Fonterra: A view of the dairy market in Asia Bruce Donnison General Manager, Sustainability Confidential to Fonterra Go-operative Group 2 March 2011

Page 2 About Fonterra Cooperative Group Formed in 2001 with the merger of the New Zealand Dairy Board, New Zealand Dairy Group and Kiwi Co-operative Dairies Largest milk processor and largest dairy exporter in the world Annual revenues of NZ$16 billion 15,000 employees Sales network that reaches customers in more than 140 countries. Cooperative structure – owned by 10,500 New Zealand dairy farmers No matter where we are in the world, dairy is what makes us tick

Page 3 Today’s presentation The dynamics of the dairy market in Asia How Fonterra operates in the Asian market The importance of a sustainable approach –Nutritional innovation –Security of the supply chain Delivering the nutritional needs of Asian consumers The role of the Australian dairy supply chain

Page 4 Fonterra Our Vision: To be the natural source of dairy nutrition for everybody, everywhere, every day Fonterra Our Vision: To be the natural source of dairy nutrition for everybody, everywhere, every day

Page 5 Total dairy market in Asia and Middle East Total market AUD $9bn Roughly twice the size of Australia Growing at 4-5% per annum Consumption will continue to rise

Page 6 China also a major driver of growth China on track to exceed 1 million tonnes of dairy imports – China – Mexico – US / Japan – Russia – EU Percentage of global imports

Page 7 Plenty of room for growth Source: Euromonitor, powder converted to its rate of 1kg = 8.33 lts data Latam average = 57 lts/capita Asia average = 11 lts/capita Low base per cap consumption Huge populations with increasing incomes Interest in healthy eating is growing Milk is seen as a ‘gold standard food’ Per capita milk consumption

Page 8 Fonterra’s approach in Asia Investing in-market: “Behind Borders” Disseminating knowledge to locals Sustainable cooperative performance Focus on specific customer needs Develop value-added products to suit Grow lasting customer partnerships Anlene and Anmum – flagship brands Backed by research and innovation Build trusted brands

Page 9 Sustainability is key to success Climate change / carbon Improve carbon footprint Monitor international carbon change policy Influence NZ’s climate change policy Research on the nutritional value of foods given carbon impacts Water Improve performance around Clean Streams Accord Manage manufacturing site issues Respond to regulatory changes On-farm storage and irrigation technology Animal welfare Address concerns around inductions, housed cows, and skinny cows Biodiversity Develop a biodiversity strategy for Fonterra Nutrition Develop understanding and improve the nutritional profile and nutrient density of Fonterra’s product portfolio All underpinned by a safe, secure, integrated supply chain

Page 10 Delivering on nutritional needs in Asia Leading adult dairy nutrition product in Asia 286 million Chinese expected to suffer osteoporosis/low bone mass by 2020 Anlene is high-calcium, clinically proven to prevent osteoporosis Backed by continuous research and innovation Leading product for pregnant women in Asia Unique ingredient builds brain connections in infants Supported by educational programs on maternity/infant nutrition Science behind Anmum building broader paediatric product range

Page 11 On-farm 1,500 farmer suppliers; 300,000 cows 20% share Australian industry The role of the Australian dairy supply chain Milk Collection 1.8 billion litres per annum 50,000 on farm pick-ups p.a. Manufacturing 12 sites nationally Manufacture consumer and foodservice products,and bulk ingredients Sales and marketing Research Innovation Product development Storage and handling 300,000 tonnes of Australian product per annum All underpinned by our principles of sustainability

Page 12 Summary Fonterra is on a journey to deliver the nutritious dairy products the world needs in a sustainable way Milk is a product of nature so this journey starts with clean water, green grass and healthy cows Asian consumers have unique demands from dairy, the market is growing rapidly and is a key focus for us We are committed to meeting demand from Asian consumers by:  Investing in R&D so they can enjoy the best of dairy  Ensuring a safe, secure supply chain to build confidence about where our products come from