NATIONAL DAIRYCONFERENCE 2017

November 28, 2017Seán Molloy,Director of Strategy & Supplier Relations

ROME

THE RUBICON

10 January 49 BC, the river Rubicon ……10 January 49 BC, the river Rubicon ……

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THE WORLD WE OPERATE IN IS CHANGING RAPIDLY…

Globalisation

GrowingMiddle Class

Urbanisation

Health andWellbeing

Natural andFree Form

Ethics, Sustainability& Traceability

Personalisation &Customisation

The Future of Retail

Digitalisation

Farm of the Future

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GLOBAL TRADE HAS LIBERALIZED SIGNIFICANTLY IN THE LAST 20YEARS BUT IS NOW UNDER THREAT IS SOME AREAS………

How competitive is Ireland on the global market place?

Global Tradequadrupled in thelast 20 years

Brexit - the singlelargest disrupter

Rise in food nationalism

Big foodrepresents safefood in emergingmarkets

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EMERGING MARKETS MIDDLE CLASS GROWTH CONTINUES…

How focused are we on the emerging market?

160 Mn enter middleclass annually

88% of the next 1 Bnwill be Asian98Mn Sub SaharanAfrica

Developedmiddle class demandpremium & convenience –willing to pay for it

Consumption growth+4% PA (developed0.5%, developing 6%)

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OUR WORLD… INCREASINGLY URBANISED…EMERGENCE OF MEGA CITIES

How do we respond to an increasingly urbanised mind set?

24 Mn residents inShanghai

Population density3,635 Shanghai Vs. 68nationally / Km2 inIreland

Populations crowdedintomega cities

Urban mindset drives consumption,preference andproduction models

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HEALTH AND WELLBEING IS FRONT OF MIND FOR CONSUMERS

Can we respond to the demand for healthy food?

Sugar, exercise,stress and immunityare key personalconcerns

54% of Asians areactively trying to looseweight

25% of US adults needfoods with highamounts of probioticsor prebiotics

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CUSTOMERS AND CONSUMERS ARE DEMANDING MORE……..

How can we verify/substantiate our claims?

ETHICS SUSTAINABILITY TRANSPARENCY Natural & ‘Free From’

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CONSUMERS ARE LIVING ONLINE AND INTERACTINGWITH THE WORLD DIGITALLY……

Are we to be the leaders or the followers in this revolution?

eCommerce could reach40% by 2026 driving$60 Bn in value

Potential to revolutioniseall aspects of agricultureand food

Facilitate integrationwithout ownership in thefood industry

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THE FARMER OF THE FUTURE WILL FACE MANY DIFFERENTCHALLENGES… AND OPPORTUNITIES

For success, a far greater integrated supplychain model will be required.

VolatilityFoodquality

Evolving farmingmodels

Knowledgerequirements& expectations

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ENVIRONMENTAL REGULATIONS …. FUTURE QUOTA

Research, science and evolved practices required toaddress these real challenges

Carbon

Nitrates Phosphates

Water

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And farm structures arechanging….

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FARMER

average age

SUCCESSORS

identified asuccessor

EMPLOYEES

Of those with no employees38% intend to employ

Employeenon-familymembers

GROUP / PARTNERSHIP

23% involved in farm partnership

Additional 20% interested infuture farm partnership

involved indiscussiongroup

LAND AREA

57 acres rented

acres

66% of suppliers rent land

RENTAL AGREEMENTS

43% Long-term, 20% Short-

term

Land area is rented(270k acres)

LAND UTILISATION

acresunsuitable fordairying

ZERO GRAZING

of suppliers will

practice zero grazing by2020

SOIL MANAGEMENT

Significant relianceon Nitrogen Derogation

83% soil test

WATERCOURSES

53% of those have a Nutrient

Management Plan

of suppliers have

watercourses on theirland

ANIMALS

37 heifers

cows

32 calves

58 beef

REPLACEMENT HEIFERS

of suppliersconsideringcontract rearingreplacements

FUTURE NON-DAIRY LIVESTOCK PLANS BY 2020

increase

63% maintain current level

GENETIC MERIT

40% Room for improvement

Excellent

BROADBAND

Poor-Very Poor

30% Satisfactory

ADDRESSING POLICY ISSUES

EMPLOYMENT LAND UTILISATION ENVIRONMENT

TECHNOLOGYSOILS

How will farmers need to evolveto ensure a sustainableproduction model…

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SUSTAINABLE MILK PROD. REQUIRES: MARKET & SOCIETY FOCUS

Farmer of the future:

- Market focused

- Consumer understanding

- Changing Societal Landscape

- Ability / agility to respond

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SUSTAINABLE MILK PROD. REQUIRES: CLINICAL SPECIALISATION

• Clinical specialisation

• Outsourcing all non core activities.

• Investing only in essential assets.

• Cost understanding/focus.

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SUSTAINABLE MILK PRODUCTION REQUIRES: SUPPLY CHAININTEGRATION…

• Embrace/drive greater supplychain integration……from pre farmto post brand.

• Development and the adaption ofnew models / new ways of working

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SUSTAINABLE MILK PROD. REQUIRES: OWNERSHIP OF THE ENV.DEBATE

• Greater ownership of theenvironmental debate……..

• Take leadership and communicatecare for the environment……

• To enhance and protect theenvironment….. to do and be seen todo the right thing.

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SUSTAINABLE MILK PROD. REQUIRES: MAX UTILISATION OF LANDBASE…

• Utilisation to its sustainablemaximum the industry’s mostprecious asset……the land base.

• This may require questioning thecurrent model…examining thecurrent results.

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SUSTAINABLE MILK PROD. REQUIRES: EMBRACING SCIENCE &TECHNOLOGY

• Embrace advances in science andtechnology.

• Exploit the promise of digitaltechnology

• Technology investments – need to befit for purpose

• A need to discern the differencebetween noise and value.

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……AND SUSTAINBALE MILK PRODUCION REQUIRES FARMERSTO CHALLENGE…

• Challenge accepted thinking, toquestion convention.

• Engage beyond the farm

• Challenge short -term thinking.

• No stakeholder in the industryshould be immune from challenge.

Sustainable milk production will also require all of the relevant stateinstitutions to continue to work in concert to drive the success of thenations most important indigenous industry

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It will require all those who comment, analyse, lobby andrecommend to go beyond the apparent, to step out of thecomfortable, the traditional - perhaps even the popular…

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…and how is/will Glanbia Ireland drivesustainable milk production?

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40%OWNERSHIP

60%OWNERSHIPOWNERSHIP

28.5%

• CONSUMER

• AGRI

• GII

WE HAVE FUNDAMENTALLY CHANGED OUR STRUCTURE…OUR MODEL

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WE HAVE ESTABLISHED A BUSINESS OF RELEVANT SCALE

1800+ EMPLOYEES

2.4 BN LITRES OF MILK Irl6 BN LITRES GLOBALLY

11 PROCESSING FACILITIES

5000 MILK SUPPLIERS

TURNOVER €1.5 BILLION

EXPORTS TO 60+COUNTRIES

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WE ARE TARGETING GROWING MARKET SECTORS…….

INFANTNUTRITION

SPORTS &LIFESTYLE NUTRITION

CLINICALNUTRITION

AFFORDABLENUTRITION

BAKERYCONSUMER BRANDEDFRESH DAIRYPRODUCTS

B2B CHEESE

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INVESTMENT INANCIENT GRAINS

EXPANSION INGLUTEN FREE OATS

FIRST TO GROWQUINOA IN IRELAND

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WE ARE LEADING INTERNATIONALLY ON VOLATILITYMANAGEMENT……

IRELAND - THE PERFECT LOCATION FOR FOOD PRODUCTION

ABUNDANCEOF WATERWAYS

PASTORALLANDSCAPE

LOW STOCKINGRATES

RICH HISTORYNATURALHEDGEROWS

BIODIVERSITY

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WITH OUR PARTNERS, WE ARE DRIVINGTHE SUSTAINABILITY MESSAGE IN THE MARKET..…

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€270MN INVESTED SINCE 2013 IN MILK PROCESSING CAPACITY

PROCESSING INVESTMENTPROPOSED €250-300MN (2017-2020)

Belview, Co. Kilkenny

WE HAVE COMMITTED TO ACCOMMODATING OUR MILKSUPPLIERS’ EXPANSION BY INVESTING IN WORLD CLASS

PRODUCTION CAPABILITY

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We have heavilyresourced our innovationand quality capability

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We have invested in our route to market and marketingcapability……

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…...and we have reached out to understand and respondto the views of our members……

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and so we returnto the Rubicon…

THANK YOU!

November 28, 2017Seán Molloy,Director of Strategy & Supplier Relations