Dairy Crest Regulatory News (DCG)

3 July 2014

Dairy Crest Group plc ("Dairy Crest")

Global partnership with Fonterra to sell demineralised whey and further global growth opportunity

Dairy Crest, the leading UK-owned dairy foods company, is today announcing that it has entered into a strategic partnership with Fonterra, the world's leading dairy exporter. Fonterra will market and sell two products for the fast growing global infant formula market.

Dairy Crest had previously announced a £45 million investment to manufacture demineralised whey powder. This is the base ingredient in infant formula and will be produced from the whey generated at its cheese making factory at Davidstow in Cornwall. Fonterra will receive a commission to sell all of Dairy Crest's demineralised whey production and will also provide technical and engineering support. The agreement is for a minimum of five years.

Dairy Crest is also announcing a new £20 million capital investment at its Davidstow site to manufacture galacto-oligosaccharide (GOS). GOS is a lactose-based prebiotic, widely used in infant formula. Dairy Crest will enter into a joint venture to produce GOS with UK-based Fayrefield Foods Limited who will provide access to the necessary enzyme and other intellectual property. Fonterra will supply lactose and will also take responsibility for marketing and selling this product. This project is anticipated to provide an eight year cash payback for Dairy Crest.

The £45 million capital investment in demineralised whey powder is already well underway and on track, with commercial production expected to begin early in 2015/16. Production of GOS is expected to commence later that year.

Mark Allen, Chief Executive, commented:

"Demineralised whey powder and GOS form an important part of Dairy Crest's strategy to grow added value sales. We are excited to be working with Fonterra and Fayrefield Foods to bring these two innovative new products to market. These partnerships, with leading experts in the field, give us exposure to global growth opportunities."

For further information:

Dairy Crest

Arthur Reeves 01372 472236

Brunswick

Tim Danaher 020 7404 5959