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Dairy Crest’s Strategy Mark Allen

3 Delivering a clear and consistent strategy… Build market leading positions in branded and added value markets Over 80% of Foods Division sales are now branded with 10% from products developed in last 3 years Clear focus on five key brands Focus on cost reduction and efficiency improvements 15 factories closed or disposed since 2001 Production now consolidated at 14 locations Improve quality of earnings and reduce commodity risk Dedicated milk pools for 4 major retailers milk&more on doorstep Ingredients turnover less than 5% of group Generate growth and focus the business through acquisitions and disposals Six major acquisitions in last 15 years have transformed group

4 Core BrandMarket Brand growth over 5 years* Brand growth to March 09** UK cheese178%22% UK dairy spreads28%33% UK spreadable butter274%48% French non-butter spreads 274%9% UK flavoured milk47%23% Build market leading positions in branded and added value markets *AC Nielsen or IRI or TNS value growth **Dairy Crest sales growth by value

5 Added Value Milk Pools A modern doorstep proposition Own-label flavoured milk Build market leading positions in branded and added value markets

6 Focus on cost reduction and efficiency improvements 2006 Closed Birmingham dairy 2007 Closed final salary pension scheme to new employees 2008 Closed Totnes dairyRegional Distribution Centres for Dairies 2009 Sold Stilton and speciality cheese Head office restructure Closed Nottingham dairy Contracted out milk collection 2010 On-going Household depot rationalisation Review of final salary pension scheme for existing employees

7 Reducing commodity risk and improving quality of earnings 2003 Closure of ingredients operation at Chard and disposal of own label chilled juice business 2006 Disposal of retailer branded cheese operations to First Milk 2009 Disposal of Stilton and speciality cheese business 2009 Disposal of YDC 2010 Minimise milk through ingredients

8 Generate growth and focus the business through acquisitions 1995 Mendip Foods (Cathedral City) 2000 Unigate’s Dairy and Cheese Business 2002 St Ivel Spreads 2004 Country Life 2005 Starcross Foods and Midlands Coop Dairies 2006 Express Dairies 2007 St Hubert 2009 Fayrefield Foodtec

9 The strategy is delivering results Revenue (£m) Profit on operations (£m) Adjusted earnings per share (pence) Operating cash flow (£m) Consistent top line growth Increasing operating profits and eps organically and through acquisition Strong cash flow

10 A compelling investment proposition Brand building Innovation Chilled distribution UK and Continental retailers Cost management Milk buying Corporate activity Underpinned by strong competencies Well defined strategy Sound, balanced customer base for both Liquid Products and Foods 5 key brands with good growth record and further potential Direct access to 1.3 million customers 14 operational sites (7 Dairies and 7 Foods) Sound finances and strong cash generation Confirmed commitment to a progressive dividend policy Experienced, well-motivated management team

11 Delivering a clear and consistent strategy Build market leading positions in branded and added value markets Invest in advertising and promotions Focus on innovation Convenience, Health, Taste Focus on cost reduction and efficiency improvements Pension scheme Exit Maelor cheese packing Efficiency gains Continued investment in industry leading facilities Improve quality of earnings and reduce commodity risk Continue to minimise ingredients risk Improve middle-ground profitability Generate growth and focus the business through acquisitions and disposals Short term focus is on cash generation Medium term return to acquisitions

Dairy Crest Milk Flows Alastair Murray

13 Introduction This presentation covers Background to milk supply Dairy Crest milk flows Dairy Crest’s Ingredients business

14 Background A sustainable supply of high quality milk is important to Dairy Crest We sell packed milk across a broad spectrum of different customers We also use a significant quantity of milk in our cheddar factory at Davidstow, Cornwall Raw milk contains around 4% fat, but the most popular drinking milk is semi-skimmed with 1.6% fat Cream, skimmed from packed liquid milk, is a major ingredient in our Spreads business Milk is produced on a seasonal profile, with more in the Spring and less in the Autumn Current milk purchase prices make it uneconomic to process milk into commodity ingredients

15 World milk supply World milk supply is around 540 billion litres Source DairyCo UK is 9th largest milk producing country with 14 billion litres in 2007

16 UK milk supply DairyCo provisionally estimates milk available for UK consumption in 2008 to be 13.1 billion litres In addition UK imports around 4 billion litres of milk, mainly in the form of cheese, otherwise UK dairy balance sheet broadly neutral with imports matching exports billion litres Used for liquid6.7 Used for cheese3.5 Other (mostly milk powders) 2.9 Total13.1

17 Dairy Crest milk flows Directs 1.35 bn litres Other 0.75 bn litres Raw milk intake 2.1 bn litres

18 Dairy Crest milk flows Directs 1.35 bn litres Other 0.75 bn litres Raw milk intake 2.1 bn litres Annual cycle Milk volume Trough Balancing Demand

19 Dairy Crest milk flows Directs 1.35 bn litres Other 0.75 bn litres Raw milk intake 2.1 bn litres Annual cycle Milk volume Trough Balancing Demand Peak Balancing

20 Dairy Crest milk flows Directs 1.35 bn litres Other 0.75 bn litres Raw milk intake 2.1 bn litres

21 DAIRIES Dairy Crest milk flows Directs 1.35 bn litres Other 0.75 bn litres NRC Liquids NRC Household Glass Household Organic NRC & Glass Frijj Flavoured milk Liquid milk processing 1.7 bn litres Raw milk intake 2.1 bn litres Cream

22 DAIRIES Dairy Crest milk flows Directs 1.35 bn litres Other 0.75 bn litres FOODS NRC Liquids NRC Household Glass Household Organic NRC & Glass Frijj Flavoured milk Liquid milk processing 1.7 bn litres Cheese Water Whey powder Whey butter Cheese manufacture 400 ml litres Raw milk intake 2.1 bn litres Cream

23 DAIRIES Dairy Crest milk flows Directs 1.35 bn litres Other 0.75 bn litres FOODS NRC Liquids NRC Household Glass Household Organic NRC & Glass Frijj Flavoured milk Liquid milk processing 1.7 bn litres Cheese Water Whey powder Whey butter Cheese manufacture 400 ml litres Vegetable oil Packet spreads Retail butter Raw milk intake 2.1 bn litres Buttermilk Butter making (Crudgington) Cream Spreads manufacture MARKET TRANSFER PRICE

24 DAIRIES Dairy Crest milk flows Directs 1.35 bn litres Other 0.75 bn litres FOODS NRC Liquids NRC Household Glass Household Organic NRC & Glass Frijj Flavoured milk Liquid milk processing 1.7 bn litres Bulk butter Potting/ alcoholics Other cream (WDP/HH) Cheese Water Whey powder Whey butter Cheese manufacture 400 ml litres Retail butter Raw milk intake 2.1 bn litres Buttermilk Butter making (Crudgington) Butter making (Severnside) Spreads manufacture Cream Packet spreads Vegetable oil MARKET TRANSFER PRICE

25 DAIRIES Dairy Crest milk flows Directs 1.35 bn litres Other 0.75 bn litres FOODS NRC Liquids NRC Household Glass Household Organic NRC & Glass Frijj Flavoured milk Liquid milk processing 1.7 bn litres Severnside Creamery Bulk butter Potting/ alcoholics Other cream (WDP/HH) Severnside dryer Skimmed milk powder(SMP) Buttermilk powder Clover B’milk powder (CBMP) Cheese Water Whey powder Whey butter Cheese manufacture 400 ml litres Retail butter Clover Buttermilk Buttermilk Skim MARKET TRANSFER PRICE Buttermilk Butter making (Crudgington) Butter making (Severnside) Spreads manufacture Cream Vegetable oil Packet spreads Raw milk intake 2.1 bn litres

26 Key points from milk flow chart We have a broadly based dairy business which uses all fractions of the milk Cream is an important internal commodity. Our principle competitors have a different model Balancing milk requires us to put some milk into ingredients…albeit we presently lose money on every litre We are working hard to reduce our exposure to ingredients in the current year

27 Adapting to a changed environment Until the boom in commodity prices in 2007 farmgate milk prices generally tracked in line with AMPE Although dairy commodity prices have fallen back, farmgate milk prices have only fallen slightly, leaving them significantly higher than AMPE and making the production of dairy commodities unattractive Farmgate prices v ingredients returns

28 Minimising risk and exposure to commodity markets – Action taken AMPE remains below farmgate prices so focus has been based on minimising the volume of milk into Ingredients Milk Purchasing strategy moved from trough balancing to peak balancing Alternative uses for surplus milk include additional cheese production, marginal middle ground liquid business, spot milk sales Ensure ingredients product quality is optimised to guarantee access to blue-chip customers

29 Summary Our ‘broadly based dairy’ strategy allows us to maximise the value we get from our milk supply while mitigating market risk The primary role of our Ingredients business is to sell by-products. Our real focus is on consumer products….

milk&more Mike Sheldon

31 milk&more – a unique opportunity We have 1.3 million doorstep customers, a large number of whom are young and affluent and have children at home We know that our customers like what we do –Milkmen –Glass bottles –Electric vehicles –Regular deliveries – to keep the fridge full But many also want to be able to operate their account with us in a more convenient and flexible way Many of our customers are used to shopping on-line and over 65% have broadband access We have taken the opportunity to retain the good, but to modernise and make our service more relevant to current and new customers

32 Healthy futures Offline = 13% Online = 26% Wealthy heartland Offline = 28% Online = 39% Golden years Offline = 21% Online = 16% An affluent customer base with great potential Tight budget pensioners Offline = 16% Online = 5%

33 milk&more – a compelling proposition All the daily top-up essentials our customers need, delivered to their door by a friendly, local milkman with no delivery charge Between 3 and 6 deliveries a week, most before 8am The product range encompasses milk, other essentials such as bread and eggs, Dairy Crest brands and heavy products such as bottled water and pet food Customers sign up onto a dedicated website and from then on can amend their orders 24/7 The software accumulates orders to be loaded onto milk floats and electronic handsets enable milkmen to see changes and adjust delivery Payment is made by credit card or direct debit, more convenient for customers and safer and easier for milkmen

34 milk&more – impossible to replicate Adding to order from product range possible with shopping list to hand Product range online 24/7 at the click of a mouse Use standing order for milk & products Customer chooses between standing orders, one-off or both Pay milkman by cheque, cash or paper direct debit Pay by Direct Debit or auto debit/credit card – all online Communicating promotions and news to customers via leaflets Both traditional and digital marketing techniques to talk to our customers Offline Online Order online up to 9pm the night before next delivery Change order with note/shopping list – if milkman carrying item

35 A well-planned national roll-out 5 depot pilot (June 2007 – June 2008) Keep it simple Regular deliveries No delivery charge 30 depot extension (July 2008 – May 2009) Online customers spend 48% more Opportunity for online marketing Simplicity is key for sign-up National roll out (July – September 2009) New user-friendly, robust internet solution Fully integrated with depot systems Available to all 1.3 million existing customers Marketing campaign to generate new customers (October 2009 – ) Strong marketing campaign planned to attract new customers and build sales

36 milk&more now has 100,000 registered customers Roll out 2009Marketing investment depots launching 2008

37 milk&more customers spend more with us Source: DC, 6 months to July ‘09 £4.54£6.20 Weekly expenditure

/10 objectives 1.Drive acquisition to online service –Switch traditional customers onto milk&more –Recruit new customers –£2.6 million marketing support –250k customers by 31 March Increase customer spend using targeted, data-base marketing 3.Reduce debt and cost of cash-handling

39 Summary milk&more can reverse the long-term decline in doorstep sales as it lets us retain existing customers, attract new customers and sell more to both groups The trials we carried out showed a real demand for the milkman from an affluent customer base but a need to modernise some aspects of our proposition We have developed a user-friendly, robust internet-based solution Roll out of milk&more is complete We have a marketing campaign planned which will make sure everyone has heard of milk&more

Dairy Crest Cheese – a world class supply chain Martyn Wilks

41 Dairy Crest cheese – a world class supply chain Dedicated West Country milk pool State of the art creamery creating high quality cheese for brands and premium retailer sub brands Single site for cheese maturation, high speed cut and wrap and National Distribution Centre A second, highly flexible facility where we cut, slice, grate and wrap £100 million invested over the last 8 years Together makes the UK’s favourite cheese brand

42 Dairy Crest - creating a world class cheese supply chain 1995 Purchased Mendip Foods and the Cathedral City brand – now has £195 million retail sales and is bigger than next three brands together 1997 Started recruiting direct milk suppliers – now have over 400 direct suppliers in Cornwall and Devon 2000 New National Distribution Centre at Nuneaton (Cost £37 million). Now despatching 67 million cases / year 2003 New Davidstow Creamery (Cost £55 million). The most modern and largest mature cheddar factory in the world 2003 Launched first resealable packaging for Cathedral City 2010 New Cheese Packing Facility at Nuneaton (Cost £25 million)

43 From farm to fridge Davidstow Retailers NuneatonFarms Frome Nuneaton Nuneaton & Frome Davidstow Consumers

44 West Country milk pool – dedicated to Davidstow The Davidstow pool consists of: farms in Devon & Cornwall Supplying 515 ml pa of milk - Average farm milk production 1.27 ml Daily collection volume: - 1.3ml from the milk field - 930,000 litres into creamery daily Key partner: Gregory’s Distribution Ltd litres of milk collection per km travelled (industry average 150) - Also providing secondary haulage for finished goods Suppliers well supported by Dairy Crest - Premium price v competitors (+1.3ppl v Milk Link) - Field support team + White Gold (on farm consultancy) funded by DC

45 Redeveloped in 2003 for £55 million Capacity > 50,000 tonnes Redeveloped in 2003 for £55m 100 employees Capacity > 50,000 tonnes cheese 09/10 42,000 tonnes cheese 65% Cathedral City and 35% Davidstow brand 25,000 tonnes whey Davidstow - state of the art cheesemaking

46 Nuneaton Cheese maturation store Opened 2000 £150 million of maturing cheddar 35,000 pallet spaces Cut and Wrap Opened in 2009 £25 million capital cost 72 employees National Distribution Centre Opened in 2000 £37 million capital cost 67 million cases per year

47 Nuneaton – Cut and Wrap £25 million invested to allow us to zip and portion pack in house –Reduced 1,500 outbound loads and 1,800 inbound loads –Saves 324,000 road miles / year 3 new integrated packing lines using latest technology –Automated in feed and out feed –Fully automated deboxing and debagging –150 packs per minute –Intelligent cutting halves off-cuts and giveaway Annual capacity of 33,000 tonnes, possible to easily expand to 42,000 tonnes

48 Cathedral City – the nation’s favourite cheddar Retail sales £195 million £27 million from ‘Lighter’ 83% weighted distribution The UK’s 21 st biggest grocery brand In every other fridge in UK But still only 13% of total UK cheddar

49 Looking forward…… Dairy Crest has a world class cheese supply chain Making the nation’s favourite cheddar Efficient production allows us to –Pay a premium to our farmers –Invest in advertising and promotion –Innovate –Invest in the future Continually innovating to drive growth –New TV advert –New packaging