1. Cooperation and solutions in agriculture 2009 The Hungarian milk market and the Global economic crises Cooperation and solutions in agriculture 2009 The Hungarian milk market and the Global economic crises

2. Hungary in Europe

3. General Introduction to the Hungarian milk market General Introduction to the Hungarian milk market  Animal Stock

4. Animal Stock

5. General Introduction to the Hungarian milk market General Introduction to the Hungarian milk market  Animal Stock  Number of Sites

6. Number of Sites Year Keeping Cattle Out of this : Keeping Cow Number of cattle/farm Agricultural Company Farmer Agricultural Company Farmer Agricultural Company Farmer 200584724 26176417 5705609,6 200690619 17080414 80853111,5 200789818 90879913 26054011,6 200887018 20678013 43354512,5

7. General Introduction to the Hungarian milk market General Introduction to the Hungarian milk market  Animal Stock  Number of Sites  Milk quotes

8. Milk quotes

9. General Introduction to the Hungarian milk market General Introduction to the Hungarian milk market  Animal Stock  Number of Sites  Milk quota  Milk production

10. Milk production (million liters)

11. General Introduction to the Hungarian milk market General Introduction to the Hungarian milk market  Animal Stock  Number of Sites  Milk quota  Milk production  Raw milk buy-out

12. Average prices of raw milk buy-out

13. The number of Milk Processors in Hungary The number of Milk Processors in Hungary Concentration among the processors

14. Top 5 in Hungary (net revenues) Net revenues 2006 (thousand HUF) Tolnatej14 354 738 Bongrain21 675 014 Danone26 596 844 Friesland44 199 820 Sole-Mizo50 977 277

15. New participants –new roles Alföldi Tej enters the market Alföldi Tej enters the market International Companies are overshadowed International Companies are overshadowed

16. Challenges that milk processors are facing Challenges that milk processors are facing  M arket Challenges  D ecrease in Demand the global economic crises affects Hungary more seriously because of the high state debt high budget deficit lack of anti-cyclic e e e economic policy Ø state spending ø ø tax decrease ø interest rate decrease

17. History of Milk Product Sales (2008) History of Milk Product Sales (2008) Forrás: GfK Hungária, Consumer Tracking

18. Challenges that milk processors are facing Challenges that milk processors are facing  I mport Pressure high import ratio unsettled European market I International chains with Eastern and Central European markets secure their home industry’s support Overproduction because of weakened quota regulations meets decreased demand Low efficiency of market regulation tools In some productcategories 40-50%

19. Market share of domestic and imported milk (UHT) Weaker HUF Collective measures in quality control for domestic and imported goods Forrás: GfK Hungária, Consumer Tracking

20. 2. wholesale 1. hypermarkets Challenges that milk processors are facing Challenges that milk processors are facing c) Strong Chains 3. supermarkets Forrás: GfK Consumer Tracking, és GfK szakértői becslés 2013. Plus supermarkets!

21. Ethical Codex Adaptation Concentration Ethical Codex Adaptation Concentration - price - price - flexibility - flexibility - supply - supply

22. Milk Processor Concentration (revenue)

23. II. Problems of Financing  Changed bank credit policy  Increasing costs of interests On base of HUF and foreign currency as well On base of HUF and foreign currency as well (companies’ loss of ~20% on foreign currency credits) (companies’ loss of ~20% on foreign currency credits) - Hungary’s position has weakened internationally increased financial imposition in export trade increased financial imposition in export trade HDB’s credit guarantee program could help

24. III. Problems of Tendering III. Problems of Tendering Slow, prefers producers to processors Slow, prefers producers to processors Without competitive FOOD INDUSTRY there is no competitive AGRICULTURE

25.  High raw milk export ratio  The landownership is not solved  Investment has stopped because of lack of financing  This years dry weather is making producers situation even worse IV. Possible damage of the producers’ base due to low price

26. V. Increase in the number of partners who do not pay V. Increase in the number of partners who do not pay General lack of trust because of mutual debts General lack of trust because of mutual debts ! Legislacy needs to be changed ! Legislacy needs to be changed debt

27. V. Prospects in the next few years SWOT analysis Strengths  Efficient, selected cattle  Appropriate forage base  High percentage of industrial milk producers  Improving milking  Relatively cheap labour  Quick adaptation Weaknesses  Lack of capital  Low cooperation skills  Low profitability  Many small businesses in the processing  Low rate of specialization  Low support in comparison to Western Europe  Deficient marketing  Low lobbyist skills  Deficient trade negotiation position

28. SWOT analysis SWOT analysis Opportunities  Growing global market  Vantage point due to close Western and Eastern European markets  Positive changes in the consumer preferences in medium term  Expected growth in the domestic consumption  Concentration  Increased public and individual marketing  Thinking together, increasing organization and lobbying Threats  Decreasing population  Worsening solvency  Currency rate fluctuation, high tax and interest rates  Financing difficulties  Increasing energy costs  Increasing environmental costs  Low scale of investment and innovation  Low economic growth  Low utilization of capacities in processing  Declining production  Increasing import  Milk’s weak competitive position in comparison to other drinks  Concentrating retail trade Kereskedelmi márkák térhódítása

29. Thank You for Your Attention! Koller Attila Chief Executive Tolnatej Zrt.