Fonterra Food Safety and Quality Requirements forSUPPLIERS OF PACKAGING

September 2016

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Customer Satisfaction

Fonterra is committed to produce and supply safe, quality food. Quality is everyone’s responsibility. Every step of the way, from our farms to the market, Fonterra is trusted by customers and consumers to supply them the best.To ensure the highest standards, we expect you to make food safety a priority throughout your supply chain.

To earn this trust, we will ensure food safety and quality throughout the supply chain – from grass to glass. As a supplier of packaging you are an integral part of our supply chain and we seek your assistance to meet our objectives, satisfy our customers and deliver on our promise.

These guidelines supplement the terms of any service or supply contract that you may have entered into with Fonterra, and broadly reflect the scope of any compliance audits we may undertake. In the event of an inconsistency between these guidelines and the terms of any contract, the terms of the contract will prevail to the extent of any such inconsistency.

ScopeFonterra’s Food Safety and Quality requirements apply to all suppliers and manufacturers of packaging materials purchased directly or indirectly by Fonterra.

These requirements clarify our expectations of you as a supplier of packaging to Fonterra. The majority of requirements have been based on globally recognised standards for manufacturers of food contact packaging. The Fonterra Food Safety and Quality requirements for suppliers of packaging apply to all packaging suppliers to Fonterra. Care has been taken to ‘right-size’ the requirements for the food contact packaging you supply Fonterra. This includes:

• Sourcing of raw materials for the manufacturing and printing of packaging materials

• The manufacturing and printing process of direct and indirect food contact packaging

• Storage and transportation of finished packaging items.

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Risk Management

Fonterra has a risk-based approach to the management of food safety and quality, which means that all manufacturing and process controls are based on the level of risk to the final product.

Packaging must not contain any raw material or combination of raw materials that creates a risk to Fonterra product and makes the product unsafe or unacceptable to the consumer. Potential migration of microbiological, chemical, physical or sensory properties from the packaging to the Fonterra product must be fully understood.

All packaging manufacturers supplying packaging to Fonterra must conduct a risk assessment to identify hazards and risks to food safety and quality across the end-to-end supply chain for the packaging material. Findings from risk assessments must be documented, including clear risk management controls and documentation.

Packaging suppliers must work with Fonterra to understand how the packaging item is used. The packaging application will determine the level of risk management that must be implemented by the packaging manufacturer where:

Primary packaging is packaging which is in direct contact with product (e.g. multiwall bags, butter wrap, yoghurt pottles, sachets and cans). Fonterra always uses primary packaging within a

controlled hygiene environment. Protection of the product from environmental contamination is essential. Primary packaging must be manufactured with suitable hygiene controls. Fonterra seeks higher requirements of primary packaging suppliers so manufacturers must meet these requirements before primary packaging is supplied to Fonterra.

Secondary packaging does not have direct contact with product and often holds multiple smaller units (e.g. butter cases, cheese cases, frozen confectionery cartons). Secondary packaging may be used by Fonterra in a controlled hygiene environment.

Tertiary packaging does not have direct contact with product e.g. pallets, slipsheets, stretch wrap. It is commonly associated with multiple packages being packed together as a single unit for ease of storage and distribution.

The risk assessment for all primary packaging must be based on Codex Hazard Analysis Critical Control Point (HACCP) principles.

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Food Safety and Quality System Requirements

Packaging manufacturers must have a quality management system in place, preferably based on an internationally recognised food packaging standard such as BRC Global Standard for Packaging or IFS PACsecure.

Fonterra recommends that the quality management system is certified by an independent third party audit body.

Management Responsibility

The system must ensure that:

• There is a nominated person, with appropriate capability, responsibility and accountability, to implement and uphold Fonterra Food Safety and Quality requirements for Suppliers of Packaging

• Management regularly review the food safety and quality management system to ensure the desired outcomes are being achieved, and to identify and implement opportunities for continuous improvement.

Complaint ManagementA complaint management process must ensure that:

• Appropriate investigation of the complaint is conducted and corrective action is taken to prevent future occurrences

• Timely escalation occurs for repeat events and/or major food safety and quality complaints to ensure management is informed and immediate actions are taken to minimise the impact

• Corrective action for Fonterra complaints must be discussed with Fonterra first before implementation to ensure no additional risks are introduced.

Staff Training and InductionA staff training plan that identifies the training needs of each position within the company must be documented. The training plan shall include:

• Management of food safety risks and regulatory compliance

• Personal health and hygiene, use of controlled hygiene facilities, housekeeping, sanitation relevant to the role and appropriate to the manufacturing operation

• An induction and refresher schedule to demonstrate all staff have been, and continue to be trained

• Documented evidence of employee training must be readily retrievable.

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DocumentationGood documentation practices shall be implemented at all steps in the supply chain to demonstrate the manufacture and supply of safe, quality packaging items.

Records relating to the verification of food safety and quality system must be complete and retained in a secure, accessible manner for the usable life of the packaging or as per applicable regulatory requirements, whichever is longer.

Continuous ImprovementImprovement opportunities may be identified from management reviews, audit programmes, complaints or internal suggestions. A structured process must be used to capture these improvement opportunities and monitor the effectiveness of their implementation.

Internal Audit ProgrammeAll operations must have a documented and implemented internal audit programme. The purpose of this programme is to verify that quality systems/processes have been effectively implemented, are working and that the desired outcomes are being met.

Non-Conformance and Corrective ActionAll packaging suppliers must have a quality management system to ensure non-conformances (NCs) are managed with the outcome that:

• Corrective actions have been taken in the agreed timeframe

• NCs are escalated where there is a high level of product safety or quality risk

• Data is captured and is available in a format that enables identification of trends

• The potential for repeat events is minimised, reduced or eliminated.

Non-conformance is defined as:

• Variances to agreed specifications

• Breaches of contractual requirements

• Internal audit non-compliance

• External audit non-compliance.

Food Safety and Quality System Requirements

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Change ControlChange Control principles shall be used to ensure that changes to systems and processes are made in a systematic and coordinated manner so that there is no detrimental impact on product safety and quality.

All significant changes shall be communicated to Fonterra Procurement Manager responsible for the packaging supply contract before being implemented. A timeframe must also be communicated.

The ownership of tools and forming die must be defined, and managed as an integral part of the Change Control process. This includes disposal of obsolete tools, forming die and printed packaging. A validated disposal process to counter future threats must also be implemented in order to avoid any theft, counterfeiting or copying of Fonterra-branded product.

RecallAll packaging suppliers shall have a Product Recall and Withdrawal plan to ensure that when required, affected packaging can be removed from distribution and sale, and returned to the supplier’s control.

The recall plan shall include annual mock recalls designed to test the recall and traceability procedures and process and include a full trace back exercise.

Food Safety and Quality System Requirements

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SecurityThe supplier must have security systems in place to protect Fonterra packaging materials and property (such as specifications, artwork, tools, dies and printing plates) including:

• Controlled access for employees, visitors and contractors to manufacturing premises, storage facilities and transport vehicles

• Controlled access to, and storage of, confidential Fonterra information.

The disposal channel will be secure for all branded waste. Any material that is being disposed of may still represent a risk during its life cycle, so this material must be transported securely and stored in a controlled and secure environment.

Fonterra operates a chain of care regarding the disposal of branded product, and suppliers must be able to deliver to the same requirements.

FacilitiesManufacturing and storage facilities, process equipment and process support services must be designed, constructed, operated and maintained in a manner that ensures safe quality packaging is manufactured.

Good building design and construction includes:

• Appropriate construction materials for floors, wall, and ceilings. These surfaces must be impervious to dust, moisture and micro-organisms and able to be easily cleaned and maintained in hygienic condition

• Constructed to meet relevant building codes and standards

• Able to be fully secured

• Fully enclosed and sealed to prevent access from pests

• Consideration of all waste flows including drainage such that risk to product is minimized.

Maintenance of building structures must ensure that:

• Equipment and building structures are free of potential foreign matter (e.g. wire, tape, loose paint and rust), which may contaminate the product and prevent effective cleaning of surfaces

• Adequate environmental controls are implemented to achieve the necessary conditions where temperature, relative humidity and air quality may impact on the processing environment

• Good structural condition and integrity is maintained.

The external environment of the premises shall be maintained in a tidy condition and not provide opportunity for harbourage of pests.

Buildings, Facilities, Utilities and Equipment

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Buildings, Facilities, Utilities and Equipment

Control of the Manufacturing Environment for Primary PackagingThe area in the manufacturing process where food contact packaging or components are exposed to the environment must be identified and designated as a controlled hygiene environment. Programmes must be put in place to eliminate and/or manage all environmental contamination risks.

Requirements for controlled hygiene areas are:

• The use of controlled access for personnel via hygiene entry transition areas with provision for clothing exchange, hand washing, hand sanitation and boot exchange or boot washing

• The absence of staff amenities and toilets

• Use of filtered air suitable to the process with dust and particulates removed

• The control of waste flows including drainage and waste removal

• To not permit the presence or consumption of any food in controlled hygiene zones

• The use of wood minimised, and ensuring that any wood in the controlled hygiene zone is kept in a clean and good condition.

UtilitiesUtilities used in the manufacture of packaging must be suitable for the manufacture of the packaging, including, but not limited to:

• Lubricants, oils and greases used on indirect and direct food contact packaging must be certified as being suitable for food contact

• Compressed air that may contact packaging material shall be free from oil, dust, rust, moisture, extraneous materials and odours

• Where micro filters are fitted to avoid contamination from compressed air exhausts, regular and recorded cleaning programmes are implemented

• Water used for cleaning equipment and/or during the packaging manufacturing process has to be potable (e.g. drinking water) quality.

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Buildings, Facilities, Utilities and Equipment

Pest Management and ControlPackaging damaged or contaminated by pests is not acceptable. Note: not all pest contamination is easily visible, but is still unacceptable.

A documented Pest Management Programme must be in place, which uses a recognised and approved pest management operator. The programme must ensure that all raw materials, processing aids, and finished packaging items are protected from damage and/or infestation by pests, such as flying and crawling insects, birds and rodents.

All chemicals used for pest control purposes must:

• Be approved and suitable for use

• Not pose a risk to the safety of the packaging, plant personnel or public

• Be handled in accordance with their Material Safety Data Sheets (MSDS) and in compliance with applicable regulatory requirements.

Fonterra does not allow the use of poison or toxic baits inside any manufacturing facilities and warehouses.

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Planning and Procurement

Planning and SchedulingKey requirements for Fonterra packaging are outlined in our product and services agreements and contracts.

The supplier must have a structured planning and scheduling process to ensure that agreed Fonterra demand is delivered in full, on time and to specification.

Approval of SuppliersThe packaging manufacturer must have a formal approval process for the supply of raw materials that will be used in the manufacture of Fonterra packaging.

Raw materials shall comply with international packaging standards and regulations and be of a quality such that the final manufactured packaging will comply with Fonterra packaging specification.

Raw materials shall be sourced from suppliers that have been formally evaluated and purchased against documented raw material specifications.

The packaging manufacturer must have monitoring systems in place to provide confidence that the raw materials are fit for intended use.

Inwards Goods ManagementInward goods procedures shall ensure that goods received:

• Have been delivered and comply with accompanying documentation

• Comply with raw material specification requirements

• Are free from contamination (chemical, foreign matter and biological)

• Are stored in a manner that ensures raw material quality and identification is maintained.

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Manufacturing Control

Good Manufacturing PracticesGood Manufacturing Practices (GMP) are to be implemented to ensure that the manufacturing environment and operating conditions are appropriate for the manufacture of packaging to be used in the food industry. GMP includes, but is not limited to:

1. The control of waste and utensils:

• The controlled removal of rubbish and other wastes on a regular basis including, but not limited to:

– Rubbish stored outside may attract rodents and insects; therefore it must be stored in covered containers and emptied regularly

– Chemical and solvent waste must be handled and disposed of in a sustainable manner and in compliance with the applicable local regulations.

• Tools and containers used in the manufacturing process must be properly identified and controlled.

2. The control of cleaning and maintenance to ensure that:

• Food safety and quality is not compromised during regular and intrusive maintenance, and the risk of foreign matter and microbiological contamination is minimised

• Overhead pipes, ceilings and walls do not become a food safety hazard

• All packaging contact surfaces, handling equipment, tools and utensils are adequately cleaned and sanitised before use

• Air systems and filters are regularly cleaned against an approved maintenance schedule

• The documentation of cleaning and maintenance schedules, including how the effectiveness of the cleaning is monitored.

3. The control of chemicals:

• Such that they cannot contaminate the packaging

• Through the use of Material Safety Data Sheets for all chemicals including those for cleaning, sanitation, pest control, maintenance and process additives.

4. The control of people activities including:

• No smoking or eating in any manufacturing or storage areas

• Defining personal hygiene standards (including health requirements)

• The use of clean protective clothing and management of jewellery and hair

• The provision of adequate hand washing, hand sanitising and toilet facilities.

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Curing TreatmentFinished packaging must be cured in a controlled environment to validated criteria, to ensure that the final packaging structure integrity will perform without failure. The curing treatment must be specified in the Fonterra Packaging Specification.

Examples requiring such treatments include:

• Laminated flexible packaging

• Internal and external coatings and linings

• Irradiated materials.

Foreign Matter ControlEffective processes must be implemented to ensure that the risk of foreign matter contamination of the packaging is prevented.

In addition to GMP requirements, a programme for the management and handling of glass, hard/brittle plastics and ceramics, must be documented.

Environmental Pathogen ManagementPathogens in the packaging manufacturing environment present a risk to Fonterra products.

An effective risk-based pathogen management programme, appropriate to the end use of the packaging, must be documented and implemented. The programme must ensure that any controlled hygiene environments are effectively managed to prevent packaging contamination from environmental pathogens.

Primary packaging items must have an environmental pathogen monitoring programme in place.

Fonterra Packaging SpecificationThe materials and format of all packaging supplied to Fonterra must be safe, functional and meet the design requirements specified by Fonterra.

All packaging made for Fonterra must have a Packaging Specification signed by Fonterra.

The process and responsibility for the development, approval and amendment of Fonterra packaging specifications must be documented and implemented to ensure that for each packaging item:

• Fonterra requirements are correctly captured

• Specifications are appropriately approved and current for the raw materials to be used, including food safety compliance information, and the artwork/printing to be used

• The specification change process is controlled.

Manufacturing Control

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Manufacturing Control

Identity PreservationFonterra products may have identity preservation (including religious, allergen, GMO and/or organic) status and may make claims around such positions.

Any identity preservation status will be clarified in the Fonterra Packaging Specification.

The packaging supplier is required to identify and control all raw materials, processing aids and process steps that could detrimentally affect the identity status of the final Fonterra product.

For example:

• The use of animal-based ingredients by the packaging manufacturer may impact on the kosher halal or status of the final food product

• The use of organic raw materials (e.g. soy, wheat based) may affect the allergen status of the final food product.

Change-Over ControlEffective product start-up and change-over procedures must be documented and implemented to ensure that:

• Mixing of printed packaging variants does not occur during the manufacturing process

• Cross contamination from other raw materials and processing lines is prevented at all times.

Traceability, Labelling and CodingIdentification and traceability shall be maintained throughout the supply chain for all raw materials (paper, plastics, processing aids, additives, printing inks, glues, etc.) throughout manufacturing, storage and distribution.

Traceability must be demonstrated from raw material to finished packaging and from finished packaging back to raw material (backwards and forwards traceability).

Traceability systems must be tested annually, which may form part of the mock recall.

Labelling on shipping units of packaging must display as a minimum:

• Manufacturer’s name and site

• Fonterra identification (e.g. item code and description)

• Manufacturing date

• Batch code

• Quantity.

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Manufacturing Control

ReworkThe practice of reworking shall never compromise the food safety and quality and performance of the final packaging.

The practice of reworking of any packaging must:

• Occur in a controlled manner in accordance with validated and documented procedures

• Ensure all aspects of the packaging specification and quality are considered through a risk assessment

• Ensure traceability is maintained at all times

• Any identity preservation status of the new packaging shall not be compromised by the status of the packaging being reworked.

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Packaging Sampling, Testing and Release

Packaging Sampling and TestingPackaging sampling and testing shall be undertaken in a manner that ensures test results:

• Are a true and accurate representation of the batch/lot (of manufacture)

• Use valid test methods based on recognised standards.

Contracted laboratory services shall be managed to ensure that all test results are reliable, accurate and available within an acceptable timeframe.

In-process controls must ensure packaging artwork and print quality meets Fonterra requirements.

Calibration and Verification of Measuring DevicesA calibration programme shall be implemented for all measurement devices and reference instruments that are critical for process control and verification of quality.

Packaging ReleaseProcedures and responsibilities for the release of finished packaging shall be documented and implemented to ensure that each lot of finished packaging is controlled until it is verified that the lot meets specification.

Management of Non-Conforming PackagingControl processes shall be implemented to ensure that any non-conforming packaging:

• Is effectively isolated

• Is managed via rework or disposal, in a controlled manner

• If already printed for Fonterra, is stored securely until destroyed. There must be a controlled and secured process around disposal management so that any threats are minimised.

Non-conforming packaging is defined as:

• Variances to agreed specifications

• Breaches of contractual requirements.

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Warehousing and Transport Regulatory ComplianceAt all times throughout the supply chain, packaging shall be transported and warehoused such that the quality and integrity of the packaging is not compromised in any way. This includes appropriate transport and storage conditions and management of any potential cross-contamination risks to the packaging. Prior to shipment, Fonterra packaging must be packed in a manner that ensures it will be in good condition upon arrival at a Fonterra manufacturing site. Receipt, storage and despatch areas for all goods including raw materials and packaging must: • Be appropriate for the goods being stored • Be clean, dry, tidy, free of odours, and in a well ordered state • Be free of insects, birds, and rodents. Incoming and outgoing trailers/containers must be free of foreign matter, odour, debris, moisture and infestation that may contaminate finished packaging. A documented inspection plan must be used to verify trailer/container cleanliness. Despatch records must include lot numbers and destination details, to facilitate traceability. Warehouses must be capable of despatching in a First-In-First-Out basis if requested.

As a global exporter, Fonterra must comply with all country of manufacturing and country of export regulatory requirements. Where local regulatory requirements for the packaging supplier exceed Fonterra requirements, the regulatory requirements must be complied with. The supplier will, at its own cost, hold and maintain in good standing, all necessary: • Licences • Registrations • Permits • Authorisations • Consents • Approvals • Food safety regulation compliance letters including:

- Heavy metals - Banned substances - Migration test results.

The supplier must advise Fonterra if the packaging contains raw materials derived of organic (animal and plant) origin. Regulatory assurances relating to radiation or environmental contamination must also be available if applicable. Copies of certificates from the competent authorities of the country of origin must be available.

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CommunicationThe supplier shall have documented procedures for communication and reporting to Fonterra.

Exception ReportingNotification shall be provided to Fonterra as soon as practicable if the supplier becomes aware of any packaging manufactured for and released to Fonterra that poses a food safety risk.

In addition, notification of the following shall be provided to Fonterra within 24 hours of the event where:

• Any quality or food safety event that may cause a disruption to supply

• Critical non-conformances arising from an external audit that affect or put Fonterra packaging at risk

• Any third party certification breaches which impact the certification status

• Any matter which calls the brand, the packaging or the production premises to public question or public enquiry, either through a government or consumer organisation. Legal action/takeover from any party must also be reported.

All events requiring exception reporting must be notified in the first instance verbally to the Fonterra Relationship Owner. Verbal notification must be confirmed by written confirmation within

24 hours. Reporting requirements may be defined as part of the contractual agreement. Regular ReportingWhere changes are made to the manufacturing process or raw material supplier, the manufacturer shall notify Fonterra prior to implementation.

Regular reporting shall be determined on a case-by-case basis and documented as part of contractual agreements and may include:

• Notification of any significant process, management, ingredient or certification changes

• Summary of production volumes manufactured for Fonterra and product quality results

• Achievement against quality and performance KPIs.

The supplier must at any time upon reasonable notice, allow Fonterra representatives and/or agents access to all facilities and relevant records for the purposes of an operational audit and/or technical review to ensure compliance with Fonterra’s contractual requirements.

Should a supplier refuse access to Fonterra auditors, the business relationship between Fonterra and the supplier must be reviewed.

All notifications shall be reported to the Fonterra Relationship Owner.

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Communication

AuditsThe supplier shall at any time upon reasonable notice allow Fonterra representatives and/or agents access to all facilities and relevant records for the purposes of an operational audit and/or technical review to ensure compliance with Fonterra’s contractual requirements. Should a supplier refuse access to Fonterra auditors, the business relationship between Fonterra and the supplier will be reviewed.

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Social Responsibility

To Fonterra, acting in a socially responsible manner means an organisation taking responsibility for the impacts of its decisions and activities on society and the environment. It is about respecting the perspectives of our stakeholders, behaving transparently and ethically, and thinking for the long term. To achieve this it is important that we, and the suppliers that we work with, seek to operate in a socially responsible manner.

Ensuring consumers’ health and safety is one crucial aspect of this and the main focus of this document. This section covers other important aspects where we have specific expectations for our suppliers.

Health and Safety at WorkThe supplier shall use a proactive approach in establishing and maintaining standards of health, safety, environmental and occupational health management. This includes regular monitoring and verification of progress towards health and safety objectives or targets.

Labour and Conditions of WorkThe supplier shall not make use of forced or bonded labour. Labour must be freely given and employees must be free to leave in accordance with established rules.

The supplier shall not employ children in violation of conventions 138 and 182 of the International Labour Organization.

The supplier shall not discriminate in any manner on the basis of race, ethnic background, age, religion, gender, sexual orientation or disability.

The supplier shall ensure that working hours and remuneration are in compliance with all applicable laws.

Anti-Corruption and Political ActivitiesThe supplier will demonstrate high standards of business conduct and responsible political behaviour. This includes avoiding involvement in disreputable business measures such as bribes, corrupt payments or kickbacks. Any lobbying activities must comply with all legislative and regulatory requirements.

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Social Responsibility

EnvironmentWe are committed to safeguarding the resources that our business depends on through reducing environmental impacts across the global value chain, improving efficiency, treating animals with care and respect and supporting the protection and enhancement of the resources and ecosystems that support dairy.

The supplier must be committed to protecting the environment through the use of sound environmental practices. This must include an environmental risk management plan to actively identify manage and report environmental risks; and environmental management systems to regularly monitor and verify progress toward environmental objectives or targets.

Of particular interest to Fonterra:

• Water – the supplier shall seek to use water responsibly and prevent water pollution

• Climate and energy – the supplier shall establish programmes to reduce energy usage and greenhouse gas emissions

• Efficiency and waste – the supplier shall seek to reduce all forms of waste and other emissions (e.g. dust, noise); and ensure that hazardous substances are managed responsibly and safely.

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SummaryBy having a collaborative relationship between Fonterra and our packaging suppliers, we can:

Ensure that the quality and integrity of our product is

maintained throughout the supply chain.

1

Fulfil our promise of consistent delivery of safe

product to customers.

2