1. Retail Meat New Zealand General Manager Alliance Meats
23 March2012
Presentation by
DAVID BAINES
General Manager Alliance Meats

2. INDUSTRY
WORLD SCENE
PRICING TRENDS
ALLIANCE GROUP POSITIONING/MARKET UPDATE
INDUSTRY OPPORTUNITIES

3. WHERE ARE WE TODAY - Industry
Red meat sector worth circa $8 billion of export earnings
Represents 15% of NZ’s total export revenue
Compares to dairy sector of $10 billion
Diversified - 22% sheepmeat to UK vs. 94% in 1958
Almost completely NZ owned industry with 55% owned by farmers
Farming sector comprises over 12,000 individual farmers
Over 90% of sheepmeats and 80% of beef exported
Sheep numbers around 32 million compared to over 70 million in mid 1970s
19 exporters to the EU - critical mass essential to supply large retailers
Industry would benefit from fewer companies - less processing plants

4. FOOD STILL A GOOD BUSINESS TO BE IN
Population worldwide growing
Consumption increasing
Need for more protein
Major domestic producers - EU, South America, Australia - in decline
Food and supply security important - NZ’s ability to maximise
Extreme volatility in foreign exchange rate relativities
Next Phase: - Sustainability
- Carbon Footprint
- Food Inflation

5. WORLD SHEEP and CATTLE PROJECTIONS
Source: GIRA

6. WORLD SCENE

7. WORLD SCENE … WEST to EAST - Volume 2006 to 2011
Total New Zealand tonnage 2006 = 311, = 221, %
Source: B+LNZ, AGL

8. WORLD SCENE

9. NEW ZEALAND PRODUCTION
LAMB EXPORT MUTTON
,000 (26.5 m) 95,100 (6.5 m)
,000
,000
,000
,000 (20.1 m) 55,000 (3.3 m)
Export tonnage loss (5 years) = 42,000 Mt - 13%
Significant reduction
Markets fully aware
Supply security
Rationalise customer base
EU/UK - less dominant
EU Quota down 45,300 Mt down 31,000 Mt (227,854 MT)

10. 1990 – 1991 Dairy accounted for 10% of pastoral land area
NEW ZEALAND
1990 – 1991 Dairy accounted for 10% of pastoral land area

11. NZ LAMB MARKETS - TOP 10 2006 2011 Change Country MT $/kg Value + UK
73,939
6.98
54,688
8.35
-19,251
19.6 %
China
20,184
1.95
37,389
4.03
17,205
106.6 %
France
23,920
8.53
18,513
9.66
-5,407
13.2 %
Germany
22,658
11.51
15,179
12.39
-7,479
7.6 %
Saudi Arabia
13,434
3.66
12,923
5.74
-511
56.8 %
USA
20,813
10.66
17,449
11.6
-3,364
8.8 %
Belgium
12,975
12.00
11,077
13.61
-1,898
13.5 %
Canada
9,652
8.26
9,738
9.33 86
12.9 %
Japan
5,980
6.15
6,688
7.78
-708
26.5 %
Mexico
11,602
3.29
3,919
4.76
-7,683
44.7 %
Totals
215,157
187,563
-29,010
Total 270,000 tonne exported - 28% Chilled
(44% main primal cuts now shipped chilled)

12. THE ALLIANCE GROUP STORY
Est by Southland farmers unhappy with lamb prices/British control
First plant at Lorneville in 1960
Today has 9 processing plants from Invercargill to Dannevirke
Annual turnover of around $1.5 billion; 5,500 employees
Diversified product range - retail, food service and manufacturing segments
100% farmer owned co-operative - 5,500 farmers
AGL represents 16% of world sheepmeat trade
Largest sheepmeat player in NZ
Global distribution network across 65 countries and ownership in UK, ME and North American marketing companies

13. MOVING UP AND DOWN THE VALUE CHAIN
ALLIANCE INVESTMENT
MOVING UP AND DOWN THE VALUE CHAIN
Base Primals Sub Primals

15. THE LOW HANGING FRUIT DMM - UK, EU, Pacific Manufacturing
Bones - China
Soup Stock
Knk Tips - China
Stock / Hot-pot
Fat - China
Lamb Roll Filler
Tails - China, Africa, PNG
BBQ / Hot-Pot
Tripe - China
Hot-Pot
Testes - China
BBQ
Heads - China
Wool -> Garments
Tng / Brain – Eating
Balance – Pet Food

16. LAMB UPDATE Supply/demand fundamentals OK – but economies impacting
Cross currencies will change trade flows - EU vs. diversified
NZ and market stocks increasing - consumer resistance at current high levels
FTA’s providing more opportunities - China, Malaysia, Korea, Russia, India
Emergence of China - low valued protein
EU Quota will not be filled
Impact of Australian product flows to market
Product Forms
Legs - continual conversion frozen to chilled
Middles - supply/demand back in balance
Shoulders – some correction on pricing
Flaps - high prices China

17. OPPORTUNITIES Meat Sector Strategy process
Automation and industry collaboration projects
Shrinking supply - MLA estimates 300,000 tonne short in next 5 years
Growing demand - protein supply needs to double by 2050
Emerging markets - becoming more sophisticated with ability to pay
NZ producers and processors more productive - more to come
Exports more precise in targeting right market, right customer, right products, right price points
Prospects forward for sheepmeat never looked better
New Zealand is well positioned to enjoy its bountiful advantages