysis
Recent major dairy industry transactions(1986‐2005)
DAIRY – FONTERRA TRANSACTIONS… and has been for decades
PAGE 38
Date Acquirer Target Price Details
June 2005 Fonterra Bonlac Foods N/A ‐ Increases Australian milk supply to Fonterra‐ Bonlac was Australia’s 4th largest milk company‐ Bonlac plant produces liquid milk, yoghurt and dairy desserts
2005 Fonterra Investment in San Lu Group $183m ‐ Invest partly to gain access to local fresh milk supplies, 43% ownership‐ San Lu was a leading Chinese milk company
Sept 2003 Fonterra Increase holdings in Bonlac Supply Company
N/A ‐ Company stake was increased from 25% to 50%‐ Fonterra now responsible for sales and marketing of Bonlac products‐ Bonlac collects milk and processes it
2002 Nestle Fonterra $318m ‐ As part of Dairy JV in South America (Dairy Partners Americas), Fonterra sold several dairy companies to Nestle in several South and Central American countries
2002 Fonterra Britannia Foods (India) JV formed ‐ Formed Britannia New Zealand Foods to sell branded cheeses and other branded dairy products in India using primarily Indian milk
December 2001
Fonterra Arla Foods (Europe) JV formed ‐ JV formed to market Lurpak (Arla) and Anchor (Fonterra) butter to the UK‐ Allowed rationalisation of Anchor brand in UK due to declining UK butter market
May 2000 Fonterra Dairy Farmers of America JV formed ‐ DairiConcepts JV company to access US milk and process with Fonterra technology‐ Produces infant formula ingredients, cheese powders, milk protein concentrate
1986 NZ Dairy Board Soprole N/A ‐ Acquired greater than 50% of this Chilean dairy company that produces a range of value added products‐ Soprole is now 99.8% owned by Fonterra
Source: various companies annual financial statements (as filed with NZ Companies Office or available company website); various press releases and news articles; Coriolis analysis
Recent major dairy industry activities(2009‐2011)
DAIRY – FONTERRA ACTIVITYFonterra is building up capacity in South America and Asia …
PAGE 39 Source: various companies annual financial statements (as filed with NZ Companies Office or available company website); various press releases and news articles; Coriolis analysis
Date Company Investment Activity Details
2011 Fonterra N/A Expanded online trading platform
Exchange expanding to include cheese, milk protein concentrate and casein
2011 Fonterra N/A Investigate forming pilot farm in India
Agreement signed to investigate building dairy farm in India; 3,000‐5,000 cow farm plannedJV with 2 Indian dairy farmer groups
2011 Fonterra N/A Plans to build dairy farm in Brazil
Plan to develop 3,300 cow farm to supply Dairy Partners Americas with milk
2011 Fonterra N/A Agreement pulled Saprole (Fonterra Chilean Subsid) and Nestle liquid and chilled pulled out of planned merger
2010 Fonterra $212m World’s largest milk powder dryer
Dryer can produce 27 tonnes of milk powder per hourIncreases output and efficiency of operation
2010 Fonterra $8m UHT expansion $8m expansion upgrade to UHT facility in Takanini (+600k packs/week) = 30% increase in production [To 1.7m/week]
2010 Fonterra $150m New plant consents New plant at Darfield, Canterbury planned – at resource consent stage; will employ 50 people
2010 Fonterra $42m Develop farm in China NZ$42m investment ‐ formally agreed to develop a new Fonterra dairy farm in Yutian County, Hebei Province, ChinaStrategy to increase local milk supply in China
2010 Fonterra $26m Expand Australian dairy plant
Capacity increased in Victoria yoghurt plant so all Ski yoghurt can be manufactured by Fonterra
2010 Fonterra $12m Expand Malaysian dairy plant
Increase capacity to produce yoghurt and related products for the Malaysian market
2010 Fonterra N/A Fonterra shift close to “Food Valley”
Fonterra moving from Germany to Amsterdam (near “Food Valley”) to grow sales of value‐added ingredients and food technology solutions near big corporate food makers and the professional culinary sector
2010 Fonterra N/A New cool store Ships more than 235,000 tonnes of butter cheese/yr from coolstore in Hamilton; located beside existing dry store will form a hub; described as NZ’s largest cool store
2009 Fonterra N/A Sold shares in JV Sold 25% shares in Arla Fonterra Foods, a joint venture between Arla (Europe) and Fonterra to merge marketing of butter to UK“No longer considered core to long‐term strategy’
2009 Fonterra $18m Expand Sri Lanka dairy plant Expanded plant to increase production of yoghurt and related products for the Sri Lankan market
Recent major dairy industry activities(2004‐2009)
DAIRY – FONTERRA ACTIVITY… continued …
PAGE 40 Source: various companies annual financial statements (as filed with NZ Companies Office or available company website); various press releases and news articles; Coriolis analysis
Date Company Investment Activity Details
2009 Dairy Partners Americas (Fonterra and Nestle JV)
$51m Built milk concentration plant in Brazil
JV plant was opened in Palmeiras daz Missoes in southern Brazil, a region with significant dairy productionProcesses 1 million litres per day
2008 Fonterra ‐$139m Wrote off Chinese investment
San Lu produced melamine contaminated infant formula causing sickness and deathFonterra maintains other significant and growing investments in China
2008 Fonterra N/A Opened online commoditytrading platform
Commodity whole milk powder exchange formed that has grown to trade 25% of total Fonterra sales, 300 bidders from 58 countries
2008 Fonterra $2.4m Created research facility Research facility in Chicago employs 50 staff to research novel milk‐based ingredients for use in the manufacture of cheeses, yoghurts, infant formulaComplements existing research facilities in Palmerston North, Melbourne and Hamburg (now in Amsterdam)
2007 Fonterra N/A Farm in China The Tangshan Fonterra Farm produces milk for local market (6,000 cows, 25m litres of milk) and uses an intensive feedlot system for dairy herd
2007 Fonterra $42m Cheese factory near Timaru Consolidates cheese production into one main site, produces a range of cheeses for Anchor, Chesdale and Mainland brandsFonterra developed patented technology to rapidly make mozarella cheesePlant also makes shredded mozarella cheese using this technology for foodservice sale to pizza chains
2007 Fonterra $72m Expand production of infant formula base mix
Investment upgrades a New Zealand and an Australian plant to increase production by 1/3rdPrimarily produces infant formula mix to supply to infant formula companies
FY06 Fonterra $77m Plant upgrades Upgraded Te Awamutu and Takaka plants in New Zealand
FY06 Fonterra N/A Plant upgrades Upgraded Soprole plants in South America
2006 Fonterra N/A Expand services for RD1 stores
In a JV with Landmark (Australia), RD1 rural supply stores will start selling finance, insurance and real estate servicesThere were 51 RD1 stores in 2006
2005 Fonterra N/A Bought Nestle plant in Aus Plant converted to only make milk powder for export
2004 Fonterra $25m Pharmaceutical lactose production facility
Plant produces lactose for drug inhalation devices
2004 Fonterra $15m Milk fractionation plant Plant opened in Hautapu and is focused on lactoferrin production along with other milk proteins
April 2004 Fonterra N/A Expanded JV in South America
Dairy Partners Americas is a JV between Fonterra and NestleExpanded operations to Trinidad, Ecuador and ColumbiaInvolves manufacture, distribution, sales of milk powder, chilled dairy products
Recent major dairy industry activities(2001‐2002)
DAIRY – FONTERRA ACTIVITY… continued
PAGE 41 Source: various companies annual financial statements (as filed with NZ Companies Office or available company website); various press releases and news articles; Coriolis analysis
Date Company Investment Activity Details
2002 Fonterra $26m Butter plant constructed Butter plant was built at existing Claneboye site
March 2002
Nestle and Fonterra N/A Form JV in South America Form Dairy Partners AmericasIn 2003, JV had 3400 employees throughout South AmericaAgreement to cooperate on manufacture of UHT milk, yoghurt, ingredient milk powder and milk management
2002 DairiConcepts (Fonterra and Dairy Farmers of America)
$73m Built dairy plant Plant built on existing site and manufactures milk protein concentrate
2001 Fonterra N/A Formed research venture JV with the University of Auckland with funding from FRST (NZ gov’t science fund)Aim is to discover novel bioactive milk compounds
2001 Fonterra N/A Built new plants New milk powder and lactose plants built at Clandeboye in Canterbury
2001 Fonterra N/A Licensed probiotic DR10 probiotic was developed by the NZ Dairy Research Institute and launched by NZ Milk (now Fonterra)Licensed product to Danisco, a major food manufacturer for use in yoghurt
Recent major dairy industry transactions(2005‐2011)
DAIRY – TRANSACTIONSTraditional dairy companies are moving into new higher growth areas
PAGE 42
Date Acquirer Target Price Details
2011 Synlait Oceania assets N/A ‐ Agreement to buy assets of Oceania land and consents (no plant built yet); “Help manage our growth” CEO, John Penno
Sep 2010 Bright Dairy & Food (China) 51% of Synlait Limited from other shareholders (equity increase)
$82m ‐ Bright Dairy’s investment of $82 million for 51 per cent of Synlait Milk will facilitate the completion of a second milk powder plant to begin operations in August 2011. The plant will produce value added products, such as infant formula and other high specification formulated milk powders, packaged for consumers in China and elsewhere
Apr 2010 Westland Remaining 25% of EasiYo N/A ‐ Remaining share from founders Kathy and Len Light
2010 A2 Corp A2 Australia Dairy Products N/A ‐ Buy up the remaining 50%; partner Freedom Nutritional Products will get 25% stake in A2 Corp; better financial position to expand internationally
Sept 2009 Kaimai Cheese Te Mata Cheese factory and café N/A ‐ Purchased factory and café
2008 AFFCO Open Country Dairy N/A
2007 Mitsui (Japan) 14% of Synlait $13.5m ‐ Mitsui of Japan invests in NZ dairy production via Synlait and an additional $16.5m loan
2007 Goodman Fielder Dairy (Meadow Fresh)
Independent Dairy Producers "relatively small"
‐ IDP processes and supplies town milk under the Cow and Gate brand to dairies and small retailers in Auckland, Wellington, Tauranga and Hamilton.
2007 Westland 75% of EasiYo from founders Kathy and Len Light
N/A ‐ $30m dehydrated yoghurt manufacturer founded in 1991; sales are 75% export , primarily Australia and UK markets; Westland’s first acquisition of a “a value‐add business”
Dec 2005 Goodman Fielder NZ Dairy Holdings (Meadow Fresh) from Rank Group
A$693.8m
1. Ex‐head PPCS (aka. Silver Fern Farms); Source: various companies annual financial statements (as filed with NZ Companies Office or available company website); various press releases and news articles; Coriolis analysis
Recent major dairy industry activities(2006‐2011)
DAIRY – ACTIVITY There has also been a range of significant investments in plants, both domestic and overseas
PAGE 43 Source: various companies annual financial statements (as filed with NZ Companies Office or available company website); various press releases and news articles; Coriolis analysis
Date Company Investment Activity Details
2011 Piako Gourmet Yoghurt N/A Distribution deal Fonterra Piako signed a deal with Fonterra to distribute through supermarketsPurchased factory in Norwich, UK to produce local yoghurt in UK branded as “Little Melton Products” (“UK‐made” company)
2011 Kaimai Cheese Company N/A Plant closure High milk prices have forced Hawkes Bay cheese factory to close the Te Mata Cheese factory and cafe with the loss of nine jobs (purchase in Sept 2009). Sold up to 135 tonnes of white‐rinded, blue and feta cheese a year. Production moving to Waharoa
2010 Miraka $35m Milk powder plant 8t/hour powder drying plant has a capacity for 50,000 cows sharing a similar configuration to that used by Open Country Cheese and Synlait plants; scheduled to open in August 2011Miraka is a joint venture between Wairarapa Moana Incorporation and Tuaropaki Ltd.
2010 South Waikato Processing Facility Ltd (Arapuni Milk)
N/A Processing plant consent granted
Plans to build a $100 million processing plant at Arapuni, Waikato; 37,000 tonnes per year milk powder plant
2010 Westland/EasiYo N/A Increase capacity EasiYo (75% Westland at the time) moves to new premises and doubles capacity at dehydrated yoghurt factory in Albany, Auckland
2009 Open Country Dairy N/A New plant ‐Wanganui Produces whole milk powder
2008 Open Country Dairy N/A New plant ‐ Awarua Commissioned the Awarua factory; whole milk powder capacity to increase to 200m litres of milk
2008 Goodman Fielder Dairy (Meadow Fresh)
N/A Plant upgrade Developing a UHT milk facility from which Goodman Fielder will be able to service its emerging market opportunities, particularly in Asia
2008 Goodman Fielder Dairy (Meadow Fresh)
N/A Plant upgrade Development of a specialty cheese facility at its plant in Longburn in the Manawatu and upgrading the plant's yoghurt and liquid milk operation
2006‐08 Open Country Dairy N/A Improved facilities Waharoa Whey Plant (2006); anhydrous milk fat plant (2007); and whole milk powder plant (2008)
Theme Details Examples
In‐market investment
Farm investments Investing in farms in international markets ‐ Fonterra – 2010 New Fonterra Yutian Farm ($42m investment) to be developed in Yutian County, Hebei, China (houses 3,000 cows)
‐ Fonterra – 2007 The Tangshan Fonterra Farm pilot successfully demonstrated ability to produce high quality milk locally (6,000 cows, 25m litres of milk)
Production investment
Piako Gourmet Yoghurtproducing yoghurt in UK
‐ Producing yoghurt in UK and branding as “Little Melton Products” (to be a UK‐made company) supplying Harrods and Waitrose
‐ Support from Fonterra in NZ market to distribute into supermarkets
Facility investment‐down the value chain
Fonterra new facility in Amsterdam ‐ EU headquarters and Fonterra’s Europe technology application centre, moving to Amsterdam to expand the value‐added ingredients and food technology solutions and sell to big corporate food makers and the professional culinary sector. Aim to become active in “Food Valley”
Efficiencies
Transport hubs Rail focussed hubs ‐ Fonterra to develop 5 hubs; national supply chain strategy, coupled with the move to use rail more often. New coolstore facility in Hamilton built beside Dry store and Kiwirail.
Identified firm level activity or investment themes(2010)
DAIRY – THEMESA number of theme emerge from firm behaviour…
PAGE 44 Source: various companies annual financial statements (as filed with NZ Companies Office or available company website); various press releases and news articles; Coriolis analysis
Theme Details Examples
Focus on Growth
Asia‐NZ co‐investment
Asian state owned enterprises investing in New Zealand dairy
‐ Vietnam Dairy Products (48% Government of Vietnam) invests to buy 19% ownership of Miraka with Maori (Wairarapa & Tuaropaki)
‐ Bright Dairy (majority owned by Shanghai regional government) buys 51% of Synlait‐ Misui (Japan) invests 15% of Synlait
Vertical integration Joint ownership of farms and processor ‐ Synlait ownership of 15,000 cows; Bright part ownership of processing and marketing assets, not including farms
‐ Miraka ownership of 18,000 cows (via Maori owner/shareholders)
Partnerships ‐ Goodman Fielder and The Grate Kiwi Cheese Co. partnership (2007) to supply cutting and wrapping for its cheeses
‐ “We will be investing limited capital in the joint venture which will be used to install specialist cutting and wrapping equipment in GKC’s Auckland plant. This will not only provide us with a secure supply base but will also allow us to develop some innovative new packaging solutions for our range of consumer cheeses.” CE, Peter Margin, 2007
‐ Fonterra and Piako yoghurt distribution deal
Increasing Retail Brands
Exporting consumer products
Dehydrated yoghurt ‐ Full ownership of EasiYo adds a branded product to Westland Milk Products portfolio. The shift to a new plant in 2010 enables EasiYo to increase export sales to $30m a year.
Identified firm level activity or investment themes(2010)
DAIRY – THEMES… continued
PAGE 45 Source: various companies annual financial statements (as filed with NZ Companies Office or available company website); various press releases and news articles; Coriolis analysis
New Zealand dairy export by form(US$m; 2000‐2010)
DAIRY – EXPORTS BY TYPENew Zealand dairy exports have achieved strong growth driven by milk powder and whey
PAGE 46 Source: UN Comtrade database; Coriolis analysis
$30 $33 $40 $39 $55 $55 $53 $72 $104 $89 $127 $276 $466 $445 $462 $472 $477 $657 $949 $880 $829 $1,023 $724
$1,023 $811 $1,062 $1,246 $1,300 $1,402
$2,049 $2,585
$1,875
$3,072
$20
$26 $15
$20 $119
$299 $322
$455
$507
$353
$419
$478
$437 $487
$550 $636
$661 $699
$880
$1,213
$950
$1,545
$496
$606 $545
$561
$688 $758
$803
$963
$1,135
$856
$1,023
$16
$15 $18
$17
$22 $35
$34
$70
$53
$40
$33
$461
$554 $473
$483
$467 $463
$484
$621
$696
$528
$476
$56
$73 $57
$56
$76 $84
$83
$154
$139
$86
$117
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Milk 16% +$97m 43% +$38m
SMP 14% +$748m 23% +$194m
WMP 16% +$2,348m 64% +$1,197m
Whey 35% +$399m 19% +$66m
Butter 12% +$1,067m 63% +$596m
Cheese 8% +$527m 20% +$168m
Lactose 8% +$17m ‐17% ‐$7mCasein 0% +$15m ‐10% ‐$51mOther 8% +$61m 36% +$31m
$2,557
$3,233$2,891
$3,250
$3,781$4,133
$4,538
$6,212
$7,312
$5,605
$7,836 TOTAL 12% +$5,279m 40% +$2,231m
CAGR Absolute
10 Year
CAGR Absolute
Last Year
$322 $364 $396 $445 $426 $422 $465 $478 $477 $405 $448 $389 $482 $420 $445 $522 $614 $589 $685 $793
$561 $504 $133 $154 $151 $160 $216 $230 $250
$326 $424
$303 $450 $321
$528 $393 $420 $439 $482 $513
$924 $1,003
$584 $779
$27
$34 $38 $67
$90 $95 $151
$200 $259
$212
$306
$261
$269 $336 $381
$492 $627
$779
$1,019
$1,315
$1,025
$1,309
$76
$76 $80 $92
$112 $140
$169
$229
$270
$225
$397
$572
$772 $580
$694 $771
$783
$891
$1,421
$1,628
$1,116
$1,585
$457
$553 $498
$546
$714 $740
$731
$931
$1,144
$1,174
$2,059
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
New Zealand dairy export by region(US$m; 2000‐2010)
DAIRY – EXPORTS BY REGIONNew Zealand dairy exports have achieved strong growth driven primarily by the developing world
PAGE 47 Source: UN Comtrade database; Coriolis analysis
Europe 3% +$126m 11% +$43m
N. America 3% +$116m ‐10% ‐$56m
Australia/ Pacific Islands
13% +$318m 49% +$148m
NA/ME/CA 18% +$1,048m 28% +$284m
Indian Sub 18% +$321m 76% +$171m
SE Asia 11% +$1,013m 42% +$469m
E Asia 16% +$1,602m 75% +$884m
$2,557
$3,233$2,891
$3,250
$3,781$4,133
$4,538
$6,212
$7,312
$5,605
$7,836 TOTAL 12% +$5,279m 40% +$2,231m
Other 9% +$458m 33% +$195m
SS Africa 27% +$279m 44% +$94m
CAGR Absolute
10 Year
CAGR Absolute
Last Year
DOCUMENT STRUCTURE
Section Page
Contents 4
Glossary of terms 5
Methodology & data sources 6
F&B IP Overview 7
Summary & conclusions 9
Sector overview 15
Milk powder 48
Appendices 61
Milk surplus and deficit worldwide(2007 or 2008)
MILK POWDER – GLOBALMilk is produced in temperate regions and exported as milk powder to tropical or dry areas close to the equator
PAGE 49 Source: IFCN
Global milk powder production by top 10 countries/regions and other(tonnes; 000; 2011 or as available )
MILK POWDER – PRODUCTION TOP 10New Zealand is the largest producer of milk powder in the world, followed by China; however, in aggregate, Europe is the largest producer
PAGE 50 Source: USDA “Dairy: World Markets and Trade July 2011” p19 and p23; UN FAO AgStat; Coriolis analysis
Comments
‐ Few would articulate that China was the second largest producer of milk powder in the world
‐ At what point will China become self‐sufficient in milk powder?
‐ At what point will China begin exporting significant quantities of milk powder?
Notes
‐ Data is USDA FAS forecast for top 10 filled in with missing data and total from FAO 2009 production
785
1,015
1,050
35
510
3
155
260
44
170
255
1,010
375
56
885
137
410
230
37
150
13
196
EU‐27
New Zealand
China
United States
Brazil
India
Australia
Argentina
Japan
Mexico
Other
WMP
SMP
1,795
1,390
1,106
920
647
413
385
297
183
194
452
WMP SMP
DAIRY – TOP 20 MILK PRODUCERS
Fresh milk production(millions of tonnes; 2009)
Countries with excess milk production export milk powder
PAGE 51 Source: UN Comtrade database; FAOSTAT; Coriolis analysis
36
45
8
12
11
29
12
12
13
32
8
10
11
86
12
28
23
9
11
15
China
India
Japan
Pakistan
Mexico
Brazil
Turkey
Italy
United Kingdom
Russian Federation
Canada
Argentina
Ukraine
USA
Poland
Germany
France
Australia
Netherlands
New Zealand
27
38
63
64
93
143
147
200
211
233
241
248
252
274
324
343
357
431
681
3,589
10
20
2
3
6
14
1
19
71
2
11
159
32
272
101
246
204
301
185
1,249
Fresh milk production per capita(kg; 2009)
Milk powder exports(thousands of tonnes; 2009)
Co‐operatives Private Corporate
New Zealand ‐
Australia ‐ ‐
USA ‐ ‐
Germany ‐ ‐
Netherlands ‐ ‐
Denmark/ Sweden ‐ ‐
France
DAIRY – KEY MILK POWDER EXPORTERSMilk powder is exported by regional dairy cooperatives; our dairy cooperatives compete with their dairy co‐operatives
PAGE 52 Source: Coriolis
Key milk powder producers by ownership structure by country(2011)
Key Milk Powder Producers
$217 $423 $365 $397 $556 $830 $832 $1,104 $1,410 $778
$191 $233
$338 $227 $273 $553
$592 $643 $922
$1,508
$580 $1,165
$1,931 $1,769
$1,402 $1,720
$1,954 $1,859 $1,556
$2,621
$3,095
$2,022 $1,503
$1,675 $2,200
$1,972 $2,028
$2,368 $2,512 $2,796
$3,774
$4,395
$3,341 $4,793
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
DAIRY – INTER‐REGIONAL MILK POWDER EXPORTS
Inter‐regional milk powder exports by region(US$m; 2000‐2010)
Oceania has grown to become the major global milk powder exporting region
PAGE 53 Inter‐regional exports means all exports by countries in a region minus exports between countries within that region; Source: UN Comtrade database; Coriolis analysis
CAGR Absolute
10 Year
CAGR Absolute
Last Year
N America 17% +$932m 101% +$586m
TOTAL 7% +$3,595m 14% +$930m
Australia/ Pacific Islands
Europe
11% +$3,117m 43% +$1,451m
‐2% ‐$428m ‐25% ‐$519m
Other ‐1% ‐$26m ‐75% ‐$587m
$4,056
$4,730
$3,966
$4,419
$5,431$5,793 $5,828
$8,421
$10,408
$6,721
$7,651
Indonesia, 144
Philippines, 143
Other SE Asia, 359
China, 282
Other E Asia, 47
Algeria, 293
Saudi Arabia, 81
Other NA/ME/CA,
232
Nigeria, 295
Other SS Africa, 128
Mexico, 192
Venezuela, 57 Other, 164
Inter‐regional milk powder imports by country/region(millions of tonnes; 2009)
DAIRY – MILK POWDER IMPORTSGlobally, milk powder is imported by tropical and desert regions; China is the main exception
PAGE 54 China includes Hong Kong; Source: UN Comtrade database; ; Coriolis analysis
Total = 2,452
Comments/Notes
‐ Inter‐regional imports means all imports by countries in a region minus imports between countries within that region
‐ China stands out as a non‐tropical, non desert country that imports significant milk powder
‐ China has significant and growing domestic milk production
Europe/N America/Oceania, 35
DAIRY – MILK POWDERMilk powder is sold as a commodity ingredient for various processed foods and reconstituted milk as shown in this Malaysian example
PAGE 55 Source: photo credit (fair use; low resolution; complete product/brand for illustrative purposes); Coriolis
Dairy cattle farming (A016)
Malaysian Dairy Factories
Malaysian cows(95,000)
Imported milk powder
Most value added at this
stage
EXAMPLE: Simplified model of uses of imported milk powder in Malaysia(model)
+20% lager than NZ in area but only 2% as
many dairy cows as NZ
0 50 100 150 200 250 300 350
China
Indonesia
Philippines
Singapore
Malaysia
Thailand
Sri Lanka
Algeria
Saudi Arabia
Oman
Nigeria
Mexico
Venezuela
Brazil
Belgium
Italy
Netherlands
Germany
United Kingdom
Spain
NZ Imports
Other Imports
Top 20 milk powder importing countries and New Zealand’s share(millions of tonnes; 2009)
DAIRY – TOP 20 MILK POWDER IMPORTING COUNTRIESNew Zealand has a very high market share in Asia, especially China
PAGE 56 Source: Plant & Food /HortReseatch Fresh Facts various years; Statistics New Zealand Agricultural Statistics; MAF SONZAF; UN FAO AgStats database (custom job); past Coriolis research & projects; Coriolis analysis and estimates
NZ accounts for much of Asia’s imports
NZ has no presence in Europe
$99 $205 $165 $206 $225 $236 $238
$366 $345 $145 $198 $12
$17 $17 $47 $66 $67 $101
$143 $152
$154 $226
$57
$67 $58
$76 $94 $116 $123
$177 $223
$145
$271
$74
$120 $49
$80 $76 $91 $99
$242
$447
$214
$331
$69
$81 $114
$135 $237
$300 $346
$447
$532
$415
$484
$305
$402
$273
$321
$300 $283
$326
$463
$648
$334
$499
$108
$131
$134
$198
$249 $207
$168
$211
$238
$468
$1,063
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
DAIRY – WHOLE MILK POWDER EXPORTS BY REGION
New Zealand WMP exports by region(US$m; 2000‐2010)
New Zealand whole milk powder exports are growing well, especially in East Asia
PAGE 57 Source: UN Comtrade database; Coriolis analysis
$724
CAGR Absolute
10 Year
CAGR Absolute
Last Year
$1,023
$811
$1,062
$1,246$1,300
$1,402
$2,049
$2,585
$1,875
$3,072
NA/ME/CA 21% +$415m 17% +$69m
TOTAL 16% +$2,348m 64% +$1,197m
SE Asia
E Asia
5% +$193m 49% +$164m
26% +$955m 127% +$595m
S America 16% +$257m 55% +$117m
Indian Sub 17% +$214m 86% +$126m
SS Africa 34% +$214m 47% +$72m
Other 7% +$99m 37% +$53m
$1 $8 $37 $46 $3 $2 $28 $7 $1 $2 $2 $30
$59 $32 $33
$26 $20 $22 $38 $45 $30 $46 $1
$4 $5 $4
$4 $10
$25 $20 $52
$36 $37
$7
$12 $38 $18
$19 $19
$23 $61 $39
$43 $37
$6
$5 $7 $10
$12 $18
$26 $36 $35
$27 $50
$28
$42 $55 $53
$65 $58
$108
$135 $150
$129 $140
$79
$117 $103
$85 $105 $93
$122
$108 $113
$144
$205
$123
$218 $168 $212 $238 $256
$302
$545 $444
$417
$506
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
DAIRY – SKIMMED MILK POWDER EXPORTS BY REGION
New Zealand SMP exports by region(US$m; 2000‐2010)
New Zealand skimmed milk powder is primarily exported to populated regions with limited domestic dairy production
PAGE 58 Source: UN Comtrade database; Coriolis analysis
$276
CAGR Absolute
10 Year
CAGR Absolute
Last Year
$466$445 $462 $472 $477
$657
$949
$880
$829
$1,023
Other 4% +$16m 54% +$16m
NA/ME/CA 17% +$112m 8% +$10m
Indian Sub
C America 18% +$30m ‐12% ‐$5m
TOTAL 14% +$748m 23% +$194m
SE Asia
E Asia
24% +$44m 83% +$23m
15% +$383m 21% +$89m
10% +$126m 42% +$61m
SS Africa 48% +$36m 4% +$1.3m
Europe/N America 1% +$0.2m ‐37% ‐0.9m
DAIRY – ASIAN MILK MARKET
Milk powder imports(thousands of tonnes; 2009)
Asia is New Zealand’s largest market for milk powder and New Zealand and Australia have captured most of this market
PAGE 59 Source: UN Comtrade database; FAOSTAT; Coriolis analysis
Fresh milk production(thousands of tonnes; 2009)
Milk powder import per capita(kg per person; 2009)
210
12
68
59
64
78
62
22
10
31
48
41
17
23
38
4
22
6
19
6
29
17
8
34
34
11
13
24
New Zealand
Australia
Europe
Other
35,510
7,909
882
14
0
41
4,894
China+HK
Japan
Indonesia
Philippines
Singapore
Malaysia
Other
0.2
0.3
0.6
1.4
28.5
3.9
0.4
Total milk available per capita(kg per capita; 1961‐2009)
DAIRY ‐ AVAILABLE MILK SUPPLY – CHINA, JAPAN AND SOUTH KOREAUsing the growth in milk production of Japan and South Korea as a guide, China should grow ~30% in the next 10 years then level off
PAGE 60 Total milk available means local fresh milk production + reconstituted milk powder imports (reconstituted milk calculated to weigh 10 times more than milk powder); Source: FAOSTAT, UNESCAP, Coriolis analysis
Comments/Notes
‐ Calculation is (milk production) + (dry milk imports x 10) / (population
‐ This is not total dairy, just available milk; it excludes imported cheese, etc.
Japan
South Korea
China
‐
10
20
30
40
50
60
70
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
CAGR(97‐07)17%
CAGR(75‐85)18%
DOCUMENT STRUCTURE
Section Page
Contents 4
Glossary of terms 5
Methodology & data sources 6
F&B IP Overview 7
Summary & conclusions 9
Sector overview 15
Milk powder 45
Appendices 61
Representing# of
membersAnnual budget Funding Website/notes
DairyNZ Farmers ~11,000 $65.1m(Expenses YE10)
‐ Levy ($51.8m) and other ($15.1m) ‐ Govt co‐funded research program PGP $170m
www.dairynz.co.nzmerger of Dairy InSight and Dexcel
Processors & exporters
8 n/a ‐ Membership Fees www.dcanz.comDCANZ ‐ Dairy Companies Association of NZ
Farmers & sharemilkers
n/a n/a ‐ Membership Fees www.fedfarm.org.nz/industry/dairy
NZ Large Herd Association
Large farmers n/a n/a ‐ Conference fees www.largeherds.co.nzConferences
Key dairy industry organisations (2010)
DAIRY – INDUSTRY ORGANISATIONSAs a major dairy producer, New Zealand has a strong range of dairy industry organisations
PAGE 62 Source: Coriolis analysis
TotalIncome
TotalStaff Focus & activities
Riddett Instituten/a n/a ‐ www.riddet.massey.ac.nz
‐ 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
n/a 100+ scientists
‐ www.fonterraresearch.com‐ Fonterra Research Centre‐ Dairy centre and pilot plant in Palmerton North
AgResearch $155m(2010)
824 ‐ Foods & Bio‐based Products; food composition and function, The role of foods in human health and wellbeing
$65.1m26 (research
team)‐ Industry good activity‐ Research farms, feed, farm systems, animal sciences
Key dairy research bodies in New Zealand(2010)
DAIRY – INDUSTRY SCIENTIFIC RESEARCHNew Zealand has strength in dairy research across a range of research institutes
PAGE 63 Source: Coriolis analysis