REFORM CAP FOOD INDUSTRY 1 Decoupled Farm Subsidies

REFORM CAP - FOOD INDUSTRY 1. Decoupled Farm Subsidies Single Payment –x--- Production Market Required Food Products • Environmental Quality • Food Safety • Animal + Plant Diseases/Health 2. Rural Development Fund (€ 1. 2 B/annum - Post 2005) • Food Safety + Quality • Animal Welfare (Diseases) Essential Knowledge Driven Agri-Food Sector

Food Industry

ECONOMIC ENVIRONMENT 8 8 8 Sustained International Competitiveness More Liberal - Global Markets Higher Levels of Food Regulation Substantially Greater Requirements • Assured Food Safety, Consistent Quality • Nutritional Attributes, Animal Diseases/Welfare • Quality of the Environment Increased Corporate Alliances • Suppliers + Manufacturers + Retailers Rapidly Changing Lifestyles Population Becoming Older Shrinking Household Size Women in the Workforce Two Income Families LESS Time Shopping + Cooking More Leisure Demands

IMPACTS - FOOD INDUSTRY Market Developments • Convenience - Easy to Prepare Meals - 30 Minute Dinners • Functional Foods - Neutraceuticals • Food Service Sector Supermarkets Requirements • Accelerated Innovations in Agri-Food Sector • Ubiquitous Application of IT + Biotech!! • Knowledge Driven Agri-Food Sector

Dairy Product Portfolio - Direction of Change Functional and organic foods 5% 15% 20% Consumer products Value added ingredients 65% Base Products Current product portfolio mix 20% 30% 45% Base Products 2015 product portfolio mix Promar International

Economic Performance Comparison 1992 - 2000 Ireland Economic Value Added Denmark Netherland 1. 56 2. 16 1. 66 100 114 108 (EVA) Relative milk Price

Current Beef Grading/Quality Systems • Depends on human judgement • Difficult to demonstrate objectivity • Producers lack confidence • Difficult to agree quality based payments

New Instrument Grading Systems • Already some adoption by industry in US and EU • Recent regulations by USDA and EU likely to increase the rate of uptake • Potential for further developments and improvements fat class (EU), palatability • Familiarity with benefits of VIA (objectivity, consistency, MIS) - lead to greater adoption

NEXT STRATEGIC STEP Step Change - Food Innovation Serious + Sustained €M - R&D + + Technological Absorptive Capacity Food Companies - SMEs + Business Partnerships Public Research Organisations Universities + Applied Research Organisations Market-Led Innovative Food Products + Processes _____ Japan - Functional Foods 50 -500 R&D Personal/Company Finland - Tekes € 50 m R&D Program Functional Foods, Food Chemistry + Biotechnology

New Food Product Development High Costs + High Risks + 90% Failure - 1 Year Market Imperative - Reduce Risks Understanding + Quantification Issues Farming Consumers Attitudes to Food Products Denmark MAPP Institute Food Related Lifestyle Consumer Model Applied Ireland

FUNCTIONAL FOODS FOOD PRODUCTS Specific Health + Nutritional Attributes especially Infants, Adolescents + the Elderly Functional Foods PROBIOTICS (Life Organisms) Lactose Intolerance Diarrhea Disease Resistance Healthy Gut NEUTRACEUTICALS (Chemical Ingredients) Osteoporosis Hearth Disease Cancer Dental Caries

Functional Foods: Potential Health Attributes of Food Ingredient Calcium Folic Acid Vitamin E Iodine Immuno-peptides Casein Phosphopeptides Lactoperoxidase Lactoferrin Modified β_ Lactoglobulin Lactic Acid Bacteria Immunoglobulins Potential Heal Attributes Prevention of Osteoporosis Promotes healthy bones and teeth Protective against hypertension Protective against neural tube defects Protective against Heart Disease Protective against Cancer Protective against Goitre Protective against Cancer Promotion of Calcium Absorption Prevention of dental caries Prevention of gastro-intestinal infection Leukaemia therapy Prevents milk protein allergies Promote a healthy gut Prevention of dental caries Prevention of gastro-intestinal infection Lowering of Cholesterol

Functional Foods and Their Potential Market Scale Small Large Small Feasibility/Approvability

SOME MARKET PROJECTIONS All Functional Foods Global Market 1994 ~ 50% = Japan $6. 6 Billion 2000 $17 Billion Longer Term $ 87 Billion Probiotic Dairy Products - Most Active Area - 65% European Functional Food Market (1997) 1997 $889 Million 1998 >250 Million Kg UK, FD, Sp, B, Nl, DK, F, S Longer Term ~ $30 Billion

FOOD SAFETY Chemical Residues Microbiological Contaminents (Pathogens) BSC - Prions Mycotocins - Fungi Viruses