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Coffee2013: ReadyforTakeOff

March 5, 2013 | Strictly private and confidential

OverviewofCoffeeTrendsinNewConsumerMarkets

Agenda

Sections

I Introduction 3

II Strategic Considerations in Global Coffee Demand 7

III Regional and Country-Level Snapshots 13

IV Key Points to Consider 22

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Ross Colbert, Global Strategist -

Beverages

Mr. Colbert joined Rabobank in January 2011 and is responsible for developingFARs research portfolio and Rabobanks global view toward the beverage sector.Rabobanks FAR team provides information and analysis covering all of themajor sectors throughout the food chain. The seven-member FAR Beverageteam is art of Rabobanks lobal FAR rou which is com rised of

Colbert joined Rabobank following an extensive career in the beverageindustry. Most recently he was Managing Director of M&A Americas for ZenithInternational, which is one of the worlds leading consulting, market intelligenceand financial advisory firms focused on the global food and beverage industry.Prior to that, he was Managing Director and Chief Operating Officer for eightyears at Beverage Marketing Corporation, which provides market intelligenceand financial advisory services to the global beverage industry. Over his careerhe has served as an advisor to Pepsico, Coca-ColaEnterprises, Heineken, Nestle Waters, Snapple Beverages, and Seagram's aswell as many independent, private beverage companies. Additionally, he beganhis career at Coca-Cola Bottl ing of Miami, then moved to Beverage Canners

,approximately 70 analysts around the world.

Ross ColbertGlobalStrategist, BeveragesFood & A ribusiness

5

International and Cadbury Schweppes. He has his undergraduate degree inpolit ical science from the Univers ity of Hawai i, and a Masters in BusinessAdministrat ion from the Univers ity of New Haven. Addit ionally, Colbertcompleted an Executive Program in Corporate Finance and Mergers &Acquisitions from the University of Pennsylvania, Wharton School.

Research & Advisory

Rabobank International245 Park AvenueNew York, NY 10167Phone: 212 916 7960Fax: 212 808 2594E-mail:[email protected]

Advisor of choice in food, beverage and agribusiness M&A

Global F&A leadership Over 160 transactions closed globally since 2003, with

total deal value exceeding US$40BN

Industry insight Understanding of effective strategies in food, beverage

Selected global F&A transactions

Introduction to Rabobank

Saputo Nestl SA VION

and agribusiness Over 100 years of banking history rooted in the F&A

sector Long-term client relationship with industry leaders

Constant dialogue with decision makers Engaged and active industry relationships help spur

credible strategic dialogue Robust proprietary deal flow in the F&A space

Senior level attention and involvement Dedicated senior M&A professionals Ability to manage complex situations and provide

tailored solutions and think outside the box

Cooperation with Rothschild M&A and equity advisory for the entire food and

agribusiness sector

R a b o b a n k h a s d i r e c t a c c e s s t o

k e y de c i s i o n m a k e r s , o w n e r s / f o u nd e r s , CEO s and

b o a r d m em b e r s a c r o s s t h e

i n d u s t r y

Pending

Acquisition of MorningstarFoods for US$1.45bn from

Dean Foods

2012

US$11.85bn acquisitionof Pfizer Nutrition

KozyShack

Sale to Land OLakes

2012

US$255msale of BannerPharmacapsto Patheon

TrilanticCapital Partners

c.125msale ofSpumadorto

Refresco

Barry Callebaut

Divestmentof its Europeanconsumer business

Stollwerckto Baronie

6

Worldwide coverage Joint advisory subject to client agreement

Benefits of the cooperation Complementary M&A advisory expertise, geographical

coverage and client base Substantial industry knowledge, client relationships and

execution skills Extensive geographic breadth and scale of dedicated

resources Leverages Rabobanks F&A research Access to financing for originated transactions

2011

Schreiber Foods

Acquisition of Dean Foodscustomer-branded yogurt

business

2011

Sara Lee

115msale of the Spanishand Portuguese freshbakery businesses to

Grupo Bimbo

2011

Brown-Forman

US$238msale ofFetzerVineyards and

related assets toViaConchay Toro

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Strategic relationships throughout the global coffee, tea and cocoasectors

Multinational coffee traders Diversified traders and processors

Roasters, consumer packaged goods andOCS companies

75

Food and Agribusiness Research (FAR) comprises adedicated and specialized group of industry analysts

FAR supports the banks M&A clients with access to its

Proprietary sector research

Rabobanks Food & Agri Research

Foodand Agr ibus inessResearch overview Recent activi ty in the cof fee sector

Client Advisory Project Strategic Sourcing of Coffee &Tea: Global Assessment of Volatility, Scarcity andSustainability, May-August, 2012

proprietary research

FAR has more than 80 research professionals in 14countries and 17 offices around the globe

Fundamental sector-based research covering theentire food and beverage and agribusiness valuechain, from primary production to processors toretailers

Output in the form of Industry Note s, F&AReviews, Commodity Notes, Regional BankingReports, World Maps and tailored presentations forinternal and external clients

Key role is to support the efforts of M&A, LeveragedFinance, Corporate Banking and Credit Risk

Keynote Presentation OCS Outlook 2012 at Coffee,Tea & Water 2012; NAMA, Las Vegas, November,2011

Keynote Presentation Single Joe Coffee Trends2013 at National Coffee Association Summit,Philadelphia, October 2012

Keynote Presentation Rethinking the BeverageSupply Chain, InterBev 2012, Las Vegas, October2012

FAR Industry Note Raj-accino Indias GrowingCoffee Culture, November, 2012

Global Coffee Outlook; Sintercafe, Costa Rica,November, 2012

Thirsty for growth 2013 Global Beverage Outlook,Januar 2013

8

Sector coverage

Farm inputs, feed,biofuel

Ingredients andsugar

Fresh produce

Non-alcoholicbeverages

Grains & oilseeds

Alcoholicbeverages

Animal protein

Confectionery

Grocery SeafoodBakery and snacks

Dairy

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C o n s um e r s n o w d e m a n d

c on v en i e n c e ,v a r i e t y a n d

p r e m i u m / q u a l i t y t a s t e , b o t h a t -

Key coffee market driversStrategic considerations in global coffee demand

Growing demand in emergingmarkets

Emerging markets to reach 50% of globalcoffee consum tion b 2020

Regional differences in retailcoffee value and volume

Western Europe continues to lead bothvalue and volume sales of coffee

h om e a n d o u t - o f - h o m e

C h a n g i n g c o n s um p t i o n p a t t e r n s a n d

r e c e n t h a r d w a r e i n n o v a t i o n s a r e h e l p i n g t o d r i v e

g r o w t h i n t h e s i n g l e - s e r v e c o f f e e

m a r k e t

I n c r e a s i n g

Shift from multi-serveto single-serve

Premiumization

Growth focused on differentiation,brands and quality

Premiumization within R&G

Premium offerings also supported by fairtrade, health benefits, organic and origin

At-home and out-of-home consumptionchanged by single-serve systems

Format innovations dr iving value growthin mature markets

i

Growth in instant coffee driven largely byemerging countries

l l l

Asia Pacific second in value but trailingNorth America, Eastern Europe and LatinAmerica in RTD retail volume

9

c on su m p o n n

em e r g i n g m a r k e t s

Note1: Source:P&A MarketingInternational

Growing out-of-home offering Product innovation

Consumers willing to pay more forconvenience

Gourmet coffee shops continue to loseground in specialty coffee to quick-service restaurants (QSR)

Innovation driving market share gainsand gross profits

Consumer preference for convenienceand quality driving innovation in single-serve R&G brewing technology

7

C o ff e e m o v i n g i n t o a n e r a o f t i g h t e r

s u p p l i e s a n d h i g h e r v o l a t i l i t y

Structural Shifts in F&A Forcing a Supply Chain Response

Dedicated Supply Chains Key to Managing Volatility

Security of Supply Becomes a Global Concern

M u c h o f d em a n d g r o w t h t o c o m e

f r o m p r i c e - s e n s i t i v e

d e v e l o p i n g m a r k e t s

S u s t a i n a b i l i t y a k e y d i f f e r en t i a t o r a m o n g p r e m i u m

c o f f e e s

10

Source:Rabobank 2012


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F r e s h c o f f e e bean s a s m a l l b u t

Coffee value, volume and premiumization trendsStrong volume and value growth expected

Global Coffee Retail Value and Volume Sales Growth (2012-17)

g r o w i n g s e gm e n t ,b o l s t e r e d b y

p r e m i um i z a t i o n

T e n d e n c y f o r i n s t a n t t o b e

p o p u l a r i n m a r k e t s w h e r e t e a l e a d s c o f f ee i n v o l u m e

O v e r a l l t r e n d Fresh Ground Coffee Pods

Standard Fresh Ground Coffee

Fresh Coffee Beans

Coffee

Retail Value RSP

Retail Volume

11

t o w a r d i n n o v a t i v e

& h i g h e r - q u a l i t y p r o d u c t s b o o s t i n g v a l u e g r o w t h i n a l l

s e gm e n t s

Source:Euromonitor

9

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%

Instant Coffee

Tea-drinking cultures more receptive to instant coffee

GLOBAL PERFORMANCE

12

Dominant Hot Drink

by Volume

Coffee

Tea

Source: Euromonitor


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Demand growth mainly to be in developing countriesTraditional consumer markets wont drive growth

V i e t n am e s e c r o p

i n 2 0 1 2 , b u t l i k e l y t o f a l l o f f i n 2 0 1 3

B r a z i l t o b e c omew o r l d s l a r g e s t

c o n s um e r b e f o r e 2 0 2 0

F u t u r e d em a n d g r o w t h t o c o m e

MY 2011/12 Share of World Coffee Exports Consumption Growth by Country Category, 2001-11

Brazil, 25%

Vietnam, 2India, 5%

Honduras,5%

Peru, 4%

Guatemala,3%

Mexico, 3%

Others, 17%

13

f r o m e x p o r t e r a n d em e r g i n g

m a r k e t s , t h o u g h p o d s a m a t u r e

m a r k e t b r i g h t s p o t

11Source:ICO, RabobankResearch

Indonesia,9%

Colombia,

6%

Whats driving demand in exporter and emerging markets?

The three key drivers of future demand growth

Rising incomes& middle class

growth

Emerging cafculture in key

countries

14

VolumeGrowthto 2016

Source:Rabobank, Euromonitor


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G r o w i n g m i d d l e c l a s s

Y o u n g p o p u l a t i o n s

Economic development, premiumization driving demand growthAsia: Young Urban Professionals Key to Success

Expected Coffee Demand CAGR, SelectedMarketsSelected Macro Indicator Performance, 2000-11 2012 Retail Market Value and Forecast Growth Rates

% CAGR

13.3%Vietnam

18%

Eme r g i n g c a fc u l t u r e

K e y B r a n d s

1,113

8.7%

0.9%

3.6%

6.7%

9.7%

9.7%

9.7%

Indonesia

Philippines

South Korea

India6.0%

2012-20

Vietnam6.8%

2012-20

SouthKorea7.6%

2012-17

China15.0%

2012-17

8%

10%

12%

14%

16%

180

1113

1421

15

Source:World Bank Source:Rabobank Analysis, Euromonitor

14.6%

3.6%

17.9%

13.2%

China

India

GDP CAGR Urban Pop Share Growth

Philippines4.8%

2012-20

Indonesia6.2%

2012-20

0%

2%

4%

6% 632452

719

Domes t i c C ha i n s

Significant consumption growth driven by instant and coffee shops

China: Booming Coffee Shop Industry

Chinese Coffee Consumption by Segment (000 bags) Rapid Expansion of Coffee Shops (# of Outlets)

00 07 07 12E

M u l t i n a t i o n a l s

300

400

500

600

700

800

InstantCoffee

Fresh Coffee

6,000

8,000

10,000

12,000

14,000

16,000CAGR CAGR

9%

15% 12%

16%

16

0

100

200

Source:Euromonitor, Rabobank analysis

0

2,000

4,000

2000 2002 2004 2006 2008 2010 2012E


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Lead i n g s p e c i a l i s t c h a i n s

Huge growth in coffee shops, caf culture

i i li i

India: Caf Culture Growing Fast, Lead by CCD

l i i

L e a d i n g o f f - t r a d e r e t a i l e r s

i i li il i i

500

1000

1500

2000

2500

5000

10000

15000

20000

25000

30000

35000

40000

Specialist Coffee Shops India Asia Pacific

Speciality

Coffee

Shops

in

India

Speciality

Coffee

Shops

in

Asia

CafCoffeeDay

IND 2000 shops by 2014

Starbucks USJV with Tata, targetsundisclosed

Dunkin'Donuts

US100 shops in next 5years

Costa Coffee UK 300 shops by 2015

Gloria Jean's AUS100 shops in next 3years

Di Bell a AUS 50 shops in next 3 years

KrispyKreme US 80 shops in next 5 years

17

Source:Euromonitor, Rabobank AnalysisSource:Industrysources, news, 2012

00

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012ECoffeeRepublic

UKIn talks, but no plansyet

O f f - t r a d e l e a d e r s

Local brands compete with internationals by tailoring products

Indonesia: Burgeoning Middle Class Thirsts forMore

AnnualGrowth%: Overall GDPvs Service Sector

Domestic Consumption, MY 2000/01-2012/13 (000

bags) 8

10

S pe c i a l t y R e t a i l e r s

Source:World Bank, Rabobankanalysis

Middle Class Growth Expected to Continue

0

2

4

6

1676

2833

3667

1500

2000

2500

3000

3500

4000

18

Source:EuromonitorSource:ICO

0

500

1000

2000/01 2006/07 2012/13


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Loca l Ca fLead ers

Big growth in instant coffee and caf culture

Vietnam: Local Brands Compete Through

Targeting Local Tastes

Retail Sales % by Company, 2012Rising Domestic Consumption Share through 2020

15%

16%

16.6

I n t e r n a t i o n a l E n t r a n t s

Source:Euromonitor

7%

8%

9%

10%

11%

12%

13%

14%

32.2

18.1

Nestle

Vinacafe

Trung Nguyen

Others

4

3-in-1 Instant Mix Market Share % by Company, 2012

19

T a r g e t i n g V i e t n am

Source:ICO, Rabobankestimates

Domestic consumption as a % of production

Vietnam exports as a % of world consumption

38

31

27 Trung Nguyen

Vinacafe

Nestle

Others

Source: USDA

International brands have the muscle, but local firms can

What does this mean going forward?

Key Points to Consider

compete through locally-tailored product offerings, orlocalvation

Mid-sized, growing cities may provide untapped expansionopportunities

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Strategic sourcing, especially through integrated supplychains, provides opportunity to add value and managesupply risk


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For more information contact:

Ross Colbert, Global Strategist-Beverages

Thank You ICO!

Rabobank International

245 Park Avenue 36th Floor

New York, NY 10169

[email protected]

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