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International Dairy Outlook 2020: A Fonterra View
Confidential to Fonterra Co-operative Group
February 2013
Anand Rao, Ph.D.General Manager, Technical Services,
Fonterra USA
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Confidential to Fonterra Co-operative Group
Presentation Overview
1. Macro Drivers
2. Changing Dairy Market Dynamics
3. Future Challenges
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Confidential to Fonterra Co-operative Group
Global trends are driving significant changes in dairy markets
Rise of emerging markets & urbanisation driving strong demand for dairy nutrition
Higher prices, increased convergence, more volatility, less regulation
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Confidential to Fonterra Co-operative Group
Global trends are driving significant changes in dairy markets
Social demographics - leading to greater focus on nutrition of paediatrics and health aging
(e.g. Aging in OECD & China)
Rising incomes and busy lifestyles -convenience foods
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Confidential to Fonterra Co-operative Group
Global trends are driving significant changes in dairy markets
New technology & innovation
Increased focus on sustainability
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Confidential to Fonterra Co-operative Group
Dairy consumption is highly correlated to development
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Confidential to Fonterra Co-operative Group
‐
1,000
2,000
3,000
4,000
5,000
6,000
‐
200
400
600
800
1,000
1,200
1,400
1,600
1996 1998 2000 2002 2004 2006 2008 2010 2012
Value (USD
million)
Prod
uct Q
uantity (000
MT)
Total China Dairy Commodity Imports
000 Metric Tonnes USD millions
An example of this is the explosion in China’s dairy commodity imports
Source: Global Trade Atlas
Dairy commodity imports from the US of USD 510 million, or 268,000 metric tonnes
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Confidential to Fonterra Co-operative Group
Dairy has moved from a highly regulated supply driven market to a demand led dynamic
MENA
2%4%
10%
India2
7%
7%
China
4%
2%
LATAM
2%2%
ANZ
1%
Nth America
1%
Europe
<1%
Outlook to 20201
ASEAN
2-3%4%
Demand Growth Supply GrowthDemand Volume Supply Volume
1%<1%
1. Current volumes are represented by the area of the circles displayed. Growth rates represent forecast compound annual growth rates.2. Although strong growth in demand is expected in India, the ability to supply is likely to remain limited. In the 12 months to May 2012, Fonterra exported 22,300 MT of product to India and total imports represented
approximately 0.2% of consumption.
Source: Fonterra estimate
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Dairy prices are higher, with more convergence and volatility
Source: Fonterra analysis
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Growth in market based tools will continue to be important to manage dairy price volatility
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Confidential to Fonterra Co-operative Group
The baby-boomers are aging and embracing healthy aging via nutrition
Source: Percentages estimated from Fonterra/TNS research extrapolated by population growth rates
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The benefits of protein are increasingly recognised for healthy aging.Demand for dairy protein is growing
Source: Based on Breen and Phillips 2011
Potential impact of high
protein diet
Potential impact of high protein diet and
exercise
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Confidential to Fonterra Co-operative Group
Food security is a major, global challenge for the 21st century. Open markets to allow the free flow of food across borders will be essential
• 9 billion people by 2050• 60% more food required
• Rapid urbanisation
• Arable land and water constraints
• Likely impacts of climate change
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A greater focus is being placed on sustainability to ensure future food production
• A challenge to do more with less• An opportunity for dairy’s nutritional density to gain greater
recognition
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Summary
1. Macro Drivers – Global trends are shaping the outlook for
dairy markets
2. Changing Dairy Market Dynamics - The shift from a supply led to a demand
led dynamic
3. Future Challenges– Ongoing price volatility and food security
concerns will require market orientated solutions
Confidential to Fonterra Co-operative Group
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Section or end slide
THERE IS A BRIGHT FUTURE FOR SUSTAINABLE, EFFICIENT, MARKET FOCUSED DAIRY
FARMERS
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Confidential to Fonterra Co-operative Group
New Zealand cannot meet the significant opportunities for dairy alone
19 BnL
54Bn L
375 Bn L
NZ
Globally Traded Dairy
Market
Formal Dairy Market
22 bn L by 2020 (2% CAGR)
80 bn L by 2020 (4-6%
CAGR)
500 bn L by 2020 (3-4%
CAGR)
Source: Fonterra analysis
