Better World. Better . DAIRY DAIRY

AGROPUR COOPERATIVE

ANNUAL REPORT 2018 1938

For 80 years.

We are dedicated to achieving better dairy

and a better world. COOPERATIVE DAIRY Our goal has not changed since the day, 80 years ago, when a group of far-sighted farmers who wanted to take control of their own future founded : to make a difference for our community.

AGROPUR COOPERATIVE

ANNUAL REPORT 2018 2018

Table of contents

Introduction 2 Message from the President 8 Message from the CEO 10 Board of Directors 12 Senior Management Committee 14

Pillars

Brand Strategy 16 Innovation 22 Cost Leadership 26 Human Capital 30 National and International Development 34

Corporate Social Responsibility 38 Financial Review 42 Consolidated Financial Statements 52

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Derny and Araya on their way home with Brie L’Extra, drinkable iÖGO nanö and 2% in the basket. INTRODUCTION 2 Introduction 3 INTRODUCTION - and the environment. To deliver that deliver experi To and the environment. employees 8,800 Cooperative’s the ence, dairy make to pride every with day strive products that meet of the expectations consumers and the of those future. today’s

Model The Cooperative Cooperative The

all their savings joined forces and Agropur was born. 87 farmers and all their hopes. formed a cooperative a cooperative formed In 1938, in the midst in the midst In 1938,

in which they invested invested they which in of the Great Depression, better world. The 3,161 member dairy member farmers 3,161 The world. better owners are thewho are Cooperative’s offering consumerscommitted to unique a welfare animal about caring while experience, For 80 years, Agropur hasAgropur been building years, 80 For a 3 INTRODUCTION - and the environment. To deliver that deliver experi To and the environment. employees 8,800 Cooperative’s the ence, dairy make to pride every with day strive products that meet of the expectations consumers and the of those future. today’s

better world. The 3,161 member dairy member farmers 3,161 The world. better owners are thewho are Cooperative’s offering consumerscommitted to unique a welfare animal about caring while experience, For 80 years, Agropur hasAgropur been building years, 80 For a INTRODUCTION 2 Introduction model cooperative the of strength The their businesses.” their to develop tools best the to acquire farmers dairy enables which system, payment fair their to support democracy. When I buy Agropur products, it’s partly and performance quality, of aguarantee is process decision-making the in engaged are they that fact the Ithink and members, by its owned is Agropur “I’m happy to a business sustainable model. support other.” any like abusiness just we’re not but other, any as a business much as it, just “We’re put members our As life. associative its of dynamism the maintained and values core to its true stayed has Agropur years, recent in accelerated has growth its as Even proud. and high cooperation ambitious modern, of standard the bears Agropur questioned, being are models economic traditional when At a time

FONTABEL FARM WEEDON, QC

Better Dairy. Better World.

Agropur, one of North America’s largest dairy processing , is proud of its distinctive business model, one that lets it help share the wealth everywhere it operates. 5 INTRODUCTION 2 1 2 Maude starting her day day her starting Maude at the crack of dawn. In the freestallTailgate barn, can move around as she pleases.

During the past Agropur year, reaped initiatives focused on the welfare of communities. animals and fruits the of its efforts: was 2018 a banner year in termsof awards and distinctions. Forbes magazine American leading The ranked Agropur first in theagri-food industry on its list of ’s best The Cooperativeemployers. picked medals,up 10 including five gold, at the World Championship Contest,in Wisconsin, winning for best Camembert, best mozzarella, best mozzarella, best Camembert, best takes environmental, social and economic and social environmental, takes productmeans contributing the to local For customers and consumers alike, alike, consumers and customers For well extends experience Agropur the beyond the product: buying an Agropur That cooperative model,rooted in sharing the and democracy solidarity, of resources, has servedas powerful a empowerment dairy farmer for vehicle for 80 years. Two years ago,Two Agropur proudly annual distributes also Agropur economy and making a difference in the community. became the first major processor in Canada commit to displaying to the logo certification-of-origin cow blue Canadianfor 100% milk, the seal of quality Canadian milk, on all the dairy brands. own its under sold products Itremains the only national processor Created do Dairy by to so. Farmers of Canada, the logo certifies that all of the in used dairy ingredients and/or milk the product are sourcedin Canada. members its to dividends patronage and contributes the to vitality of rural In keeping valuescommunities. its with of mutual assistance,it allocates significant amounts its to donations and sponsorships program.asAnd, a Agropur business, responsible socially smoked provolone, best shredded shredded best provolone, smoked cheese and best feta in the world in a field of 3,400 products from countries. 26 Mercuriades prestigious Quebec’s At businessAgropur wonawards, in the Enterprise of the andYear Successful categories. Strategy Business INTRODUCTION 6 7 INTRODUCTION

1 2 3 4 Maxime and daughter Ariane. cleaning Maude the gestation area. With the robotic milking machine, the Ferme Fontabel’s new buildings on the right, with the old onesthe to left. cow decides when she wants be to milked. 3 4 We madeWe very significant investments in infrastructure, notably at Lake Norden, Southlaying Dakota, the groundwork for our next organic growth phase. As oneof the largest top 20 dairy processors inthe world and the one offering the most extensive line of dairy products leading a remain to intends Cooperative the Canada, in player that stands out virtue by of its values. Agropur,At we knowthat Better Dairy means a Better World.

2 ation, cost leadership, leadership, cost ­ation, development. humancapital, as well as national and international and investing for thelong term was evident. pressed We ahead with our business strategy, which revolves around innov strategy, brand our five pillars: This year more than the ever, importance of planning As these honours demonstrate,our transformative actions are earning recognition from our peers.

MESSAGE FROM THE PRESIDENT 8

René Moreau René Message from the President President the from Message 21 years, including five as vice-president as five 21 including years, past the for history rich this of part had the exceptional privilege of being Ihave Board, Agropur’s of amember As of our sustainability. them into the indis solidarity and profitability, weaving members have successfully combined Agropur years, 80 For success. our of remain life the cornerstonesassociative our cooperative rich our and model hand. in destiny Today, their to take tool apowerful created and forces joined founders our ago, years Eighty active role in Agropur’s transformation Agropur’s in role active this time, I have been able to play to play able been Ihave time, this During president. as two last the and ­sociableelements an an

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investments of the past 10 years, and 10 and past years, the of investments However, Canada. in markets our competitive particularly and prices whey and cheese by lower industry, entire the of those were as affected, negatively were front, earnings our financial the On all. to us are resilience and strength Cooperative’s our vital how again once showed year 2018 financial progress. The for a catalyst and interests shared our to promote instrument apowerful once at is Cooperative our to which extent the to see opportunities many had I have market recovery when it occurs. occurs. it when recovery market the of advantage to take position ideal an in us put year, have last the of our unprecedented capital expenditures

9 MESSAGE FROM THE PRESIDENT

pay tribute the to skills anddedication of our senior managers.particular, In I am very grateful Robert to Coallier, and I thank the 8,800 Agropur employees who pursue both the cooperative values excellence. operational and I am confident that we have established winning strategiesfor our Cooperative’s We future must development. continue growto andin develop investing by our facilities and systems,product in We haveWe amplydemonstrated the value and robustness of our cooperative model. areWe where we are today because those who came before us understood long ago that secure to our future and control our destiny,we had grow. to I am counting on colleagues my and the next generation continue to our work. After all these years of active involvement in the Cooperative,I have decidedto pass the torch and retire. As I take my leave of the Board and the president’s office, I would like thankto my fellow directors,past andpresent, and to René Moreau René President innovation, in cutting costs and promoting preserve for future generations. future for preserve which we can be proud and must our brands. brands. our In these uncertain times, being a member of Agropur is a tremendous privilege of

strongly but all needs of consumers, who consumers, of needs product packaging. We did We packaging. product our milk suppliers to follow best practices practices best follow to suppliers milk our with regard animal to In welfare. practical with members our provide we terms, training and support help to them meet the highest standards of care in the treatment of their“Better herds.Our signatureDairy. states Better World.” our reality, from one end of the supply chainPrograms the to other. such as on practices best promote proAction® the farmand, most importantly, they help position Canadian milk in the eyes of consumers as milk of the highest standard that is among the best inthe world. Given the current environment, animal and proAction® supporting welfare has never been more vital. areWe always privileged be to part of Agropur but never more so than in environment business challenging a such as the one we are facing now. areWe the owners of a world-class Cooperative. It serves as kind a of policy andstabilizes our incomes absorbingby most of the markets. world in fluctuation cyclical encourage not only our members our only not encourage so meet to the want be to able to identify and buy products. local In addition where to their food comes consumersfrom, want know to howit was produced, andparticularly how the animals are treated.Therefore, we logo on its the wiser. In 2016, wethe decided In wiser. 2016, offer to Canadian products made with 100% Canadian milk. Agropur became the first major dairy processor use to the Dairy certification-of-origin Canada of Farmers dairy policies andstrategies that will, among other things, help the entire value chainadjust sustainably the to new market of series therecent by created realities concessions.There is an urgent need for representatives of the entire dairy industry sit to down with government officials at the same table and redefine strategies and dairy policies Canada’s along those lines.Agropur intends to be player a key in any such discussions. In light of the current situation,some of our decisions of recent years appearall

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and is necessary, what Canada’s dairy Against this background,it is all the more surprising that thegovernment has grantedmultinational a US a licence importto into Canada,a duty-free, dairyproduct of which an equivalent other countries ofthe world,a dangerous Canada agreed Moreover, precedent. eliminateto which Class is needed 7, to a dairy processors Canadian ensure supply of milk ingredients at competitive prices,as well as manage to our structural surpluses of skim milk powder. is already available on the Canadian pendingmarket, the completion of its plantThis preferential in . treatment gives the multinational a significant advantage over the pro cessors that are already established in Canada,even though Agropur is making much more substantial invest ments—$153 million this year alone. keeps government the federal And yet repeating that it believes in supply must It it. defend will and management be said that there is a disconnect between words and deeds at the inconsistency The government. federal uncertainty considerable creating is and increasing the complexity of planning investments in our Canadian Mexico signed on November2018, 30, infrastructure. While financial compen financial While infrastructure. sation CUSMAlimits some of our dairy exports to Onthe trade Canada,thefront, US the Canada–United-States–Mexico In addition the to market access,the Agreement (CUSMA), which will replace replace will which (CUSMA), Agreement the agreement, the Under NAFTA. Canadian government has sacrificed a system supply-management our of piece for the third time in just a few years. agreement trade Canada-EU the After the Partnership,Trans-Pacific and the Canadiandairy industry has been used as a bargaining chip in yet another round of international trade negotiations.On all concessions Canada’s occasions, three were described as minor, but once all the treatieshave come into effect, those concessions will of the10% add up to CanadianThat is milk market. that will not be processed at our plants. industry needs is more consistent

MESSAGE FROM THE CEO 10

Robert Coallier Robert Message from the CEO CEO the from Message industrial products, grew our share share our grew products, industrial and ingredients for market US the in footprint our expanded progress, our continued we Nevertheless, exception. no was Agropur operating income for processors. lower and margins to narrower led has cycle economic industry’s the in phase this world, the in Everywhere States. United the in price block cheese the in adrop and prices whey world in decrease a significant 2018: in landscape industry dairy the dominated Two developments related cheese and fresh products segments. segments. products fresh and cheese the in growth our and Foods Ultima of inclusion the part in reflecting 11.7%, up were sales Our Canadian exchange rates. 2018, fiscal in constant 5.5%year at or 4.7% over year increased sales Our increased our operating efficiency. and market consumer Canadian the of whey prices. whey especially and prices block cheese in 2.4%, decrease by only the despite expressed States, sales, our United the In in US US in down were dollars, 11 MESSAGE FROM THE CEO the e PROTEIN ÖGO Robert Coallier CEO innovation is more important than ever Agropur’s to front this on successes major scored We sustainability. Canadian in consumers 2018. ranked i Product of the and portion Year OKA L’Artisan packs the Best New Product. launchedWe Inno Accel,North America’s first dairy business Inno program, Agropur Inno the of offshoot An accelerator. Accel matches Agropur’s knowledge and know-how with the dynamism of high-potential start-ups. The first cohort of five start-upsfrom Canada and the US has graduated from Inno Accel. These young businesses are reinventing dairy with us in a brand-new co-working space at our head office. I cannot leave unmentioned thefact that Agropur won two Mercure awards in for Successful 2018, Business Strategy and Enterprise of the in the Year large business category. The coveted Quebec business awards are recognition of the invaluable andunstinting work of everyone at Agropur. I thank the members of the Board and particularly our members: Agropur all thank I And Moreau. René president, their support and solidarity are the basis of the Cooperative’s sustainability. and success In conclusion, I would like salute to the entire management team andall Agropur employees for their outstanding work. Day after they day, translate our strategy into reality and into successes on the ground. On the other hand, in Canada, wasEBITDA stable year On both sidesour of cost-reduction the border, program The decrease in our was EBITDA essentially due lower to Between andwe invested 2018, 2014 billion $1.3 in our facilities,of it56% inAfterCanada. years 80 of existence, In the US, we are pressing ahead with the expansion of our cheese plant in LakeSouth Norden,which Dakota, will triple its capacity. It is the largest capital investment project in Agropur’s history.The plant will be commissioned in phases in the second quarter of 2019. Duringwe signedthe year, or renewed major contracts with a number of customers. Our vast national network enabled us land to these contracts and increase ourmarket share from coast coast, to which should make a positive contribution to our results in 2019. There are other developments specific Agropur to that should help boost our salesand our earningsOur in 2019. market share continues grow to on both sides of the border. Our progress is being driven innovativeby and effective marketing and, most importantly,the intrinsic quality of our products.This as inyear, years past, the excellence of our products won wide recognition. the At World Championship Cheeseour Camembert Contest, L’Extra was named the made-in-USA our of Camembert four and Best world’s took top honours.InQuebec, we won a Caseus award for our OKA L’Artisan. Projectsin progress We remain We confident that themoves we have made in recent years will accelerate our growth going forward. 3. hasbeen very successful.Three years ago, we set a $100-million target for annual costsavings the by end million,of which million are $28.9 We at 2018. of $117.9 was realized now We’re targeting in 2018. an additional $50 million in annual savings as of 2019. 2. over year even though the aggressive competition continued exerting pressure on dairyThe prices. addition of Ultima Foods and the full-year contributionfrom Scotsburn’s activities werepositive factors, as were the growth in our market share and theshift in our salestowards a higher mix. product value-added 1. cheese and whey prices, which had a $109-million negative impact on theoperations. ofour EBITDA US Ourearnings can picture be in threesummed points: up BOARD OF DIRECTORS 12 Directors of Board Mauricie–Portneuf 2003 Mauricie–Portneuf Vice-President Massicotte Roger Nicolet–Bois-Francs 1998 President René Moreau Atlantic 2013 Vice-President Dyk Jeannie van Montérégie 2017 Boisvert Michel Laurentides–Lanaudière 2014 Forget Alain 4 3 2 5 1

by universal suffrage 2011 suffrage by universal elected and Presented Jean-Pierre Lacombe Érable–Seigneuries 2015 Cressier Claude Céline Delhaes Chaudière-Appalaches 2001 Executive the of Member Second Couture Michel 2012Estrie–Granby Executive the of Member Third Lieutenant Valère 2007 Salaberry–Richelieu Executive the of Member First 10 6 9 8 7

Eastern Quebec 2014 Roger Beaulieu 2015 suffrage by universal elected and Presented Benoit Stéphanie 2014 Board the of Guest member Jim Walker 2013 Board the of Guest member Ralph Ballam 2015 Board the of Guest member Blanchet Suzanne 13 14 12 15 11

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/ 9 SENIOR MANAGEMENT COMMITTEE 14 Committee Management Senior Cooperation and Governance Vice-President, Veilleux Marie- Human Capital Vice-President, Senior CorriveauPierre 2 1

1 and Chief Financial Officer Vice-President Senior Émile Cordeau and Corporate Secretary Legal Affairs, Member Relations Vice-President, Senior Outgoing Bédard Lorraine 4 3

2 Officer Executive Chief Robert Coallier and Communications and Affairs Institutional Vice-President, Senior Dominique Benoit 6 5 4 /

5 6 3 15 SENIOR MANAGEMENT COMMITTEE 9 13

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/ 11 12 13 Christine Forget Vice-President, Sourcing Strategic Global Michael Aucoin President, Operations Canada Simon Doug President, Operations US 11 8

/ 7 9 10 Benoît Zolnaï Benoît Senior Vice-President, Quality and Excellence Operational Serge Fortier Senior Vice-President, Technology Information

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7 8 Simon Olivier Senior Vice-President, Innovation and Strategy Senior Vice-President and Ice Manager, General Nicolas Marie

PILLAR BRAND STRATEGY 16 Brand Strategy 17 PILLAR BRAND STRATEGY with consumers. In the US, we continued continued we consumers. In with the US, the branddeveloping Agropur and completed operations,the integration of Davisco’s acquired in 2014. which we

we performedwe well and our brands strong our relationship close by boosted were Our brands continued to grow, picking up picking Our grow, brands to continued In Canada, share duringmarket the year. PILLAR BRAND STRATEGY 18 19 PILLAR BRAND STRATEGY Created in Brother by 1893 Alphonse OKAJuin, is an iconic Canadian cheese this itsteeped is still day, To in history. made according the to original recipe. tookWe the opportunity conduct to a bold campaign,and we were active on social media, posting anecdotes and authentic photos past. fromOKA’s The campaign shared the love story between OKA cheese and its devotees, andshowed that OKA is much more thana cheese: it is a storehouse memories! of The anniversary was also marked by the launch cheese of OKA L’Artisan portion packs, which won the 2018 Best New Product Award in its As well, category. OKA distinguished itself the prestigious at Sélection Caseus awards for fine cheese in 2018, wherewon first OKA L’Artisan prize in category. its remains OKA cheese surprisingly, Not consumers’ Canadian of one cheeses. favourite In the spring cheesebar.ca, of 2018, a new Web platform featuring Agropur’s entire selection of fine cheeses,as well as recipes, tips and detailed descriptions, With its newwent cheese live. site, Agropur is taking the lead in developing a fine cheese culture. 125 years of OKA years 125 of history eldest the cheese, OKA Legendary member of the Agropurcele- family, bratedits 125th birthday this year. accompanied were celebrations The a Canada-wideby mediacampaign. After the success of its first campaign revolving around the theme of pride Agropur conductedin 2017, a second campaign featuring new a ad high- buying of advantages the lighting Canadian products,which ran from Thecoast campaign coast to in 2018. awareness brand Agropur increased intentions. buying consumer and Marketleader Natrel innovates Natrel held its status as the Canadian lactose-free fine-filtered, the in leader categories. organic and Natrel continued differentiating itself expandingby its product line in 2018. The addition of new offerings such as lactose-free cheese, cottage whipped cheese and lactose-free ice cream position. leading its strengthened Natrel’s the segment, in lactose-free Also lactose-free chocolate milk earned a ConvenienceNACDA InnovationAward in“Better thecategory. Beverage” for You Strong brands brands Strong that appeal to consumers 1 Stephen’s son with iÖGOnanö in hand,all set for daycare! PILLAR BRAND STRATEGY 20 of new products in 2018: in i products new of i innovation, for drive constant its of part As the of Year the “Dairy” in category. 2018 voted Product was and Canada in yogurt Greek fastest-growing segment. I segment. favourite brand of millennials in its the become year, has the during IÖGO, which celebrated its sixth birthday of millennials I ÖGO , the preferred brand Canadian consumers’ consumers’ Canadian ÖGO favourite cheeses. ÖGO PROTEIN OKA, one of one OKA, introduced a string e ÖGO was the the was nanö’s nanö’s

100% natural yogurt. 100% natural centres on healthy, superior-quality, Western Canada. Its brand promise in yogurt Greek fastest-growing the has also Olympic segment. yogurt organic the in leader national the as out to stand continued brand Olympic The rapid growth registers Olympic all delighted young consumers. packs portion cheese and sugar refined smoothies, with yogurt no added

a promoter of the biPro line’s benefits. benefits. line’s biPro the of a promoter also endorsed the brand and became MacDonald Rory artist martial Mixed Team. National the of sponsor protein official the Team (USABS), becoming Skeleton and Bobsled States United the with a partnership formed BiPro water. protein caffeinated first the of introduction the as such moves with development its continued biPro States, United the In BiPro expands

2 1 21 PILLAR BRAND STRATEGY 1 2 3 Wine and cheese with friends on the deck,always a treat when the cheese Cheddar. Grand Agropur is celebrated cheese OKA legendary The its 125th birthday this year. Skateboarders burn up a lot of energy! Derny and Charles always pack biPro protein water to quench their thirst and restore their strength. 3 - Cooperative’s profile with American American with profile Cooperative’s thiscustomers. end,To the Agropur packaging the to added been has logo internationally. sold ingredients all of recent Cooperative’s the Following acquisitions, the research and develop ment teams have been consolidated development the spearheading are and of new products.

Agropur strengthens While Agropur’s brands already have a Canada, in reputation established firmly its marketing teams are raising the its presence in the US in the presence its The biPro brand, already well known known well already brand, biPro The in the US, isin now the available US, in Canada, where it issupported athletes by Mikaël Kingsbury and BenoîtHuot, brand’s The ambassadors. Canadian its Amazon, on increasing is popularity a new platform for Agropur. PILLAR INNOVATION 22 Innovation 23 PILLAR INNOVATION internal and external platform dedicated to to dedicated platform and external internal consumers offer to dairy order in reinventing Through Inno we Agropur new experiences. a unique ecosystem. created have

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Innovation dairy products. Inno anAgropur, therefore createdtherefore Innovation is key innovation process process innovation to Agropur’s future. designed to reinvent The Cooperative has Cooperative The Innovation is a core element of Agropur’s element Agropur’s core a of is Innovation com In an increasingly business strategy. petitive market, innovation is a necessity a necessity is innovation market, petitive survive and to thrive. the Cooperative for an launched we Inno Agropur, In2016, 23 PILLAR INNOVATION internal and external platform dedicated to to dedicated platform and external internal consumers offer to dairy order in reinventing Through Inno we Agropur new experiences. a unique ecosystem. created have

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Innovation is a core element of Agropur’s element Agropur’s core a of is Innovation com In an increasingly business strategy. petitive market, innovation is a necessity a necessity is innovation market, petitive survive and to thrive. the Cooperative for an launched we Inno Agropur, In2016, PILLAR INNOVATION 22 Innovation the world the are changing that Ideas we consume and renew the dairy industry.” dairy the renew and consume we products dairy the to reimagine possible it make will that solutions original to find crowdsourcing using of idea the Ilike itself. reinventing and offering its of quality the enhancing in succeeded “Agropur has platform. the out rounds fund, a co-investment Capital, Inno dairy. reinventing is Agropur which with start-ups promising the for accelerator an is Accel, Inno addition, latest The products. new of testing market up speeds that process a development Boutique, Inno and showcased, are trends latest the where selected prototyped concepts compete and and externally (Inno Challenge), as well as Inno Expo, anisms for generating ideas internally (Inno Fabrik) mech include components Its Agropur. at innovation drives that platform integrated the is Agropur Inno

- PILLAR INNOVATION 24 25 PILLAR INNOVATION

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products or products North American is invest to in innovative companies thatoffer dairy du QuébecIts objective basis. on a 50/50 AI SCALE we process, innovation our Alongside leadership Canada’s bolstering and artificialin intelligence. Inno Capital Inno Inno Capital,a logical extension of Inno Agropur, stepped up its activities The $40-million in 2018. joint invest the of member founding a became Supercluster, Chains Supply AI-Powered The -based AI. SCALE innova tion superclusterannounced initiative, in February is dedicated 2018, building to platform chain supply global new a ment platform is funded Agropur by placement et dépôt de Caisse the and dairy-related technologies. technologies. dairy-related

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a successful successful a

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along with some some with along

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Agropur’s resources resources Agropur’s extensive access the to creativity. In thesecreativity. ways, ­potential start-ups in order twenty coaches who support them in an entrepreneur and a member of Agropur Agropur of member a and entrepreneur management senior with high- with to quicklyto bring the most exciting innovations market. to world andthe agri-foodTheindustry. first cohort also gets a hand from OSMO Foundation, FoodBytes! by RaboBank pillars l’innovation, de Quartier the and ecosystem. entrepreneurial the of In addition, theselected participantsIn addition, haveenjoyed Cooperative’s research and development matches Accel Inno InnoAccel Inno Accel is a four-month program that offers start-ups customized members The support. and guidance of the first cohort were announced in October Each company 2018. has been mentors two assigned environment that simulates the business teamand pilot plant.A co-working space has been created promote to collab oration and

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the expectations of our customers andconsumers. customers our of expectations the Today, Inno Agropur is the largest open innovation innovation open largest the is Agropur Inno Today,

initiative in the North American dairy industry. Our goal Our goal American dairy North in the industry. initiative is to solidify our status as an industry leader by exceeding exceeding by as status an our solidify to industry leader is 1 Entrepreneur Stefano Amelio of of Amelio Stefano Entrepreneur Sweetaly points out the merits of his artisanal desserts based on traditional Italian recipes at the Inno Accel launch. a springboard for innovation.It was born of a desire reinvent to dairy through thinkers Innovative collaboration. open challenged are world the around from submitto new dairy-related products, oppor consumption and packaging platform innoagropur.com The tunities. launched in fall serves 2018 as a meeting place wherecreative thinkers and start-ups can team upwith Agropur. In thea large winter of number 2018, of start-ups entered the second edition promising 11 and Challenge Inno of young businesses fromCanada, the US andEurope were selected pitch to their innovations at Agropur’s head office in a “Dragons’ Den” format, in the spring. They showcased their products and offered tastings a jury to composed of Agropur executives and partners. Five outside-the-box concepts passed the test and the selected teams moved on Inno to Accel, the first dairy business America. North in accelerator Inno Challenge was created in 2016 as as 2016 in created was Challenge Inno InnoChallenge PILLAR COST LEADERSHIP 26 Cost LeadershipCost 27 PILLAR COST LEADERSHIP deploy a common IT platform and improve platforma common deploy and IT improve These changes equipour us plant operations. in the marketplace newrealities respondto to our customersand and provide consumers deserve.with the service they

Agropur has Agropur comprehensive a developed synergies, maximize itsreduce costs, to strategy and dramatically increase its agility. To carry To and dramatically its agility. increase the necessarytaken have we outthis strategy, our management processes, optimize to steps PILLAR COST LEADERSHIP 28 Reducing costs Reducing sharing and better cost management. improvedsupporting information database, asingle and ized processes harmon Agropur give will platform the Among other things, implementation of way. under is Canada in sites Agropur completed and deployment at many Fresh Products operations, has been some at payments to depositing taking order- from processes covered which 2, phase of rollout The IT platform. asingle on processes operational its of majority vast the to manage system (ERP) Planning Resource Enterprise an In 2013, Agropur began implementing processes Optimizing management customers. its for choice of partner abusiness Agropur to make departments business practices will enable these best and synergies ments. Capturing service, and operations planning depart for the logistics, distribution, customer appointed to this position is responsible 2018. person summer The Chain, in Supply position, a new Vice-President, created Agropur effectively, more Canada in chain supply entire its To manage annually. structure cost our from $50 million additional an to cut year, plan we fiscal next the in Starting efforts. our however, to relax plans, no 2013. We since have $200 million than by more costs its reduced has nization orga the margin. total, In by awide it exceeded but objective this achieved years, only not three have we After target. cost-reduction year, $100 million costs. 2016,to reduce In athree- set we efforts its continued has ciency, Agropur effi of importance the of aware Ever ripening room. 110 in days, the least at aged cheese, ash-ripened 75 Agropur 1

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Three-year target In millions of dollars THREE operational-excellence system. organization’s the as program Evolution System, which will gradually replacethe Operating Agropur the of introduction the with practices in-plant its of all to review 2018, decided fall In Agropur Quebec. Saint-Hyacinthe, in plant the at the packaging and boxing operations efficiency of many operations, such as the improved also has automation Plant exponentially agility Increasing - YEAR COST YEAR 2016 2018 2017

- 48M 29M 41M REDUCTION TARGETREDUCTION

in the plant. the in employee every of empowerment the promote also will time, and real in decision-making and problem-solving with knowledge and tools to facilitate operations will help provide employees This integrated system for managing tasks. their enriching and workplace the of ownership to take employees enabling further, even go us let will Agropur Operating System demands new the that approach dynamic indicators. The quality its improve and costs its reduce its productivity, to increase Agropur enabled program 2014From Evolution to 2018, the 100M 118M

29 PILLAR COST LEADERSHIP PILLAR HUMAN CAPITAL 30 Human Capital Human 31 PILLAR HUMAN CAPITAL

the Cooperative. achieving a common goal: manufacturing common a achieving goal: dairytop-quality products and building

Agropur’s 8,800 employees play a primary play employees 8,800 Agropur’s objectives. in pursuingrole the organization’s andOur united committed are to employees PILLAR HUMAN CAPITAL 32 Our employeesOur recruitment the and Canada in campaign . SeptemberIn 2018, Agropur launched afar-reaching young people into Agropur workplaces. internship program that brings talented arobust have we and States, United the in Agropur with careers for graduates Leaders program prepares recent on succession management. Our Future emphasis astrong places also Agropur leadership skills. team and communication solving, problem- organizational, their develop Canada and the US, helps managers in introduced being is program, which The LeadR team management training talent. best our of retention increased has and responsibility more with participants to entrust possible it made has VisionR Agropur, at implemented was it amentor. of Since support the access to a leadershipprogram and The campaign highlights the benefits benefits the highlights campaign The who serve as Agropur’s ambassadors. employees, our around revolving and brand employer anew on based States the United and Canada in campaign recruitment afar-reaching launched we best candidates. In September 2018, the to attract methods innovative to use us forcing are shortage labour the and The increasingly competitive market Recruiting the best talent objectives development professional their achieve employees high-potential helps program VisionR The generation next the grooming and development Skills the arrival of new generations of employees who demand specific recruitment, training and job enrichment measures. measures. enrichment job and training recruitment, specific demand who employees of generations new of arrival the by wrought changes the reflect and market labour to abustling tailored are practices management capital human Our by giving them them by giving

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employees to translate the the Cooperative’s to translate employees enables it places, meeting informal and formal 80 its With environment. work outstandingly healthy and stimulating head office building provides an LEED silver-certified new Agropur’s while standardized, and improved been has environment plant the addition, In work. employees’ enrich helps injury. of approach risks This higher pose and repetitive are that tasks mated auto has year, Agropur past the Over environment working and Enriching employees’ jobs spring 2018 with the creation of the the of creation the 2018 with spring management was also reached in our approach to capital/payroll human of revamp the in milestone A major human capital/payroll. to managing approach a new introduces and platform one on together tools brings capital human management that Kronos) and IT (Workday system state-of-the-art anew implementing continued year, past Agropur the Over livesdaily easier employees’Making into reality on a daily basis. basis. adaily on reality into integrity, excellence and collaboration— communication,values—boldness, five internally and externally. 2019, in continue will It themselves. employees by the articulated proudly and defined as Agropur, at working of

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alignment with corporate objectives. corporate with alignment know-how more effectively and maintains and effectively more know-how ment structure leverages each team’s Canada Operations. The new manage at yogurt) and products fresh cheese, fine cheese, cream, (ice leadership Agropur also introduced category structure governance New work. the do who people the of eyes the in important most are that opportunities improvement the prioritize and to target serves which tee, commit safety and health occupational ajoint sites, have we our of At each safety and Health human capital or payroll. or capital human about questions or requests with help need who employees for contact of point asingle Centre, Service Employee

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33 PILLAR HUMAN CAPITAL 2 3 1

1 2 3 At Head Office: Michelle Demers Demers Michelle Office: Head At and Lavigne Tommy discuss the merits of Natrel naturally lactose-free medium white cheddar and Natrel lactose-free 2% milk. Alexandra Demers at Head Office, Office, Head at Demers Alexandra Luc Chartrand on the job atthe Oka plant. perusing a document. a perusing PILLAR NATIONAL AND INTERNATIONAL DEVELOPMENT 34 International Development International and National 35 PILLAR NATIONAL AND INTERNATIONAL DEVELOPMENT has picked up the pace of its up of the investments, pace has picked but has Agropur been a leader in this regard million $733 capitalwith totalling expenditures millionin Canada in the States. United and $565

80 years 80 to realize it. realize to

“The Cooperative “The Cooperative

knows no borders,” said the founders of ambitious dream lives dream lives ambitious

who continue working working continue who on today, thanks to the thanks the to today, on

Agropur. Their modern, members and employees Complex market conditions, changing changing conditions, market Complex consumer habits and the shifting social and demographic landscape prompted have development. its accelerate to Agropur industrythe entire Over the years, past five National and International Development 35 PILLAR NATIONAL AND INTERNATIONAL DEVELOPMENT has picked up the pace of its up of the investments, pace has picked but has Agropur been a leader in this regard million $733 capitalwith totalling expenditures millionin Canada in the States. United and $565

Complex market conditions, changing changing conditions, market Complex consumer habits and the shifting social and demographic landscape prompted have development. its accelerate to Agropur industrythe entire Over the years, past five National and International Development PILLAR NATIONAL AND INTERNATIONAL DEVELOPMENT 34 International Development International and National the more we can help build a better world.” a better build help can we more the values, these share who are there us of more The world. equitable more a fairer, to build helping is it acooperative, as because Agropur “I choose standards. quality highest the maintaining while of pride years 80 its lineup of yogurt, ice cream, cheese and milk brands milk and cheese cream, ice yogurt, of lineup its offerings by expanding its wide range of products and its diversifying been has Agropur years, 80 For alike. customers and by consumers valued promise aquality make that products with out stands Agropur marketplace, competitive ahighly in Operating growth. on understood that its long-term survival would depend processing cooperatives, it is because its founders dairy largest world’s the of one now is Agropur If model. cooperative its of strength and value the Over the decades, Agropur has clearly demonstrated

CORPORATE SOCIAL RESPONSIBILITY 38 Responsibility Corporate Social 39 CORPORATE SOCIAL RESPONSIBILITY - facturing process, the product’s impact, and facturing the product’s process, impact, want They it. with associated the experience be held account. businesses to to concerned aboutconcerned the production and manu

Environment Environment Animal Welfare and and Welfare Animal

from well-treated responsible manner animals all at times. dairy products made dairy made products using top-grade milk top-grade using in an environmentally

Agropur is committed to offering high-quality At Agropur, we always strive to manufacture to strive always we Agropur, At dairy with products that consistent is in a way the values our of customers and consumers. Consumers demanding more are when it especially are accountability: they to comes 39 CORPORATE SOCIAL RESPONSIBILITY - facturing process, the product’s impact, and facturing the product’s process, impact, want They it. with associated the experience be held account. businesses to to concerned aboutconcerned the production and manu

At Agropur, we always strive to manufacture to strive always we Agropur, At dairy with products that consistent is in a way the values our of customers and consumers. Consumers demanding more are when it especially are accountability: they to comes CORPORATE SOCIAL RESPONSIBILITY 38 Responsibility Corporate responsibleA I am convinced that it’s a cause-and-effect relationship: acause-and-effect it’s that convinced I am hand. in hand go quality product and “Animal welfare World.” Better Dairy. “Better vision: its to achieve does it everything describes that Report Responsibility Social Corporate afull published year, Agropur This reused. are materials waste its that ensure emissions, manage its water consumption and gas greenhouse its to reduce steps including initiatives, of aseries taking is and practices best applies Agropur environment, the regards As members. to its it promotes and Welfare Animal on aStatement produced has Cooperative the receives. why is That animal every attention viable depends industry dairy on the care and Agropur and its members know that a prosperous, members. our are who farmers dairy the of value a fundamental been always has animals for Respect a well-treated cow gives high-quality milk.” high-quality gives cow a well-treated

CORPORATE SOCIAL RESPONSIBILITY 40 the members who provide the the provide who members the Agropur Club of Excellence recognizes the farm, the on directly standards production highest the To maintain performance monitoring. effective and ingredients) and traceability (including packaging access to information, enhanced quality management through improved supplier optimized 2018, In further we business. do we which with companies to the to excellence commitment own our extend thus and suppliers 565 our from buy we that products and ents packaging,compon ingredients, dairy the of conformity and the traceability supplier-quality program to ensure 2017,In acomprehensive launched we standards. compliance and safety food highest the meet that products quality offer will we that is consumers and customers to our promise Our Products trends.industry based on best practices and agri-food responsibility encompasses five areas, social to corporate approach Agropur’s

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witness to our social, witness build a better world. better a build full social corporate social full report, which bears bears report, which published its first first its published initiatives to help help to initiatives In 2018, Agropur Agropur 2018, In Agropur’s main environmental environmental commitments. economic and and economic responsibility It describes

to the Cooperative’s democratic life. democratic Cooperative’s to the 17 people introduced young Program of the Young Cooperative Leaders edition 11th The requirements. program’s proAction® the meet and goals their achieve members to help ready now are they and welfare, animal in expertise extensive acquired have Advisors storage. Since 2018, the Cooperative production process, from milking to milk the of stage every at members assists Advisors Cooperative of A team members. its for network support important an also is Cooperative The the management team. and discuss Agropur’s priorities with ideas to exchange opportunity an with life. Those gatherings provide members associative our nourished sessions training and courses meetings, 95 than more 2018, In 3,161 by its members. sustained is life democratic Cooperative’s Our Members row. a in year second the for award top the received Quebec, Saint-Moïse, in Inc. farm Holstein dairy Jolipré milk. year, best-quality the This

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41 CORPORATE SOCIAL RESPONSIBILITY

2 in North America.Agropur was also part ofAcademos’ Coalition for Agropur provides financial assistance assistance financial provides Agropur theto BreakfasttheClub, Canadian foundations university and college Retention. Student Last but not least, Agropur funds students outstanding for scholarships sciences food and agricultural in enrolled colleges American North at programs and universities. Red Cross, the Quebec Make-A-Wish Foundation, Fondation Institut OLO, Pacifique,the Moisson network of foodand banks, many hospital,

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Community By virtueof its cooperative nature, Agropur hasclose ties the to com munities in whichThrough it operates. ourmember farmers and ourplants, our activities strengthenthe and social economic fabric of communities across NorthAmerica. In fiscal more 2018, than $65.2 million was distributed in the supporting dividends, patronage communities where our members live. that support organizations also We work for the common In good. 2018, we provided more than million$1.5 sponsorships. and donations in 2016 and 2017. areWe also making efforts with respect of optimization consumption, water to our and management waste packaging, consumption. energy buildings’ about ourDuring initiatives.the year, greenhouse our tracking continued we processing from emissions, gas plant transport to Our carbon truck. inventory, prepared a third by party, showed a 1.3% reduction in our between milk of litre per emissions

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1 2 to reduceto the environmental impact of our activities and we are transparent Environment efforts wide-ranging making are We On the health and safety front, In the vast majority of jurisdictions where we operate, ourcom workers’ in Canada andwork the day US by daygrow to the business. Ourorgan izational structure and human resource support must practices management our haveWe ambitions.therefore embarked on a majoreffort improve to and agile more become practices, our synergies. internal capture implementation of a prevention program based on safe behaviours continued. Each plant has developed action plans and tools promote to to approach tolerance zero a industrial accidents. the than lower are premiums pensation industry average, an indication of our forward stance on health and safety. Agropur’s team of 8,800 employees HumanCapital Urban joggers admire the light. early-morning Derny quenches his thirst with biPro protein water.

Agropur Communications Exergue

Cooperative HEAD OFFICE AND OPERATIONS CANADA 4600 Armand-Frappier Street J3Z 1G5 Saint-Hubert, QC Canada Tel.: 450-878-2333 1-844-878-2333 free: Toll OPERATIONS US Drive Destination 3500 East WI 54915 Appleton, USA 920-944-0990 Tel.: agropur.com Graphic Lee design:Sid Graphic production: M&H Lee StudioProduction: Sid GaëllePhotographer: Leroyer Writing: and Larouche Consultant Analogos Translation: Printed in Canada