Sustainable Agriculture strategy Zurich 8 th June 2011

1. Sustainable Agriculture strategy Zurich 8th June 2011 Neil la Croix Director of Supply Chains

2. Core trends in agriculture 2 • Pressure from • Water scarcity • Erratic climate patterns • Population growth increasing demand for staple foods • Competition for land against different crops (inc food and biofuels) and limited additional agricultural land • Increased costs of agriculture driven by rising oil price impacting fertiliser price and use • Reduced investment in agriculture from aid budgets and national Governments • Yields • Generally declining where agricultural practices are weak • Limited inputs of fertiliser, pest control, new planting material or physical farm management • Occasional areas increasing through intensive farming • Fertilisers, Pesticides, GMO • Declining rural communities • Aging farmer base • Lack of youth engagement • Rural-urban migration and poor living conditions • Land tenure weaknesses hindering development • Campaign and policy pressures • Environmental impact of fertilisers and pesticides • Labour standards and living/working conditions in agriculture (e.g. child labour, bonded labour low pay, • Animal welfare • High carbon and water footprints • Food prices and commodity speculation impact on markets • Distortive policies (e.g. biofuels or trade policies)

3. It matters because… For a company that depends on farming for core ingredients on which we spend billions, sustainable agriculture is all about: • Securing and delivering a long term supply of the ingredients we need that guarantees quality and quantity, and delivers competitive value • Protecting and enhancing the reputation of our brands and business • Giving us a message for our stakeholders and consumers

4. Kraft Foods Coffee Commitment: Kraft Foods to source 100% sustainable beans for all European coffee by 2015 • Membership of industry bodies and multi-stakeholder initiatives • European Coffee Federation • Sustainable Commodities Initiative • Sustainable Coffee Partnership • SAI Platform • 4C’s • Certification • Rainforest Alliance

5. Impact of climate change • WWF survey commissioned 2008 • Two of Kraft Foods five main origins (Brazil and Vietnam) classified as “high risk” of vulnerability to climate change • One (Indonesia) classified as “medium risk” • Address in Sustainable Coffee Strategy

6. Sustainability strategy Strategic Themes Productivity Additional Incomes Community Development Institutional Engagement Activities • Increase income • More efficient • Use of inputs • Reduce pressure to expand cultivation • Community management & Planning • Maintain environment • Education • Healthcare • Energy • Water • Institutional strengthening: • District, national, international • Policy changes • Capacity building • Skills training • Access to credit • Youth engagement PES: carbon, water, biodiversity NGO partnership Institutional partnership NGO partnership Institutional partnership Industry collaboration Enablers Knowledge transfer Effective extension Industry collaboration

7. Partnerships • Kraft Foods can not and should not attempt to tackle alone the issues associated with the sourcing of sustainably produced coffee • Recognition of the value of bringing together players along the supply chain and coordinate efforts on most pressing issues • Many coffee industry activities, need co-ordination and focus • Must form partnerships: • Governments • supranational and national organisations • NGO’s • Farmers organisations

8. Requirements at origin • Origin government engagement • Strong, effective, grower organisations • Community involvement in developing solutions • Effort : Reward equation must work for farmers • Information transfer: technical support, irrigation, fertilisation, P&D control, new varieties • Selection and involvement of NGO partners • Certification bodies

9. The role of certification Provide framework and verification BUT 10% coffee growers certified How to reach the other 90%? Design schemes for SCALE

10. Summary • Kraft Foods identify climate change as a serious risk for coffee • Should not be tackled in isolation but as part of overall sustainable strategy • Effective industry organisation required • Partnerships with growers, NGOs and government critical • Certification scale up mechanisms essential