Challenges and Opportunities in Dairy – post EU milk quota

Frank van OoijenSVP – Nutrition, Sustainability & Society

Building a reputation when your relevance is challenged (consumer, social, business)

Agenda:

• Introduction: some facts and figures

• Painting the Dairy Challenge: what is the issue?

• Risks and opportunities post EU milk quota abolition

• How to keep endorsement and public support

• Defensive vs the Offensive approach on reputation

4

Give me your first spontaneousthoughts on milk and dairy

5

Who we are: a global player in dairy‘From grass to glass’

3nd largest dairy cooperative in the world● 6th processor of milk globally ● 19,000 member farmers

and 22,000 employees● Annual sales EUR 11.3bn (2014)● Factories in 32 countries● Sales in 100 countries● 14,000 dairy farms: 10 bn kg

milk (NL, Germany, Belgium)

6

Global Top 20 players in dairy

77

Generation 2 generation

Family ownedAverage87 cows

MeadowGrazing +CSR

A typical Dutch Farm

Average farm:670.000 kg milk per year

Who we are..

• Capital invested: EUR 3 mln• Annual milk sales EUR 300K• Net annual income:EUR 30K

Founding of Arnhemse

Melk-inrichting

Founding of CCF in

Leeuwarden

Friesche Vlag,Dutch Baby and

Bonnet Rouge are registered

for international markets

Founding ofCoberco in

Zutphen

Merger of Coberco, Friesland Dairy Foods,

De Zuid-Oost-Hoek andTwee Provinciën

Acquisition of Nutricia

Dairy &DrinksGroup

Friesland Foods

receives Royal designation on its 125th anniversary

Founding of the firstdairy co-operatives

Founding of the De Meijerij Veghel / De Melkindustrie Veghel

Campina brand introduced

DMV Campina and Melkunie Holland introduced

Founding Campina Melkunie

Acquisitionof Sudmilch(Heilbronn)

International launch of formation of international Campina brand and co-operative

Acquisition ofAlaska Milk CorporationPhilippines

Acquisition ofZijerveld

and Veldhuyzen B.V. andG. den Hollander Holding B.V.

Acquisition of IDB Belgium N.V.

8

18

79

19

13

19

19

19

65

19

97

20

01

20

04

20

13

20

12

20

08

20

01

19

93

19

89

19

79

19

47

19

26

18

80

20

14

20

20

We have a long history…

Acquisition Olam Ivory Coast and DEK srl in Italy.

Nine farmers take over a

cheese factory in the Dutch

Wieringerwaard

18

71

Ambition

Foundation

Growthcategories

Respond to needs

Capabilities

To create the most successful, professional and attractive dairy company for its member dairy farmers, employees, customers and consumers and for society by providing people around the world with essential nutrients from dairy products during every phase of their lives

Dairy-basedbeverages

Infant nutrition (B2B, B2C)

Strongholds & geographicexpansion

Brandedcheese

Food-servicein Europe

Basic products

Growth &development

Daily nutrition

Health &wellness

Functionality

Talent management

Milk valorisation

Innovation Business model& cost focus

Chainadvantages

Sustainable dairy farming & business operations

The way weWork & safety

Goodnessof dairy

9

And a clear strategy: route2020

Milk is a natural source of nutrition and provides nutrients for a healthy lifestyle

Milk contains essential nutrients such as proteins, vitamins B2 and B12 and minerals such as calcium

Milk is suited to contribute to the right balance in all types of diet

10

…using milk as a healthy basis

11

Chocomel versChocomel with fresh milk

Milner Koe & Geit and Milner Lente Graskaas

OptimelNew flavours yoghurt Greek style

Optimel Puur100% natural yoghurt drink

Friso infant nutritionNow also available in Indonesia

Peak Value pack

Dutch Lady Essential nutrients for children

Dutch LadyIntroduction portion packs yoghurt Dutch Lady Vietnam

Black & WhiteSachets

NoyNoyNoulac

Recent introductions

Landliebe HungaryIntroduction in Hungary

Mona(ice)pudding

NezhniyNew packagingCampina Nezhniy Russia

DubbelFrisss FreeFree from artificial sweeteners andadded sugars

Frisian Flag Frisian Flag Disney series in Indonesia

2009 2010 2011 2012 2013

8,160

8,972

9,626

10,309

11,281

2009 2010 2011 2012 2013

0.94

1.961.83

2.37

3.04

11,348

2014

2.93

2014

Revenuein millions of euros

Value creationPerformance premium + member bonds€ per 100 kilo milk

12

Successful merger since 2009?(sales grew 40%, dividend 300%)

A remarkable transition from useless

grass to a highly nutritious product

Feed stock NL: approx. 50% grass; 30% maize; 20% concentrates(“krachtvoer”) from recycled residue from food industry (soy crushing; breweries, potato industry, sugar beet leaf, citrus juice producers, etc.)

Proteins

Minerals

Vitamins

Milk fat

Bio-actives

14

NL: global leader in dairy because of USP’srivers delta, mild climate, soil & knowledge

15

A century of craftsmanship & salesmanship conquered foreign markets

June 2013: celebration 100th anniversary of CCF factory in Leeuwarden:

Sietze Hepkema

16

>70%

€ 1.8 billion in the Netherlands

in € x million

More than 2.5 billion invested…

2009

2010

2011

2012

2013

2014

2015

€ 2.5 billion total

600

261

236

376

423

559

656

Agenda:

• Introduction: some facts and figures

• Painting the Dairy Challenge: what is the issue?

• Risks and opportunities post EU milk quota abolition

• How to keep endorsement and public support?

• Defensive vs the Offensive approach on reputation

Building a reputation when your relevance is challenged (consumer, social, business)

19

Doing the Google test:

• Cell phone radiation

is bad for your health! 5,060,000 results

• Fats are bad for you! 14,800,000 results

• Potato chips are bad for you! 20,200,000 results

• Coke is bad for you! 136,000,000 results

• Smoking is bad for you! 296,000,000 results

• Sugar is bad for you! 365,000,000 results

• Milk is bad for you! Just guess……

20

Doing the Google test: what is our problem?

• Fats are bad for you! 14,800,000 results

• Potato chips are bad for you! 20,200,000 results

• Coke is bad for you! 136,000,000 results

• Smoking is bad for you! 296,000,000 results

• Sugar is bad for you! 365,000,000 results

• Milk is bad for you! 270,000,000 results

• Milk is good! 590,000,000 results

Communications challenges FrieslandCampina Post-merger 2009

• Campina well known as consumer brand, FC was invisible

• Poor employer brand, reputation: ‘room to improve’

• Focus in communications on cooperative and farmers

• Logo & strategy in place, but no corporate story, purpose

• Social media non-existing, leadership comms underdeveloped

• Sustainability & CSR still to be developed and integrated

• Health story of dairy underutilized both in- & externally

And there are serious challenges with milk..How to deal with these?

• Milk consumption goes down in the West

• Only 56% of Dutch mothers serves milk to kids in NL

• Soy drinks and ‘biobased’ are hot and trendy

• Lactose intolerance and milk allergy are the talk of the school courts today

• Dairy & global warming is becoming an issue

Complexity and Ambiguity in the (big business) world of dairy

- We love cows and farms, but we stop drinking milk (in NL)

- Chinese know everything about food & health and do everything to get our milk (even take it from the shelf here)

- What automotive is for the German economy is agrofood(incl. dairy) for the Dutch economy. But there is no pride

- There is a food and health authority in the NL (Gezondheidsraad) that tells us what to eat but we rather believe our neighbour, the book Voedselzandloper, etc.

- Is this related to our poor food culture? How is this in France or Italy?

23

Food, health and consumer confidence

Louise Fresco: President of ExBo Wageningen University & Research (former assistant DG Food & Agricultural Organisation UN: FAO)

“Healthy eating does not depend upon the choice of individual food items. It is about your entire food consumption pattern. You cannot say pineapple or dairy is bad for you, or having walnuts every day is good for your health. There is no single, simple solution.”

“Food is our direct link with nature. Food is about life and death. Technology dominates our society and our lives, but in food we are afraid of technology. Understandable but unjustified. Food has become anonymous, we are no longer personally involved in food production. Put us out in the forest or the ‘polder’, we would die in three days. That is why we feel so powerless and why food triggers emotion.”

24

The pedestrian question about gluten-free

25

Agenda:

• Introduction: some facts and figures

• Painting the Dairy Challenge: what is the issue?

• Risks and opportunities post EU milk quota abolition

• How to keep endorsement and public support

• Defensive vs the Offensive approach on reputation

1984-2015 : EU milk quota system

• EU ‘milk lakes’ and ‘butter mountains’ have vanished

• Now EU dairy farmers can produce for the world market

• 1983: 2.5 million dairy cows in NL – 2015: 1.6 million cows

• More sustainability required (manure, phosphate, GHG)

• And volatility in milk volume / price needs to be managed

Growth in global dairy demand2015–2024 looks great

10

15

17

10

78

4

6

11

Source: Rabobank

Canada, USA & Mexico

South America

Central-America & Cariben

EU

Rest of Europe

Africa

MiddleEast

Russia & GOS-

countries

Australia andNew Zealand

in billion kg milk

1

2Asia

“Until 2024 global dairy demand will be between2.6% to 2.9% per annum. Growth will be drivenmainly by L America, Africa, India and Oceania. The EU – behind India – will be one of the keyproduction regions in milk volume.” (Financieele Dagblad: 7 July 2014)

But growth prospects are hampered by

serious global challenges

29

800 mln people undernourished, 1.6 bn obese

By 2030 the world needs 50% more foods (FAO)

Food waste in supply chains is about 30%

- 150 mln households depend on dairy farming- Farmers are aging (57 years on average)

Growing scarcity in natural resources

Agenda:

• Introduction: some facts and figures

• Painting the Dairy Challenge: what is the issue?

• Risks and opportunities post EU milk quota abolition

• How to keep endorsement and public support

• Defensive vs the Offensive approach on reputation

31

How do we bring responsible

entrepreneurship and sustainability

into practice on the basis of a vision on

society?

Milk, by nature, containsessential nutrients. By offeringtrustworthy and tasty dairyproducts FrieslandCampinacontributes towardssafeguarding food and nutrient security. FrieslandCampinaalso strives to limit the pressure on the sources of natural raw materials andthe environment.

Now dairy gets visible U.N. endorsementas a provider of key nutrients….

33

Our social purpose is aimed at three global challenges..

Food and nutrient security for

a fast growing world population

Building more efficient & sustainable food supply chains

Helping small farmers in dairyworldwide (aging farmers is a major issue)

Our navigation tool to build a more sustainable business “grass to glass”

CSR Mission and Vision

FrieslandCampina CSR Business CaseCSR Strategy, 4 priorities, KPIs

CSR Performance Measurement – Annual Reporting – Stakeholder dialogue - Partnerships

Employee & Dairy Farmer Engagement – CSR Training programs – Annual CSR Team Award

CSR Governance Board – 4 implementation teams

Dairy Development

Helping farmers Africa, Asia

Sustainable Value Chains

Improving resource

utilisation

Responsible Dairy Farming

Setting the standard

Health & Nutrition

Combating obesity & nutrient deficiency

companycompany company cooperative

Business Practices for Suppliers – Code of Conduct – Foqus – Policies & Position Papers

The CSR Strategy House

Our CSR targets:

3838

Outdoor grazing

BiodiversityEnergy andclimate

Animal health and welfare

Sustainable dairy farming

Sustainable dairy farming is one of the four pillars of our CSR policy

The ‘pressure factors’ or levers constitute the framework for biodiversity actions

Land-use

Emissionsto air

Emissions to water

Landscape

Biodiversity

Energy(CO2)

Use Fossil energy

Soiluse

Water-use

Use of pesticides

Light &noise

Energy Production Sustainable

energy

Sustainable Soy &

Palm oil kernel

Ammonia

Methane (CH4)

Nitrous Oxide(N2O)

Nitrate

Phosphate

OutdoorGrazing

Nature & Landscape

maintenance

Soil fertility

Soil compaction

Chemicalcomposition

Light emissions

Noise Emissions

Application

Types

Quantity

1 2 3 4 5 6 7 8 9

4040

+ 5.725 euro• Meadow farming• Maximum

sustainabilityperformance

+ or –10.000 euro

Redistribution of cooperative funds leads to income difference per farmer

- 4.275 euro• Indoor housing• Minimum

sustainabilityperformance

41

Renewable energy

Mineral efficiency

Green transportationBiogas as truck fuel

Digesters

We keep on pushing the green innovation agenda

Climate-neutral growth is our starting point…

Agenda:

• Introduction: some facts and figures

• Painting the Dairy Challenge: what is the issue?

• Risks and opportunities post EU milk quota abolition

• How to keep endorsement and public support

• Defensive vs the Offensive approach on reputation

How do we build our defense line:

- Regular high level communications meetings FC + sector- Quarterly issues matrix (dairy sector/food industry)- Position papers portfolio (ongoing)- Issues & Crisis Mngt team (global remit)- Cooperation with risk discipline FC- Crisis simulations (on the “wish list”)- Calender with relevant events - be prepared- Regular stakeholder meetings (bric & mortar plus digital)- Public opinion research (case: outdoor grazing)- Consulting risk rankings (e.g. WEF annual risk list)- Quarterly reputation tracking, weekly (social) media analysis

Farm Factory Product

45

What to do about it – following the offensive approach?

Customer appreciation Top Stakeholder Mngt

Business Excellence X Social Purpose X Top Communications

-------------------------------------------------------------- =

Leadership in Corporate Responsibility & Sustainability

Corporate Story

WhyCorporate purpose

What Company

profile

WhoCorporate identity

How route2020

strategy

The FrieslandCampina corporate story is ready and shared

What makes FrieslandCampinadifferent from other big dairy players?

What makes us unique?

CorpCom facilitates effective CEO communication

Employees central officeFinancial results

town hall presentation 2x p.a.

Corporate traineesBusiness update 6-8x p.a.

All employeesColumn Spark 4x p.a.Local town hall presentation ± 24 p.a.Financial results webcast and CEO letter 2x p.a.Ask Roelof on Yammer 6x p.a.

Academic Potential & Future LeadersBusiness update 6-8x p.a.CEO event 2x p.a.

New joiners NLPresentation our story 10x p.a.

Top 200Business update 6-8x p.a.IMD Q&A - live or via videoconference 1-2x p.a.

YoungstarsMeet & Greet 1x p.a.

Top 70Leadership Days 3x p.a.Leadership Team WebEx 10x p.a.

Employees NLCEO Breakfast 4x p.a.

48.

The Story of Milk commercial, World Milk Day and Campina Open Farm days

www.melkisbijzonder.nl

ONLINE AND OFFLINE PLATFORM FOR DIALOGUE

FRIESLANDCAMPINA / HET PORTAAL

LISTEN CONNECT COMMUNICATE COOPERATE

Blog contestEvents Facebook

Instagram Twitter

Hike & Bike tour

De MelksalonShare Your Story

50.

‘Campina Dichtbij’ campaign 23 May 2012

-

-5.000 member farmers and 1.200 employees of FrieslandCampina-350.000 families in 135 cities/towns ‘got milk’-One million consumers reached by social media

Campina en Epke Zonderland maken zich sterk voor gezonde voeding

Campina gaat zich samen met topsporter Epke Zonderland sterk maken voor gezonde voeding. In de nieuwe campagne ‘Sterk met Campina’ moedigt de zuivelaar samen met de Olympisch kampioen sportend Nederland aan om gezond te leven. De campagne start vandaag, vlak voordat het buitensportseizoen begint. Maar liefst 9 miljoen Nederlanders sporten minimaal één keer per week. Niet alleen omdat het gezond is, maar vooral ook omdat ze het leuk vinden. Uit onderzoek blijkt dat 81% het ‘goede gevoel’ na afloop het allerleukste vindt aan sporten.

De meest favoriete sporten in Nederland zijn wandelen, fietsen en fitness. Mensen sporten het liefst aan het begin van de avond, één uur lang en vinden daarbij gezelligheid belangrijker dan winnen. Ook voeding speelt bij het sporten een belangrijke rol. Als snack direct na het sporten zijn fruit en zuivel favoriet, zo blijkt uit onderzoek van PanelWizard onder 1.000 respondenten.

Carola Boer, Marketing Directeur FrieslandCampina Nederland: “In onze nieuwe campagne ‘Sterk met Campina’ brengen we beweging en goede voeding samen. Zuivel bevat belangrijke voedingsstoffen waardoor het prima past in een gezond eetpatroon. Melk bijvoorbeeld levert proteïne, calcium en vitaminen B2 en B12 die je spieren en botten goed kunnen gebruiken. Samen met Epke Zonderland als ambassadeur willen we het verhaal over de kracht van zuivel delen met heel Nederland.” bron: FoodClicks

‘Campina’ teams up with Olympic

champion and NOC NSF

Amsterdam gets ‘pop-up’ MilkSalon

Op 1 april a.s. opent er in Amsterdam een MelkSalon. Een tijdelijke proef- en ontwerplokaal waar consumenten, melkveehouders, zuivelverwerkers, ontwerpers en wetenschappers worden samengebracht, om de waarde(n) van melk te herontdekken. Er zullen onder andere lezingen, ontwerpsessies, filmavonden en stadswandelingen worden georganiseerd. Ook verzorgen chefs een serie bijzondere diners.

De pop-up MelkSalon, die opent aan de Oude Spiegelstraat 6, is tegelijkertijd een winkel en een melkbar waar je binnen kunt lopen om bijzondere melken te proeven. De pop-up is een initiatief van ontwerper Sietske Klooster en project- en campagnebureau Food Cabinet. “

Rond 1900 kende het straatbeeld van Amsterdam vele melksalons, waar stadsbewoners een glas melk nuttigden van boeren uit de buurt. Melk kopen we tegenwoordig in de supermarkt, maar nog steeds speelt melk een belangrijke rol in de Nederlandse geschiedenis, (eet)cultuur, economie, innovatiegeest en het landschap.

Met de pop-up MelkSalon wordt melk uit de anonimiteit gehaald en wordt de dialoog aangegaan over de betekenis van het product voor onze cultuur en maatschappij.

“The Dutch Oscar for businesses and entrepreneurs..”

May 14, 2014

FrieslandCampina winner "Koning Willem I" Award

Amersfoort, the Netherlands - Thursday evening 13 May 2014 Cees ‘t Hart,

CEO Royal FrieslandCampina N.V. accepted the prestigious "Koning Willem I"

Award from Her Majesty Queen Máxima on behalf of FrieslandCampina. The

winner was announced during a gala at the Dutch Central Bank in Amsterdam.

Cees ‘t Hart: “I am immensely proud to have accepted this prestigious award

on behalf of the company, its board, our members and all our staff. The King

Willem I Award reflects the public acknowledgement of the contribution that

we, as a business, are making to the economy of the Netherlands.“

Concluding:

#Reputation mngt built on top of a robust foundation of showing relevance:

• Consumer Health / Nutrition, • Societal / Sustainability / Food Security • Business / Innovation / Economic NL)

#Our Purpose – part of corporate story – has made the difference

#Transparency , reaching out, partnering is key for success

#“Dusting off” our dairy category / business and finding new ways to connect with consumers & society is still going on (re-invent yourself)

Thank you