Joint Ventures with International Partners

1
Joint Ventures with International Partners
Don Schriver Executive Vice President Dairy
Farmers of America, Inc

• November 7, 2005

2
Introduction

• DFA represents one-third of the nations milk
  production
• During fiscal 2004, DFA marketed 57.2 billion
  pounds of milk
• Largest dairy cooperative in the U.S.
• One of the largest milk marketers in the world
• More than 12,000 member farms
• DFAs objective is to maximize value received by
  members for their milk

3
Organizational Structure
Bottling Manufacturing Affiliates
Fluid Milk Group
Manufacturing Group

• Market members milk at highest competitive price

• Balance seasonal milk production
• Process members milk into value-added dairy
  products with longer shelf-lives

• National network of affiliates and alliances

Formulated
Borden
Dairy Foods
Seven Areas

• Manufactures and markets value added dairy
  products
• Manages DFA purchasing and logistics
• 2004 sales of 372.9 million

• Produces consumer packaged cheese products
  marketed under Borden brand name
• 2004 sales of 300.4 million

• Products include shredded and packaged cheeses,
  processed cheese products and whey products
• 2004 sales of 1,362.6 million

Member Dairy Farms

• 12,500 member farms
• 49 states
• Market 100 of milk through DFA
• 34 of U.S. milk supply

4
The DFA Footprint
Roy
Cheney
Salem
Duluth
Vernon
Barre
Portland
LaFargeville
Norwood
Pollock
Bruce
Oneida
Minneapolis
Concord
Wolcott
Winthrop
Albany
Sodus
Greenwood
Melrose
Zumbrota
Agawam
Farmington
Chili
Plymouth
Rapid City
Arkport
Winsted
Fortuna
Suffield
Rochester
Binghamton
Middlebury
Norfolk
Cedarburg
Reading
Cleveland
Lancaster
Smithfield
Goshen
Des Moines
Harleysville

W. Middlesex

Iowa City
Omaha
Salt Lake City
Philadelphia
New Wilmington
Allerton
Hatfield
Hummelstown
Hughson
Pleasanton
Cincinnati
Ft. Morgan
Colorado Springs
Mechanicsburg
Beaver
Kansas City
Evansville
Louisville
Winchester
Cedar City
London
Turlock
El Dorado Springs
Roanoke
Somerset
Springfield
Ventura
Springfield
Wichita
Madisonville
Riverside
Bristol
Monett
Cabool
Fayetteville
Los Angeles
Springfield
Fulton
Corona
Chattanooga
Santa Ana
Covington
Norman
Clovis
Memphis
Ft. Smith
Portales
Chandler
Little Rock
N. Charleston


Greensboro
Dallas
Lovington
Sulphur Springs
Dothan
Winnsboro
Hattiesburg
Conroe
El Paso
Austin
Mobile
Franklinton
Humboldt Creamery
Lafayette
Schulenburg
Baker
Southwest Cheese Co.
Winterhaven
Wilcox Dairy Farms
Miami
Stremicks Heritage Foods
Ideal American
Melrose Dairy Proteins
Roberts Dairy
Turner Dairies
Eagle Family Foods
Hiland Dairy
Southern Belle
DFA (American Cheese)
Hiland-Roberts Ice Cream Co.
Kellers Creamery
DFA (Italian Cheese)
National Dairy Holdings
DairiConcepts
DFA (Canning/Specialty)
DFA (Condensed/Butter/Powder)
HP Hood
5
Industry
International Milk Production for 2004 (millions
of pounds)
6
International Alliances
7
Intl Alliances - DairiConcepts

• Started in 2000, this joint venture combines
  DFAs U.S. manufacturing capacity with Fonterras
  technological innovations and advanced research
  and development
• Manufactures dairy and cheese ingredients for
  industrial customers, including McCormick, Nestlé
  USA and Frito-Lay
• Venture also manufactures dried and grated
  Italian cheeses for the retail, food service and
  industrial markets

8
Fonterra - Highlights

• Leading multinational dairy company, owned by
  13,000 New Zealand dairy farmers
• World's largest exporter of dairy products,
  exporting 95 percent of its production
• Customers and consumers in 140 countries
• Ingredients business is the largest dairy
  ingredients operation in the world, manufacturing
  and marketing more than 1,000 ingredient products
  to the international food industry
• Credit rating of AA-

9
DairiConcepts, LP Business Overview

• Dairy Flavors
• Supernatural 3X
• Next Generation SN 5X
• ALACO EMC 10X

• Dairy Powders
• Straight Cheese
• Cheese Blends
• Seasonings
• Creams Fats
• Organics
• Cultured

• Nutritional Powders
• Infant Formula
• Nutritional Drinks
• Retail Packaging

• Dairy Ingredients
• Proteins
• Fats
• Club Cheese

• Hard Italian
• Grated Bulk Retail, Food Service
• Bulk Natural Cheese

10
DairiConcepts Governance
Fonterra / DFA Oversight Board
DFA Representatives
Fonterra Representatives
DairiConcepts Board of Directors
DFA Representatives
Fonterra Representatives
11
DairiConcepts, LP Plant Locations
Greenwood, WI
Bruce, WI
Winsted, MN
Pollock, SD
Chili, WI
Hummelstown, PA
Allerton, IA
Portales, NM
Springfield, MO
El Dorado Springs, MO
Dairy Ingredients
Hard Italian
Nutritional Powders
Dairy Flavors
Dairy Powders
12
DairiConcepts, LP

• Many of DairiConcepts products end up in
  Convenience Food Applications
• Snacks
• Ready Meals
• Sauces
• Soups
• Baked goods

13
DairiConcepts, LP

• DairiConcepts also sells into two other important
  segments
• Nutritional and infant foods
• Prepared Dairy

14
DairiConcepts, LP

• DFA and Fonterra have committed significant
  amounts of capital to the joint venture
  approximately 25 million from each partner
• DairiConcepts recently entered into a credit
  facility
• The financing is supported by the assets of
  DairiConcepts
• The partners do not guarantee the credit facility
• DairiConcepts annual sales are aproximately 400
  million

15
Intl Alliances Southwest Cheese Co.

• Several years ago, DFA began evaluating strategic
  alternatives to handle the rapid growth in milk
  production in the southwestern U.S.
• Annual cost of transporting milk out of the
  region conservatively estimated at 40 million
• Nearly all milk in the southwestern U.S. is
  marketed by the Greater Southwest Agency
• Identified Glanbia PLC as an ideal partner

16
Glanbia PLC - Highlights

• International dairy, consumer foods and
  nutritional products company
• Major international cheese manufacturer
• Annual turnover exceeds 2.3 billion
• Employs 5,500 people
• Operations in Ireland, USA, UK
• Credit ratings of BBB- and Baa3

No. 1 European Pizza Cheese Manufacturer No. 1
Cheese Manufacturer in Northwest USA No. 2
World producer of formulated milk products No. 2
USA producer of whey protein isolate No. 2 UK
cheese producer / marketer No. 3 USA lactose
producer
17
Intl Alliances Southwest Cheese Co.

• In February 2004, Southwest Cheese Company
  announced commencement of construction of a 190
  million cheese and whey manufacturing facility to
  be located in Clovis, New Mexico
• Once fully operational, it is anticipated that
  the new facility will generate sales of
  approximately 350 million per annum and will
  employ approximately 220 staff
• 7 million pounds of milk per day (line 1 4
  million, line 2 3 million)
• 340 million pounds of cheese per year
• 640 and 40 pound block capacity
• DFA indirectly owns approximately 30 of the
  joint venture

Clovis, New Mexico
18
Southwest Cheese Company, LLC
Southwest Cheese Company
50
50
35 mm
35 mm
Milk Member, LP
Glanbia
68
30
2
The Milk Member partners represent nearly 100 of
the milk in the region!
Zia Lonestar
DFA
Select
_______________________ Estimated ownership
percentage based on amount of milk supplied to
joint venture
19
Southwest Cheese Company Governance

• Six Person Board of Directors
• 3 Milk Members David Jones
• Mike McCloskey
• John Dunker
• 3 Glanbia John Moloney
• Geoff Meagher
• David Thomas

20
Southwest Cheese Company, LLC

• 100 of the Milk in the Region
• 20 Year Product Sales Agreement
• 20 Year Milk Supply Agreement
• 10 Year Stand Still Agreement
• Proven Cheese Maker and Milk Marketers

21
Southwest Cheese Company, LLC
22
Intl Alliances - DairyAmerica

• Started in 1995, this cooperative of cooperatives
  was established to market NFDM
• DairyAmerica currently markets approximately 75
  of US NFDM production
• In August, 2001 DairyAmerica entered into an
  exclusive export marketing agreement with
  Fonterra, New Zealand
• Benefits of the relationship
• Producer access to expanded markets
• International producer relationships
• Increase returns to producers
• Expand product mix
• Reduce marketing expenses
• Share manufacturing knowledge

23
DairyAmerica Members

• 1995
• California Milk Producers
• Dairymans Cooperative Creamery Association
• Danish Creamery Association
• 1997
• San Joaquin Valley Dairymen
• 1998
• Land OLakes
• 1999
• United Dairymen of Arizona
• California Dairies, Inc
• 2000
• Agri-Mark
• Maryland Virginia Milk Producers Cooperative
  Association
• O-AT-KA Milk Products Cooperative
• Dairy Farmers of America
• 2004
• Lone Star Milk Producers

24
Governance Structure

• 26 Directors (staff farmers)
• Officers
• President Keith Murfield (UDA)
• Vice-President Keith Gomes (CDI)
• Secretary Richard Stammer (Agri-Mark)
• Treasurer C. Richard Mosemann (MD VA)

25
2004 Exports by Region
Over 950 million in sales on over 1 billion
pounds of product annually.
26
Ireland
Leadership Visits
27
Leadership Visits
South America
28
Thank You!