Building Trust to form global

partnerships in Russia & CIS Fonterra Russia & CIS

Elena Grishina

February 2015

Page 2 Confidential to Fonterra Co-operative Group

From

The world’s largest

exporter of dairy

To A Co-op that makes a difference in the lives of two

billion people by 2025

Our purpose: to be the worlds most trusted

source of dairy nutrition

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New Zealand Milk Processing Sites

Through world class processing

approximately 22 billion litres of milk was

processed last year around the world,

more than 17.9 billion litres was

processed in New Zealand across the

following processing sites:

- 2 manufacturing sites

approved for RU

- A total of 10 factories

approved

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Brazil – Powders

Chile – Powders, Cheese & Whey

Argentina – Powders & Cheese

Israel – Lactose & Whey

France – Whey

We continue to build our global supply footprint to

support our NZ supply

Germany – Lactose & Cheese

USA – Lactose,

Cheese, EMC’s

Australia – Powders & Cheese

Netherlands – Lactose & Whey

Lithuania – Powders

UK – WPC

Russian approved supply (current)

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Russian customers currently procure a diverse

portfolio of ingredients from Fonterra globally

Ingredients

purchased by

RU customers

Cheese

MPCs

SMP

WMP

Casein

Butter

AMF

Lactose

Salted Butter (lactic

potential). No

Anchor butter

access. This is a

TOP 3 RU strategic

opportunity

Rennet & Acid

Casein

WMP ex-NZ and

LATAM

SMP ex-NZ and

LATAM

NZ & AU supply is currently restricted. Gouda

supply ex - Chile is currently transacting. This is a

TOP 3 RU strategic opportunity for Anchor brand

Premium AMF (1MT

and 210kg, NOT

cartons)

Currently restricted

globally – this is a

TOP 3 RU strategic

opportunity Multiple supply

options available

No Fonterra supply options

Limited Fonterra supply options

Good Fonterra supply options

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We recognise the dairy market is

increasingly volatile

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Russian Economic Overview

Russia Economic today

• This is a wild ride as the markets are out of

control for the moment and short-term

volatility is extreme.

• The interest rates - rising to 17% in Jan 2015

• The rouble is struggling to find a new

equilibrium every week as the oil price

plummets

• Inflation is rising but not yet spiking but could

reach 10-12% in early 2015 and even a

fraction higher before declining.

• Sanctions are having a multitude of indirect

effects as well as direct ones.

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Russian Dairy Market

• Russia is the largest processed food market in Europe and one of the world's largest importer of

dairy products

• Demand for higher-quality ingredients is increasing as more local food processors strive to meet

international quality standards. That demand will lead to increased imports

• Possibility to increase GS presence during the ban

• Tightly regulated import market for countries outside of Customs Union

• Unpredictable Government and political environment leads to large trade and economic risks

• Unstable economical environment: high rate of inflation, rouble devaluation, growth of credit rates,

etc

• Devaluation makes import non-competitive (even from Belarus)

• Deficiency of means: crisis in financial sector does not allow to "buy“ easy an additional finance

any more, as a result of the large credit rate growth

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We believe there is more we can do together…

LOWEST COST MILK FAT

AND WMP GLOBALLY DE-RISK YOUR SUPPLY

CHAIN WITH MULTI

ORIGIN SUPPLY

MANAGE PRICE

VOLATILITY THROUGH

CUSTOMISED

CONTRACT SOLUTIONS SUPPLY GUARANTEE

HIGHEST QUALITY

PRODUCT

ABILITY TO ALIGN

FACTORIES TO

COMPANIES AUDIT

REQUIREMENTS

ACCESS TO WORLD

CLASS R&D SUPPORT

BEST IN CLASS SERVICE

AND OPERATIONAL

SUPPORT

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Fonterra Russian & CIS focus

Create and maintain stable and customer focused multi-origin supply chain

Stabilize Global Sourcing supply chains into Russia (ex LATAM, Turkey,

Azerbaijan)

Maximize NZ origin market access

Deepen reseller relationships and open new markets (Kazakhstan)

Profitable growth of Russia & CIS

Confidential to Fonterra Co-operative Group

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Thank you!