Cheese in America Global Dairy Congress Warsaw 2018 - Jay Waldvogel • U.S

Cheese in America Global Dairy Congress Warsaw 2018 - Jay Waldvogel • U.S. Market Overview

• Key Trends

• DFA Activities

2 Both Domestic Use and Export Have Contributed to Long Term Growth Commercial exports have grown in importance to total commercial sales of cheeses

Domestic Use Export

14,000 60% 12,000

10,000 2%

8,000 10+% 6,000

4,000 6%

2,000 25% 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

1 Commercial Sales = Domestic Use + Commercial Export Source: USDA ERS; USDA commercial disappearance; includes civilian and military purchases of milk and dairy products for domestic and foreign use, but excludes farm household use and USDA donations of dairy products 3 U.S. Per Capita Cheese Consumption Continues to Grow

Per Capital Cheese Consumption annual pounds per person 40 36.3 35 32.2

30 27.1 25 23.1

20 15.5 15

1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1994 1995 1996 1997 2001 2002 2005 2006 2007 2010 2012 2013 2014 2015 2016

1992 1993 1998 1999 2000 2003 2004 2008 2009 2011

Source: USDA ERS; Per capita “available” for consumption is calculated by dividing domestic disappearance by the U.S. resident population plus armed forces overseas. It is a proxy for actual consumption as it does not account for product waste and thus, tends to overstate actual consumption. 4 The Foodservice Channel is Growing as the Heaviest User of Cheese Since 2012, foodservice has gained share of cheese usage, mostly at the expense of retail

2016 Volume Share by Channel

- 1 percentage point share Food vs. 2012 Processing 24% Foodservice 43% +4 percentage point share vs. 2012 Retail - 3 percentage point share 33% vs. 2012

Total volume = 12.4 billion pounds

Sources: IRI Custom WMMB Database (MULO+C); WMMB Foodservice Cheese Tracker, 2017; 5 WMMB Cheese In Food Processing Study, 2017 Natural Cheese Continues Growth, Processed Cheese Shows Losses

Retail Volume Trend

NATURAL CHEESE PROCESSED CHEESE

2014 2015 2016 2017 Latest 52 WKs Ending 04-22-18

4.3% 4.0%

1.6% 0.8% 0.9%

-4.2% -4.8% -4.6% -5.4% -6.6%

Source: IRI Market Advantage, DMI Custom Cheese Database; Total US Multi Outlet + Convenience 6 TOTAL CHEESE CATEGORY [$ Billions]

Loaf Cheese 0.1 Imitation Cheese Deli Cheese 0.5 2.0

Processed Cheese 2.0 11.0 Natural Cheese No Loaf 14.8

Imitation/ TOTAL Natural Processed Deli Loaf Non dairy $ Change [%] 0.3 1.0 -5.7 1.2 1.5 4.0 Cheddar Remains the Top Selling Cheese Variety While Other Cheese Blends, Cream Cheese and String Cheese Have Contributed the Largest Volume Growth in the Latest 52 Wks

Latest 52 Week Vol. Share Vol. Chg vs. PY CHEDDAR 22.2% 255,999 CREAM CHEESE 10.6% 7,505,327 MOZZARELLA 8.7% 1,583,097 COLBY/JACK BLENDS 6.0% 3,414,286

OTHER CHEESE BLENDS 6.4% 7,986,561

STRING MOZZARELLA 4.6% 5,142,760

MONTEREY JACK 3.4% -1,698,698

PARMESAN 2.8% 1,178,234

RICOTTA 2.5% -907,988

SWISS 2.1% -3,101,354

CHEDDAR/JACK BLENDS 1.8% 1,895,748 QUESO FRESCO 1.5% 2,792,513 PROVOLONE 1.4% 248,893 ITALIAN BLENDS 1.3% 1,420,380 FRESH MOZZARELLA 1.2% 1,871,288

Source: IRI Market Advantage, DMI Custom Cheese Database; Total US Multi Outlet + Convenience 8 Almost All U.S. Households Purchase at Least Some Cheese During the Year

PENETRATION 97.9% Households Buy Cheese

VOLUME INDEX* BY GENERATION

Millennial: HH born 1976+ 112

Gen X: HH born 1965-76 115

Yngr Boomer: HH born 1956-64 100

Older Boomer: HH born 1946-55 87

Retiree: HH born 1936-45 73

Senior: HH born b4 1936 57

Source: IRI Consumer & Shopper Insights Advantage Database, 52 WE July 9, 2017

9 MILLENNIALS ARE CHANGING THE LANDSCAPE OF FOOD CONSUMPTION

FRESH, Whole, NATURAL Don’t want to Use SMARTPHONE and LOCAL foods. compromise on and SOCIAL MEDIA to LOCAL is super relevant CONVENIENCE… inform purchase decisions

Buy more ORGANIC LOVE snacking PRODUCTS vs. other generations

Want VARIETY Made DAIRY and diverse ALTERNATIVE FLAVORS products popular Top 20 Growing Cheese Varieties

Latest 52 Wks. Ending 04-22-2018 Retail Volume % Change vs PY MEXICAN 6,079,536 304.1% MENONITA 71,723 47.0% BUTTERKASE 129,939 31.7% GOUDA 16,835,915 30.9% MANCHEGO 594,793 27.2% OAXACA 2,069,974 25.6% JARLSBERG 1,048,462 23.3% Over half of top 20 growing QUESO DE FREIR 2,717,611 23.0% COTIJA 5,142,405 21.0% cheese varieties PANELA 4,424,593 18.9% are Hispanic/Hispanic style FONTINA 1,268,267 16.8% cheeses QUESO QUESADILLA 6,540,368 15.2% QUESO BLANCO 3,893,166 14.1% HAVARTI 13,290,659 12.3% GOURNAY 3,738,953 11.3% QUARK 627,478 11.0% CHESHIRE 3,395 10.9% ASADERO 880,695 9.5% BABY SWISS 13,636,157 7.2% QUESO QUESADLA 2,093,094 6.8%

11 Source: IRI Market Advantage, DMI Custom Cheese Database; Total US Multi Outlet + Convenience VOLUME versus VALUE THE RETAIL LANDSCAPE IS ALSO CHANGING AS KEY RETAILERS CONTINUE TO DRIVE DIFFERENTIATION AND GROW SHARE BY BUILDING THEIR OWN BRANDS THE DAIRY AND REFRIGERATED CASE IS THE SWEET SPOT WHERE “FRESH” AND “CONVENIENCE” MEET

REFRIGERATED PLANT-BASED “DAIRY” GUACAMOLE DIPS

REFRIGERATED SNACKING BUNDLES HUMMUS SPREADS

NO LONGER COMPETING WITH JUST OTHER DAIRY PRODUCTS! Key Retail Takeaways

▪ Consumers continue to be heavily engaged with cheese ▪ Consumer trends and preferences driving growth include: o Convenience or Snacking

Hillshire Snacking Small plates meat and Sargento Sweet Trader Giottos cheese pairing Balanced Breaks Oven Baked Monterey Jack Cheese Bites Natural Cheese, Dried Cranberries, Milk Chocolate, Graham Crackers

o Home Cooking, Taste & Culinary Exploration o Natural/Clean label Cheese on Restaurant Menus Cheese Category Insights

16 Key Restaurant Takeaways

▪ Key Themes are: ▪ Veggie Forward ▪ Blurring of AM and PM meals ▪ Globalization ▪ Authenticity = Regionality ▪ Optimizing Off Premise ▪ Portable and Snackable ▪ Balance Familiarity with Novelty

17 While Some Cheeses are Maturing at Foodservice, Many New Varieties are Emerging

Cheese Flavor Lifecycle at Restaurants Mature

Cheddar Mainstream Parmesan Blue Cheese Mozzarella Feta American Cheese Provolone White Cheddar Growth Swiss Cheese Brie Cream Cheese Introductory Cotija Monterey Jack Smoked Gouda Pepperjack Cheese Ranchero Ricotta Ricotta Salata Burrata Gouda Queso Muenster Pecorino Fontina Romano Boursin Parm. Reggiano Mascarpone Cottage Cheese Chihuahua Manchego Queso Fresco Fresh Mozzarella Cheese Curd Grana Padano Gruyère Goat Cheese Comte Danish Blue Havarti Asiago Roquefort Buffalo Mozz. Gorgonzola Fine-Dining Upscale & Fast -Casual Quick-Service Independent Concepts Contemporary CDRs Segments tend to adopt flavors from the preceding stage

18 Source: Technomic MenuMonitor, Q3-2017 19 BRAND INNOVATION IS A MAJOR PART OF OUR STRATEGY! INNOVATION IN

THICK CUT SHREDS SNACK BARS

Launched SEPTEMBER 2017

WHOLE MILK HISPANIC

Launched Q1/Q2 2018 LAUNCHING A NEW BRAND

L O C A L FA R M - TO- TABLE CHEESE

▪ It all starts with our eight select, local New York dairy farms, where our cows receive the ultimate in care and nutrition to ensure the highest quality milk. This pure, consistent milk source is what distinguishes Craigs Creamery cheese for wholesome, dairy goodness you can taste. ▪ Enjoy the difference of farm fresh goodness at your table. New York State

Phase I plant • Eight farmer-partners ⎻ Average 1,500 cows • Phase 2: Cheese production

• Anaerobic digester Phase II plant ⎻ Electricity powers the plant • Solar hot water heating • Nutrient recovery • Manure composting

23 INNOVATION IN

AUTHENTIC CHEESES LAUNCHED IN DAIRY ISLE IN A CONVENIENT FORMAT

Launch Q1 2018 Foodservice ProductGuide

The History of La Vaquita

Maria Castro — an immigrant from Mexico and the mother of three young daughters — began making queso fresco, “fresh cheese” for her family in her Houston home. The business continued to grow steadily. The Since then, DFA has maintained the La brand’s top seller, queso fresco, became a staple Vaquita artisan, handcrafted process while She based it on a recipe her for many who use the cheese to top o traditional grandmother had taught her while of their increasing its appeal among consumers not Hispanic dishes from enchiladas and tacos to familiar with Hispanic cheeses. family’s farm. soups and salads. 1971 19080s & 1990s Today

1977 2010 The growth of Houston’s Castro Cheese Co. Hispanic population drove Castro Cheese Co. was acquired by Dairy many people to look for was incorporated; Farmers of America. familiar products. Through her cheeses were word of mouth, Ms. branded Castro’s cheeses were “La Vaquita”, discovered, which forced Spanish for “The her to remodel her garage Little Cow”. and turn it into a mini cheese factory. Why La Vaquita?

LatinAmerican • 60% of chefsconsider cuisine LatinAmerican istrending flavors a “hottrend”1 60% HOTTREND

Mexican • 83% of families enjoy Mexican % % dishes are a food at leastoccasionally OCCASIONALLY 83 FREQUENTLY 63 big opportunity • 63% eat it frequently2

ServingLaVaquita • Cotija and queso fresco are among the fastest-growingcheeses brings out 3 authenticflavor in restaurants

1 2016 Culinary Forecast, National Restaurant Association. 2 Survey: Mexican food straddles foreign, US cuisines. Sept 4, 2015. Nation’s Restaurant News. 3 The Top Ten Food Trends, April 2015. IFT.org FoodServiceProductPortfolio “Artisanal Mexican cheese, hand-crafted by expert cheesemakers in Texas since1971.”

C H E E S E C R E M A

QUESO FRESCO OAXACA COTIJA PANELA CREMA CREMAMEXICANA CREMA Keh-so Fresco Wah-hak-uh Ko-tee-hah Pah-neh-la MEXICANA AGRIA SALVADOREÑA

•"FreshCheese“ •“The mozzarella ofMexico” •“The parmesan ofMexico” •“Queso de canasta,” •Most popularand •Rich, cultured •Rich, cultured DESCRIPTION •Made from pasteurized •Semi-soft, white, string- •Dry, aged cheese witha traditionally molded ina versatile type of spreadable sour cream spreadable sour cream cow’s milk type cheese made from dense texture basket Mexicancream similar to crèmefraiche similar to crèmefraiche •Smooth flavor -fresh, cow's milk •Bold, complex flavorprofile •Fresh & smooth, similarto a •Rich, heavy fresh •Tangy, savoryflavor •Slightly less saltythan light, milky andmild •Savory and mellow flavor - – salty andzesty fresh Farmer’sCheese cream(non-cultured) •Milky whitecolor MexicanaAgria slightly salty, buttery andmild •Light and fresh flavorwith a •Slightly sweeterthan •Creamycolor touch ofsalt sourcream

•Our hand-made process •La Vaquita Oaxaca cheese is •La Vaquita Cotija cheese is dry, •La Vaquita Panela cheese has LA •La Vaquita Cremas are inspired by family recipes from Mexico and Latin results in a lower moisture made from whole milk, making crumbly, and full offlavor, a fine, semi-soft texture, with VAQUITA America, and are used by Hispanic American home cooks as trusted, high and higher butter fat itricher and creamier making itstand up to a host a higher butter fat content DIFFERENC qualityingredients forbringingauthentic flavorsto bothtraditional content, making itcreamier •Nice balance ofsalty of heartydishes E and moderndishes and easier tocrumble & butteryflavors •Meltssmoothly

APPLICATIONS It crumbles! - just like feta It melts! - similar to Crumblesand grates- similarto Slicefresh to use as a filling for Drizzle over enchiladas, Dollop on tostadas, •Dollop on pupusas, or bluecheese- so it’s easy mozzarella ormuenster parmesan cheese - for a tortas or sandwiches baked casseroles, and plantains, and even grilled corn, andmore to add to anydish •Use in place of cheddar flavorful garnish to any dish •Try grilling in thick slices, as it soups bakedpotatoes •Use as a base fordips •Use in traditional recipes cheese in quesadillas or over •Zesty way to finish traditional holds its shape and does not •Swirl in tothicken •Use as a base fordips and spreads or to upgrade conventional refriedbeans recipes like beans &tacos melt toomuch sauces &soups and spreads menu items with a simple, •Try in lasagna, bakedpasta •Add Latin flair to vegetables, •Pairwith freshtropicalfruit •Use in desserts authentic Mexicantouch dishes andcasseroles salads, soups, and more

FORMAT • 5lb wheel, 8lb wheel • 5lb strips New! • 12 oz wedge New! • 5lb wheel • 16lbbucket • 16lbbucket • 16lbbucket • 10lb bucket • 5lb pre-stripped bag • New! 5 lbbag fresh grated, • New! 20 lb block, 6 lb 5 lbbag dry ground loaf, and 5lb bag shreds

• 75 days (strips) • 180 days(wedge, dry ground) • 70 days • 49 days • 63 days • 63 days SHELF LIFE* • 70 days (wheel) • 90 days (fresh grated) • 40 days (bucket) • 60 days (block, loaf, shreds)

* Shelf life from manufacturedate NewFormat Offerings: Introducing new Food Service Oaxaca and Cotija cheese offerings for a Oaxaca & Cotija variety of menu applications!

MONTEREY OJACK A X A C A MUENSTERC O T I J A

“The mozzarella of Mexico” “The parmesan of Mexico” DESCRIPTION Semi-soft, white, string-type cheese made from cow's milk Dry, aged cheese with a dense texture Savory and mellow flavor - slightly salty, buttery and mild Bold, complex flavor profile APPLICATIONS Melts wonderfully! Crumbles & Grates! • Use in place of cheddar cheese in quesadillas or • Zesty way to finish traditional recipes like beans & tacos over refried beans • Add Latin flair to vegetables, salads, soups, and more • Try in lasagna, baked pasta dishes and casseroles

FORMAT 20 lb block, 6 lb loaf, and 5lb bag shreds 5 lb bag fresh grated, 5 lb bag dry ground

SHELF LIFE* 60days 90 days

PACK SIZE Block and loaf –1 4 Shreds -4 *Shelf Life from manufacturedate

lavaquitacheese.com Dairy Farmers ofAmerica Kansas City, MO 31 THANK YOU