Food & Services Division Nigel Garrard Managing Director Food - PDF document

Food & Services Division Nigel Garrard Managing Director – Food & Services 16-17 October 2008 6 Key Issues to Cover 1. Australian SPCA Manufacturing Restructure 2. The Drought and its Effects 3. Creating the Goulburn Valley Master Brand 4. New Products to counter Private Label Challenges 5. International Strategy 6. Grinders Growth Trajectory 2

The SPCA Manufacturing Restructure � Previously announced restructure, results in consolidation of fruit production at Shepparton site � One-off restructuring charge of $26.4 million to be taken in H2 � Estimated benefits $8-10 million pa for full year 2009 � No financial impact in 2008 as benefits offset by restructure costs � Progress is on plan and on budget – will be completed by end November – well before 2009 fruit season 3 What does the Australian Manufacturing Restructure involve? Shepparton Mooroopna (only3-4 months of wet production) � Production � Peach � � � � � Pear � � � � � Fridge Packs � � � � � Juice/Paste � � � � � Baked Beans/Spaghetti � � � � � Tomatoes � � � � � GV “Erca” Snacks � � � � � Distribution � � � � � Kyabram site not affected 4

And where do the cost savings come from? � Casual Wages � Only running one plant (the most automated of the two) allows significant labour efficiencies across the plant � This is a further step in a 5 year cost reduction and efficiency program � Reduced Overheads � One factory management structure (given Mooroopna only on 3-4 month operation) � Reduced trade waste, power, gas, maintenance � Improved plant efficiencies � with 1 plant running at close to full capacity 5 Full Time Equivalent Staff Numbers at SPCA Down by 30% Over 4 Years 1500 1400 1300 1200 1100 1000 900 800 2005 2006 2007 2008E 2009E 6

Australian Manufacturing Restructure - Why not close Mooroopna altogether? � The drought will not last forever. We need to preserve capacity. The drop in AUD will open up export opportunities once drought breaks � No fruit preparation at Mooroopna – Erca (Goulburn Valley fruit snacks) fruit will be transferred from Shepparton � Space at Mooroopna will be utilised for additional warehousing 7 No Sign of Victorian Drought Breaking – yet! NOT 8

Fruit Sourced from Two Key Regions Murray Irrigation Goulburn Irrigation 9 Allocations already down on 2007/08 Allocations at 1 October 2008 System %HRWS In 2007/08 Murray 13% 16% Broken 0% 15% Goulburn 9% 23% Campaspe 0% 1% Loddon 0% 5% Bullarook 0% 0% 10

Recent Year Water Allocations at Historical Lows 250 200 150 100 50 ? 0 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 0 / / / / / / / / / / / / / / / / / 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 Murray G oulburn 11 SPCA – Managing the Drought effects well � Water entitlements used by permanent plantings (most efficient use) at expense of annual crops and dairy � Subsidies and loans to grower suppliers have helped ensure SPCA’s fruit intakes � For 2009 fruit season: � Have acquired sufficient temporary water entitlements to underwrite tomato requirements. � Expect to receive all the fruit that is required � Growers have adapted well to less water, changing agricultural practices � Expect intakes to be in line with 2008 but unlikely to be better 12

Leveraging SPCA – The Goulburn Valley Brand Creating a ”Power Brand” � Joint initiative of food and beverages to leverage the Goulburn Valley brand and CCA’s distribution capability � Increased consumer awareness, improved distribution, coordinated marketing – all provide group benefits 13 Power Brand Build + + MORE TO + + + + COME 14

Overall Goulburn Valley brand sales have increased by >50% since CCA acquisition $ Million 160 140 120 100 Sales 80 60 40 20 0 2005 2006 2007 2008 15 Utilising the CCA Network – 1+1 = >2 � Over 3,500 Convenience & Petroleum customers now serviced via CCA distribution � Transitioning SPCA Agency agreements in � PNG � Fiji � Pacific Islands to CCA Sales & Merchandising teams � Changeover planned for October 08 with strong support from local CCA beverage teams � Reviewing opportunities in Indonesia to use existing CCA relationships 16

New Products help combat Private Label growth � Private Label offerings from major retailers have increased foothold over last few years, across most of SPCA’s categories � SPCA supply some of these Private Label products where we can supply profitably. Some customers have shown preference for Australian sourced products � Private Label is here to stay! Heightens the requirement for NPD and investment in our brands � Strong brands will be well placed to take advantage of retailers range/supplier rationalisation 17 Range of New Fruit & Snacks Products Launched – over 25 in total 18

International Strategy continues to develop � Leverage SPCA’s market leadership in packaging innovation across selected international markets � Develop a branded business using “SPC Nature’s Finest” � Transition out of sole Australian supply to include mix of sourcing countries � Provide multi-country sourced, multi- product variety offering to selected retail customers 19 Diverse International Relationships Strategic JV - Deciduous Alliance Exclusive Supply Agreement JV - Tropical Exclusive Supply Agreement 20

And the results are coming! � UK market is the stand-out performance � SPC Nature’s Finest now No. 2 brand in packaging fruit in UK � Listings in all major retailers � Appointed category captains by Tesco and Sainsbury � Trials underway with vending and convenience channels � Next priority is to roll out in other European countries. Canada showing promising early signs 21 The New Sainsbury UK Fruit Fixture 22

The New Tesco UK Fruit Fixture 23 Germany – Off shelf Displays in Product 24

Grinders Volume Comparison 2008 v 2007 v 2006 Tonnes Volume Growth 900 20% Volume Growth 23.7% 800 700 600 500 2008 400 2007 2006 300 200 100 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Month 25 25 New Brand Launch – September 2008 � Rainforest Alliance Protecting the environment, wildlife, workers and local communities � Being heavily promoted by McDonald’s � Over 30 outlets already signed 26

Our Coffee Business now comprises Environmentally friendly Premium offering Core of Corporate business offering 27 SPCA Priorities for 2009 � Complete implementation of the rationalisation of Australian manufacturing. On plan to deliver $8-10m of savings in 2009 � SPCA is well positioned vs industry peers � Drive growth of Goulburn Valley brand in conjunction with Beverages � Continue to reduce the reliance on Australian sourcing by fast-tracking the international business � Pro-actively manage the drought and its effects � Continue to drive NPD to deliver ongoing sales growth 28

29