11/6/2012 Sourcing sustainable palm (kernel) oil A perspective from FrieslandCampina RT10 – October 2012 0 Contents • Introduction FrieslandCampina • FrieslandCampina & CSR • FrieslandCampina & RSPO • FrieslandCampina’s global sustainable palm oil policy • Prerequisites • Status quo 2012 / Future 1 1
11/6/2012 W e provide m illions of people around the w orld w ith all the good things m ilk has to offer Worldwide Europe 6,307 revenue (in millions The Netherlands of euros) Germany Belgium 12,662 Hungary Romania employees Greece Russia United Kingdom 71 France Spain locations Italy Austria 324 North and 999 Africa and 1,996 Asia revenue revenue revenue South America The Middle East (in millions (in millions (in millions China of euros) of euros) of euros) Hong Kong United States of America Indonesia Ghana 140 1,032 5,202 Singapore Nigeria employees employees employees Malaysia Saudi Arabia Thailand United Arab Emirates 5 4 26 The Philippines Vietnam locations locations locations India 2
11/6/2012 Our position 2011 dairy revenue, in billions of euros Company Dairy revenue 18,6 18.6 1. Nestlé - Switzerland 1. Nestlé - Zw itserland 2. Danone - Frankrijk 14.0 2. Danone - France 3. Lactalis - France 3. Lactalis - Frankrijk 13.5 4. Fonterra - Nieuw Zeeland 11.3 4. Fonterra - New Zealand 5. Friesland Campina - 9.7 5 . FrieslandCam pina - Netherlands Nederland 6. Dairy Farmers of America 9.3 6. Dairy Farmers of America - USA 7. Dean Foods - USA 7. Dean Foods - USA 8.4 8. Arla Foods - 7.4 8. Arla Foods – Denmark/ Sweden Denemarken/Zw eden 5.5 9. Kraft Foods - USA 9. Kraft Foods - USA 5.3 10. Meiji Dairies - Japan 10. Meji - Japan 5.2 11. Unilever - Nederland/UK 11. Unilever – Netherlands/ UK 4.9 12. Saputo - Canada 12. Saputo - Canada 13. DMK - Germany 13. DMK - Duitsland 4.6 4.4 14. Sodiaal - France 14. Sodiaal - Frankrijk Source: Rabobank, July 2012 15. Yili - China 15. Yili - China 4.2 Strategy route2 0 2 0 : Grow th & value creation Aspiration To bring the To be the essential m ost nutrients of attractive natural dairy dairy com pany to people for m em ber w orldw ide farm ers Value-drivers Dairy-based I nfant & Branded Strongholds Foodservice Basic beverages toddler cheese & geographic in Europe products nutrition expansion ( B2 B, B2 C) Benefit platform s Grow th & Health & developm ent Daily nutrition w ellness Functionality Capabilities Talent Milk Business m odel m anagem ent valorisation I nnovation & cost focus Foundation The w ay Goodness Chain w e w ork & of dairy advantages Sustainability safety 3
11/6/2012 Our CSR Mission : There is a fundamental need in the world for nutritious foods. Dairy is one of the most nutrient-dense food stuffs. As an international dairy leader we aspire to demonstrate our commitment to responsible production and leadership in the CSR domain by providing: Health & Sustainable Dairy Responsible Nutrition Value Chains Developm ent Dairy Farm ing Combating nutrient Helping 40,000 small Improving resource Setting the standard deficiency & obesity farmers Asia, W-Africa utilisation Reduce sugar, salt Energy, w ater, Productivity per 3 0 % reduction in and fats in our w aste in our supply cow in SE Asia, greenhouse gas products. Set chain reduced by Nigeria raised by ( 1 9 9 0 com parison) com pany standard 2 0 % 5 0 % ( com pared on labelling w ith 2 0 1 1 ) Com bat under- Clim ate neutral To align sm all Outdoor grazing nutrition in grow th and 1 0 0 % farm ers w ith our m aintained at 7 5 - strategic use of renew able com pany’s global 8 0 % participation partnership w ith energy in our quality standard of our dairy farm s Red Cross ( relief supply chain Foqus aid) 1 m ln children p.a. Soy, palm , cocoa, To raise annual I m prove overall reached effectively other agricultural farm er incom e w ell perform ance in w ith healthy com m odities above UN defined anim al health & eating/ living sustainably sourced poverty line w elfare on farm s 6 education FrieslandCampina CSR Strategy House CSR Mission and Vision FrieslandCampina CSR Business Case CSR Strategy, 4 priorities, KPIs Health & Sustainable Dairy Responsible Nutrition Value Chains Developm ent Dairy Farm ing Combating obesity & Improving resource Helping farmers Setting the standard nutrient deficiency Africa, Asia utilisation company company company cooperative CSR Governance Board – 4 im plem entation team s CSR Perform ance Measurem ent – Annual Reporting – Stakeholder dialogue - Partnerships Em ployee & Dairy Farm er Engagem ent – CSR Training program s – Annual CSR Team Aw ard Business Practices for Suppliers – Code of Conduct – Foqus – Policies & Position Papers 4
11/6/2012 FrieslandCampina & RSPO • Developments sustainable palm monitored by category team oils&fats since 2005 • FrieslandCampina RSPO member since 2007 • Global sustainable palm policy approved by executive board October 2010 • Start implementation policy in January 2011 8 FrieslandCampina’s global sustainable palm policy Switch palm oil from conventional to segregated * ) Switch palm fractions to mass balance (in future: segregated) * ) Switch palm kernel oil to mass balance (in future: segregated) * ) Switch palm-based emulsifiers to mass balance/ segregated * ) if not available yet: buy mass balance or buy greenpalm certificates W hy a policy? • Execute FrieslandCampina’s CSR strategy W hy this policy? • One uniform global FrieslandCampina policy • Attend to customers’ requirements • Show entrepeneurship • Clear policy, no window dressing 9 5
11/6/2012 FrieslandCampina’s portfolio Product portfolio: • Palm oil • Hydrogenated palm oil • Palm oil fractions • Palm kernel oil • Hydrogenated palm kernel oil • Palmkernel stearine • Emulsifiers Main applications: • Fat powder for bakery • Fat powder for soups and sauces • Topping • Non-dairy creamer • Cappuccino foamer 10 Prerequisites (internal) • Commitment senior management/ EB • Committed (dedicated) project team • Multidisciplinary team (procurement, QA, supply chain, sales, marketing) • Time & money to ensure proper implementation • Understanding of RSPO supply chain models and claims • Ability to work with different implementation pace per geographic region 11 6
11/6/2012 Prerequisites (external) • Market enablers (e.g. certified plantations; new mass balance rules RSPO) • Alignment with suppliers / supplier commitment to CSR • Physical availability of MB or SG oil in the destination region • Critical mass required for further roll out • All players in the supply chain need to take their responsibility and cooperate: “It takes two to tango” 12 Implementation (preparatory phase) Inventarisation with suppliers on 2007 future availability sustainable palm oil Internal alignment: translate RSPO 2008 developments to our company. First customers showed interest for sustainable palm products Decision all palm (kernel) oil 2009 suppliers should be RSPO member Alignment supplier base / draft policy 2010 October: approval policy by executive board 13 7
11/6/2012 Implementation (realisation phase) Policy letter to all suppliers November 2010 Training sales/ QC/ logistics: claims, November 2010 marketing, ERP system change. Prepare QC system: MB/ SG specifications FrieslandCampina Kievit plant, The December 2010 Netherlands, RSPO SCCS audited and certified. Start purchase SG palm oil in Europe FrieslandCampina Satro, Germany August 2011 certified FrieslandCampina DMV, The Netherlands September 2012 certified 14 Status quo October 2012 sourcing sustainable palm (kernel) oil Almost 100% SG or MB palm (kernel) oil EUROPE and emulsifiers Malaysia: MB palm oil SOUTH EAST ASIA Indonesia: Implement MB 2013 Thailand: Greenpalm certificates Vietnam: Greenpalm certificates Nigeria: Greenpalm certificates AFRICA 15 8
11/6/2012 Further action 2013 • RSPO-SCCS certification of other FrieslandCampina plants (depending on marketing policy operating company) • Ongoing discussion with suppliers globally on availability SG/ MB oil. Special attention for further roll out in Asia • Monitor together with suppliers applicable surcharge for SG/ MB as critical mass is growing 16 It takes two to tango: Let’s dance! 17 9
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