Rabo Bank

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New perspectives

Barcelona, 25th October 2005

European Pasta ComplexIn A State Of Flux

III Pasta World Congress

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New perspectives

Introduction

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Strategy Rabobank Group

To become the largest, best and most innovative Allfinanz provider

in the Netherlands

To be the most sustainable and socially involved bank

Global no. 1 in financing in the food & agri market

International network in 35 countries

International market leader Food & Agri wholesale

Domestic retail banking in selective countries

Knowledge based banking

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New perspectives

EU pasta complex in astate of flux

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Shift in consumer demands

Food expenditure as proportion of household income is declining

Consumer have become more and more price sensitive

Serving an ageing and declining consumer base

Obesity has vast societal dimensions

Diets come and go

Continuing popularity of the Mediterranean diet

Increasing on the go and out of home consumption

Manufacturers challenge:How to capture a greater share ofconsumers food expenditure

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A gradually growing pasta market

EU Pasta Market

0

1.000

2.000

3.000

4.000

5.000

6.0007.000

8.000

9.000

10.000

1999 2001 2003 2005 2007 2009

InEuros(m

)

Dry pasta Fresh pasta

CAGR 99-09

6.3%

CAGR 99-093.6%

Source: Datamonitor, 2005

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Supermarkets remain main channel forpasta purchases, but

Distribution by Value, 2004

Discounters

16,0%

Convenience

stores

0,4%

Supermarkets/

hypermarkets

69,3%

Traditional

grocers10,6%

Others

3,7%

Source: Datamonitor,Rabobank estimates, 2005

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0

10

20

30

40

50

60

Germ

any

UK

Belg

ium

Net

herl

ands

Switz

erla

nd

Fran

ce

Spai

nIt

aly

Port

ugal

Gree

ce

Nor

way

Den

mar

k

Swed

en

Finl

and

, discounters will become an even moredominant force in Europe,

Discount percentage

shares in total grocery retailingMain discount labels

Source: M + M Planet Retail, Rabobank estimates

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, as is seen in the stunning growth ofAldi and Lidl outlets

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

Aldi Lidl

1990 1995 2000 2004

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

EU

1990 1995 2000 2004

Number of outlets in EU Number of discount outlets in EU

Source: GfK

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Consumer's willingness to pay a premium for privatelabel

0%

10%

20%

30%

G

erman

yUK

Spain

Fran

ce

Nethe

rland

s

Cana

da

D

enmark

USA

Swed

enIta

ly

Hung

ary

Cze

chRep

.Spendonprivatelabels

25%

30%

35%

40%

45%

Pricedifferencebrandover

P

L

Spend on private labels Price difference PL and brand

Private label gaining acceptance at theexpense of brands

Source: IGD 2004, Rabobank

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Italy still the major producer, but Russiaand Turkey can have a major influence inthe midterm

Italy

27,1%

Russia

8,0%

Turkey

4,0%

Germany

3,0%

Others

10,1%

North America

21,4%

Asia

2,1%

Australia

0,4%

Europe

53%

Middle East

0,3%Africa

4,5%

Central and

South America

19%

Source: UNIPI, Rabobank estimates, 2004

Global pasta production, volume

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Italian pasta producers depend heavilyon export; Germany main destination

Italian exports account for 48,5% of

production

Export volume CAGR 1990-2003: 8%

Significant price differential between

national and export markets

Italian producers are the main private

label suppliers for EU retail trade

In addition export to fill up production

capacity

As a result the European pasta market

is suffering from overcapacity

Germany

22%

France

14%

UK

11%USA

10%

Others

32%

Japan

5%

Sweden3%

Nether

lands

3%

Source: UNIPI, 2004

Italian export destinationsBy volume, 2003

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Polarisation in EU pasta market:as is the case in the German market

Discount

market 30%

Middle

market 60%

Premium

market; 10%

Structure of German dry pasta market

0.29-0.59 0.89-1.19 1.80-2.50Price per

500g pack

Source: Industry sources, AC Nielsen and Rabobank estimates

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Policy developments will continue toimpact the pasta industry

CAP reform: 1992 reform

Price volatility (reduction of the intervention price)

Non-traditional areas switched production from durum to other

crops (e.g. soft wheat)

Mid Term Review

Impact of production in tradional areas will be limited

EU will remain a net importer

Eastern EU enlargement (May 2004):

Better access to these markets

Per capita pasta consumption is close to EU-15 levels

Turkey, a future EU member? Turkey seems to have a competitive (export) position in the entire pasta

complex

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New perspectives

Adaptation of businessmodel

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Changes have urged players to adapttheir business model

Topline

Bottomline

Rationalizationof portfolio

Increase buyingpower

Higher marginproducts

Innovation

Restructuring

Increase market share

Access new markets

Diversification ofproducts andservices

Internationalisation

Growth

Raiseefficiency

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Rationalization in pasta complex

125

150

175

200

225

250

275

1992 1997 2002 2007 (est.) 2012 (est.)

NumberofEUpasta

companies

0

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

5.000

Production(x1000tons)

Source: UN.A.F.P.A (2003), Rabobank estimates

Number ofcompanies

Production

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Several dominant branded players, but

strong demand for private label suppliers

No pan-European player with exception of

Barilla

Diversity of consumer demand has resulted

in many small factories, short runs and

manufacturing complexity

Fragmented market with many small scale

players (

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Sizeable players already active in Centraland Eastern Europe

Per capita consumption of pasta in Eastern

Europe

0 1 2 3 4 5 6 7

Czech Rep

Hungary

EU-15

Russia

Estonia

Turkey

Slovak Rep

EU-14 (excl. Ital y)

Lituania

Lat via

Poland

Romania

kg /capita

Pasta production (volume)

0 50 100 150

Agros

Makfa

Adriana

Altan

Lubella (Maspex)

UMC

Malma

Vermani

(in th. tonnes)

Source: UNIPI, Rabobank estimates

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Will the pasta industry create its ownActimel?

Organicgrowth

New product development will be

a key element for sustainable

success in the pasta industry,

although very complex

The pasta industry has not been

very innovative over the last

decade

Innovation has been

predominantly incremental-me

toos and brand extensions

Focused on health and quality

Relevant innovation will be

rewarded

Strategies in European pasta industry

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Strategies in European pasta industryMultiple strategies across country borders

Geographic

expansion

Source: Rabobank,, 2005

Commodity Generic Premium

Do

mestic

Eu

rope

G

lobal

Value added

VolumeCost leadership

BrandsN.P.D.

Disintegration?

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Pasta industry has the tools to overcomethese challenges

Cost input priceinflation

Inability to pass this onto customers

Competitive pricingCommoditization

Weather risks in supply

Involvement of foodmultinationals

Fall indemand/volumes

Cross sectorcompetition

Current debate onobesity

Challenges

Focus on higher marginproducts

Established key brands withstrong support

New product development

Strong market shareDistribution power with criticalmass

Customer retention andloyalty

Reduction of cost base

Efficient capacity utilisation

Secure ingredient supply

Access to stable growthmarkets

Access to optimum financialresources

Tools

Strategy

Clearly defined

strategy, based onunderstanding of

individual markets

and industry drivers,

supported by a strong

and in-demand

portfolio of products

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New perspectives

Outlook

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Rabobanks view on the European pastacomplex

Outlook

The pasta market will remain a value growth market throughout Europe

characterised by many, highly professional competitors

Cost side of the pasta industry needs to improve

Retail-supplier relationships will become even more intense

The share of private label products on offer will continue to grow

Some segments will become commoditized, making cost leadership in these

segments a necessity

There is an urgency for further industry consolidation

New product development will be a key element in further value growth

Expansion to non-traditional growing areas

CAP reform will lead to more open markets and more volatility in durum

prices

As a result of CAP reform, EU durum production could fall

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New perspectives

Barcelona, 25th October 2005

European Pasta ComplexIn A State Of Flux

III Pasta World Congress

7/28/2019 Rabo Bank

27/27

27

Strategy Rabobank Group

To become the largest, best and most innovative Allfinanz provider

in the Netherlands

To be the most sustainable and socially involved bank

Global no. 1 in financing in the food & agri market

International network in 35 countries

International market leader Food & Agri wholesale

Domestic retail banking in selective countries

Knowledge based banking