Certain Pasta from Italy and Turkey; Inv. Nos. 701-TA-365 ...> Barilla is, well, Barilla >...

Smart in your wor ld

Arent Fox

Certain Pasta from Italy and Turkey; Inv. Nos. 701-TA-365-366, 731-TA-734-735; Third Sunset Review; Turkish Producers Presentation Before the Commission

Presented by:

Matthew Nolan, Diana Dimitriuc Quaia, Arent Fox LLP

Bulent Hacioglu, Trade Resources Company

July 11,2013

The Pasta Industry Has Changed

> ConAgra acquired American Italian Pasta Co. in 2010

> Barilla is, well, Barilla

> Glencore/Xstrata owns Viterra which bought Dakota Growers in 2010

> Grupo Ebro in Spain acquired New World pasta in 2006

Why are such large multinationals interested in U.S. pasta companies?

S m a r t in y o u r w o r l d

Arent Fox Turkish Producers' Presentation 2

Perhaps they perceive a healthy U.S. industry

> Average net sales value increased 58% over the POR

> Capacity utilization is very high (when stated correctly)

> Gross profit margins ranged from 26-35% during the POR

> Operating income also quite healthy.

> Average figures mask individual results which show significant variation.

Source: Staff Report at Table III - 7. ®

S m a r t in your w o r l d

Arent FOX Turkish Producers'Presentation 3

What of imports over the last 17 years?

Mexico Replaced Turkey

US Pasta Market 1994

Turkey Subject 2.1

Italy Subject 9.4

US Producers

84.1

US Pasta Market 2012

Source: Staff Report at Table L-1 Source: Census Data


Arent Fox Turkish Producers' Presentation

Turkish Imports are Negligible while Other Non Subject Imports have grown, no effect on U.S. industry

350,000.00

300,000.00

250,000.00

c 200,000.00 o i-o

I 150,000.00

100,000.00

50,000.00

0.00

U.S. Pasta Imports

Italy

•Mexico

•Turkey

•Grand Total

2007 2008 2009 2010 2011 2012


Arent Fox

Source: Census Statistics

Turkish Producers' Presentation 5

While Turkish capacity has increased to meet world demand

Average Capacity and Capacity Utilization

1,000,000

900,000

800,000

700,000

600,000

500,000

400,000

300,000

200,000

100,000

0

2007 2008 2009 2010 2011 2012 2013*

^^•Average-product ion capacity ^ ^ "P roduc t i on

Source: Public Staff Report at Table I V - 1 0 .


Arent FOX Turkish Producers'Presentation

Turkish Capacity Utilization is Strong and Getting Stronger

Capacity Utilization 100.00%

60.00%

50.00%

40.00%

30.00%

20.00%

10.00%

0.00%

2007 2008 2009 2010 2011 2012 2013*

^ ^ • C a p a c i t y Utilization

Source: Public Staff Report at Table IV-10. ® • — — i


Arent FOX Turkish Producers'Presentation i

Turkey Has Had Success In Other Markets

Growth of Turkey's Domestic and Major Export Markets

600,000.00 -i—

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: Official Turkish Export Statistics S m a r t in your w o r l d * TU rkish Producers' Prehearing brief at bxhibit 2. Arent FOX Turkish Producers'Presentation 8

Domestic demand is steadily increasing

Turkey Pasta Consumption 600,000

500,000

400,000

o i-o 300,000

s

200,000

100,000

0 "I 1 1 1 1 1 1 1 1 1 1 1 1

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Turkish Pasta Producers Association S m a r t in your w o r ! d * lurkish Producers' Prehearing Keport at bxhibit 7. Arent rOX Turkish Producers'Presentation 9

And Turkish consumption is expected to continue to grow

Turkey Pasta Consumption (Projected) 700,000

600,000

500,000

c 400,000 o

| 300,000

200,000

100,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: Turkish Pasta Producers Association S m a r t in y o u r w o r l d

Arent Fox lurkish Respondents' Prehearing Brier at bxhibit 7.


While Turkey Has Diversified its Export Destinations

Number of Countries Turkey Exported Pasta

146

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: Official Turkish Export Statistics


Arent Fox Turkish Producers' Presentation n

Key U.S. Sectors/Barriers for Turkish Producers

Expected Markets In U.S. are limited

> Food Service

> Ethnic Markets

Barriers to Growth

> Zero recognition/presence - no customers

> Extremely Limited Market Knowledge

> Packaging and certification requirements

> Logistics, supply chain

> Availability of Product

> No Vitamin Enrichment

* — — — — — — . S m a r t in your w o r l d


Turkish AUVs to U.S. are similar to other developed export markets, and Mexican AUVs

Compar ison of Turkish Export Prices with Average Prices of Mexican

Pasta Imported into the U.S.

1.S0C.OC

1.60C.OC

1,400.00

I.200.OC

1.00C.O0

5 800.00

600.00

400.00

232. CC

— ••— US Imports AUV fm M-exico

i|( US imports AUV fm Turkey

• TR ExportAUV to Japan

j i TR ExportAUV to Korea

* TR Export AUV to Germ any

2337 20CS 2009 201C 2011 2012


Arent Fox

Source: Turkish Official Export Statistics and U.S. Import Statistics Turkish Producers' Prehearing Brief at Exhibit 2-3.


Canada: similar market, no barriers, no growth?

Canada Total Imports vs Canadian Imports from Turkey

100,000.00

90,000.00

80,000.00

70,000.00

„ 60,000.00

c

o .y 50,000.00 +•»

S 40,000.00

30,000.00

20,000.00

10,000.00

0.00 2006 2007 2008 2009 2010 2011 2012

Turkey 117.49 98.83 164.37 347.73 631.22 500.03 1,653.24

World 81,056.84 81,126.11 77,435.66 84,235.68 85,964.84 90,843.19 95,431.79

Turkey

i World

• S m a r t in your w o r l d

Arent Fox

Source: Canadian Import Statistics (Stats Canada) Turkish Respondents' Prehearing Brief at Exhibit 14.

14

Stephen Harper (Canadian PM)

Petitioners believe pasta is basically all the s a m e , . . .

Brand does not really matter, does it?

<s> ——1 1 1 1——— S m a r t in y o u r w o r l d


Consumers do not look at brand, only price.

But then why are there so many brands?



And why is there so much price variation?

DtUUQ Spaghetti

• Thin Spaghetti

(f) SAN GIORGIO

T H I N S P A G H E T T I

SKH HID MM MQNI PKODH

R O NZOM

SmartTaste Thin Spaghetti, tNHICHiiD MACARONI PRODUCT MADf RfiOM UJ09ir DURUM SEMOLINA

THIN SPAGHETTI NETWri60Z(1LB)454g



Imports from Turkey Should Not Be Cumulated with Imports from Italy

> Imports from Turkey and those from Italy compete under dramatically different conditions of competition Turkey.

> Turkey and Italy compete in different market segments. Turkey is not in the retail sector.

> Turkish pasta is not known in the U.S. whereas buyers seek out Italian brands

> No fungibility: Turkish pasta is not vitamin enriched and limited mostly to long products. The Italian pasta is imported under many shapes and varieties and is vitamin enriched

r Non-subject imports (from Mexico) are the only possible competition for subject Turkish imports and the U.S. industry has not been affected.

r Commission should exercise its discretion not to cumulate imports.


Ar^Plt rOX Turkish Producers' Presentation 21

Certain Pasta from Italy and Turkey; Inv. Nos. 701-TA-365 ...> Barilla is, well, Barilla >...

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