This document provides an overview of a large Spanish food company. It discusses the company's business segments including rice, pasta and dairy. The company has a turnover of €2.3 billion and profits of €194 million. It has international presence in over 26 countries across Europe, Asia, Africa and Americas. The document performs external and internal analysis of the global food industry and the company. It discusses key success factors, resources, capabilities and provides a SWOT analysis. The business strategy focuses on leveraging competitive advantages in research and product innovation, especially in rice and pasta segments.

1. CaseStudyRome, June 7 2010

2. COMPANY SNAPSHOTLARGEST FOOD COMPANY IN SPAIN>TURNOVER €2.3 MLN>PROFITS €194M>MARKET CAPITALIZATION €2.17BLNMainbusinesses:In numbers:RICEPASTADAIRY*

3. INTERNATIONAL PRESENCE MORE THAN 60 BRANDS26 COUNTRIESASIA:IndiaThailandEUROPE:GermanyBelgiumCzech Rep.DenemarkSpainFinalndFranceGreeceHungaryItalyPolandPortugalUKRomaniaUkraineAFRICA:AlgeriaEgyptLibyaMoroccoIsraelAMERICA:CanadaUSAMexicoPuerto RicoUruguay

4. PRODUCT PORTFOLIOMILKPASTARICE

5. GLOBAL FOOD INDUSTRY: OVERVIEWGROWTH TRENDSLOW BUT POSITIVE

6. EXTERNAL ENVIRONMENT ANALYSIS

7. GLOBAL FOOD INDUSTRY: 5 FORCES ANALYSISBUYERS POWERSUPPLIERS POWERNECESSITY OF FOOD PRODUCTS FOR BUYERS’ BUSINESSNEED FOR RETAILERS TO TAKE INTO ACCOUNT CONSUMERS’ BRAND LOYALTYHIGHER CONCENTRATION OF BUYERS RELATIVE TO SELLERS THE AVAILABILITY OF CHEAPER INTERNATIONAL SOURCESTHE ABILITY TO INTEGRATE BACKWARDS DRIVE UP BUYERS’ POWER WEAKMODERATEMODERATELARGE AMOUNT OF CAPITAL INVESTMENT IN PRODUCTION HIGH FIXED COSTS LARGE SCALE PRODUCTION REQUIRED, PRESENCE OF STRONG BRANDS DIFFICULT ACCESS TO DISTRIBUTION CHANNELSLIMITED ENTRY OPPORTUNITIES BECAUSE ALL SECTORS ARE ALREADY OCCUPIEDNEW ENTRANTSSTRONGER FINANCIAL SITUATION OF MARKET PLAYERS THE POSSIBILITY TO PURCHASE SUPPLIES IN THE OPEN MARKETCOMMITMENT TO SUPPLIERS THROUGH FIXED-TERM CONTRACTSHIGH SWITCHING COSTS STRONG RELIANCE UPON SUPPLIERS

8. GLOBAL FOOD INDUSTRY: 5 FORCES ANALYSISSUBSTITUTESNO SUBSTITUTES DUE TO THE NATURE OF PRODUCTS HIGHRIVARLY AMONG EXISTING FIRMSNO SERIOUS THREAT FROM SUBSTITUTES -> NATURE OF THE PRODUCT: YOU CAN’T SUBSTITUTE ITSUPPLIERS -> OPEN MARKET ALTERNATIVEBUYERS -> RELIANCE ON BRANDED PRODUCTS TO SATISFY CUSTOMERSDANGEROUS RIVARLY AMONG EXISTING PLAYERSHIGH FRAGMENTED INDUSTRY (DESPITE LEADING INTERNATIONAL INCUMBENTS) HIGHLY SIMILAR PRODUCTSLOW SWITCHING COSTS FOR RETAILERSHIGH EXIT BARRIERSSTRONG COMPETITION BASED ON PRICETO SUM UPFOR AN INCUMBENT: NEED FOR STRONG DIFFERENTIATION TO SURVIVE COMPETITIONCONCLUSION

9. GLOBAL PASTA INDUSTRY: OVERVIEWTOP 3 GLOBAL PLAYERSWORLD PASTA PRODUCTION EXPECTED GROWTH IN PASTA DEMANDINCREASED NEED FOR EASY-TO-PREPARE, VERSATILE FOODeven in the middle eastern and african regionsCOUNTER-CYCLICALILTY OF DEMAND FOR PASTAas pasta is a relatively less expensive food staple, demand for pasta increases when the economy slows.

10. GLOBAL PASTA INDUSTRY: 5 FORCES ANALYSISMODERATE WEAKMODERATETHE PASTA MARKET IS ATTRACTIVE IFPRODUCTION IS ON A LARGE SCALE (CONSIDERABLE COST EFFICIENCY IN PRODUCTION)

11. CAPABILITY FOR INNOVATION IS STRONG

12. CAPABILITIES IN MANAGING INVENTORIES AND WHEAT PRICES’ FLUCTUATIONS ARE DISTINCTIVEWEAKMODERATE

13. GLOBAL RICE INDUSTRY: OVERVIEWRICECOMPETITIVE LANDSCAPEIMPORTANCE OF PRODUCT DIFFERENTIATIONHIGHEST POTENTIAL FOR GROWTH IN THE HIGH VALUE ADDED PRODUCTSDEMAND FOR RICEONLY 2 GLOBALLY RECOGNIZED BRANDSMinute RiceRivianaSTRONG THREAT OF PRIVATE OWNED LABELS IN BASIC PRODUCTSLOW PRICE SENSITIVITY OF WORLD RICE CONSUMPTIONLOW SWITCHING COSTS FOR CUSTOMERS

14. INCREASING DEMAND IN US AND EUROPESUPPLY OF RICESTRONG PRICE VOLATILITY

15. POTENTIAL FOR INCREASING POWER OF SUPPLIERS

16. CONCERNS ABOUT CONTAMINATION OF GE RICENEED FOR DIVERSIFICATION OF RAW MATERIALS SUPPLIERS:

17. INTERNAL ENVIRONMENT ANALYSIS

18. APPRAISING RESOURCESTANGIBLE RESOURCESHUMAN RESOURCESManagement and development of talent.Creation of stable, quality employment.Implementation of pay policies based on criteria of individual recognition and furtherance.Participationin management.Internalcommunication.Human Resources Policy is based on:

19. APPRAISING RESOURCESINTANGIBLE RESOURCESVALUES leadership, transparency, servicevocation, honesty, integrity, respect and commitment to our shareholders and the environmentCULTUREVISION to be leader in the meal solutions sector, with the aim of providing consumers with the best possible food solutions in terms of functionality, health, convenience and pleasure,achieved through constant innovation geared towards meeting the demands of the market.TECHNOLOGYHigh R&D investmentsin the nutrition research, including patents on infant formulas;in the process for extraction and purification of Omega-3 acidsin the development of functional and high value-added products

20. in innovation in packaging (easy-to-use and extend life of products).REPUTATIONGLOCAL STRATEGY (respect of cultural differences among countries)Strong reputation and brandperceptionStrong local brands (more than 60 in dairy, rice and pasta)

21. APPRAISING CAPABILITIES: functionalapproachCORPORATE MANAGEMENTMultidivisional coordination Intenrnational Management Good financial management  high cashflow generation Strategic innovation Management experience and expertise in M&AMANAGEMENT INFORMATION Integrated MIS systems supporting decision makingResearchcapability PulevaBiotechDevelopementof innovative high value-addednewproductsR&DEfficient volume manufacturing SISLOG WMS solution in flexibilityOPERATION INVENTORYDesign capabilityPRODUCT DESIGNBrand managementQualityreputationResponsivenesstomarlettrendsMARKETING Sale responsivenessCustomer service ensuringsatisfactionEffectivesales promotion and executionSALES, DISTRIBUTION & SERVICE

22. Management experience and expertise in M&ASOME CASES OF EBRO’S M&A: THE MARKET REACTIONS Ebro Puleva’s buy of the rice company Riviana for $380 millions

23. Ebro Puleva’s acquisition of Panzani, pasta company, for €636 millions

24. Ebro Puleva’s buy of Minute Rice from Altria/Kraft for €280 millions

25. Ebro Puleva’s purchase of New World Pasta for €362,5 millions

26. Sale of Ebro Puleva sugar division to A.British Foods for €385mln

27. Ebro Puleva sells its diary business to Lactalis for €630 millionEbro Puleva’s buy of the rice company Rivianafor USD380 millionsSlight variance of 7-day-share-priceafter the acquisition announcementHowever, the company’s share pricetrend remained above IBEX 35. 6-month-variance of share price isn’t going up along with the index, only exceeding at the last month due to the initial fruits of cost synergies integration.

28. Ebro Puleva’s acquisition of Panzani, pasta company, for EUR636 millions7-day-variance of the share price dropped according to speculative actions Although the prices went up until July 2005 for nearly 15%, a gradual slump occurred on the 22nd May 2005, due to the claim of Australian Sugar Society to WTO against EU countries export levels.Source: http://finance.yahoo.com/q?s=EVA.MC

29. Ebro Puleva’s purchase of New World Pasta for EUR362,5 millionsWithin 7 days of acquisition announcement, the share price increased by 3.5%, exceeding the IBEX 35 Index one.The price dumped for 15% due to the initial invisible effect of the Credit Crunch which, necessary to note, was commenced in Europe by run on Northern Rock and spread all over the EU.

30. Ebro Puleva’s buy of Minute Rice from Altria/Kraft for EUR280 millions7 days after the acquisition announcement the share price trend was always higher than that of IBEX 35, even though remained stable. The business was growing on a normal scale, the acquisition approved successful by adding value to shareholders. However, due to speculation in the market, the share price slumped at the beginning of 2008.

31. Sale of Ebro Pulevasugar division to Associated British Foods for EUR385 mln.The 7 day trend of share price hasn’t changed with minor technical variances and speculation matters. The market share price increased for nearly 7% due to positive sales perception of investors in the stock market and initial strengthening of brand value.

32. EXTERNAL + INTERNAL ENVIRONMENT ANALYSISSWOT Analysis

33. WEAKNESSES:COMPLICATIONS IN NEW RECIPE DEVELOPEMENT

34. WASTE OF WATER AND ENERGY COSTS

35. LIMITED PRESENCE IN MICROWAVE AND QUICK COOKING PRODUCTS

36. RELATIVELY LOWER DIVERSIFICATIONS IN COMPARISON TO COMPETITORS

37. FALLING REVENUES FROM DAIRY BUSINESSSTRENGTHS:STRONG MANAGEMENT TEAM

38. STRONG BRAND

39. R&D INNOVATION AND REASEARCH

40. LEADERSHIP IN DIFFERENT SEGMENTS

41. STRONG CASHFLOW GENERATION

42. EFFICIENT STOCK MANAGEMENT

43. ACTIVE SHAREHOLDER REMUNERATION POLICY

44. EXCELLENT RELATIONSHIPS WITH RETAILERS

45. STRONG CAPABILITY TO DIFFERENTIATESWOT ANALYSISTHREATSSENSITIVITY TO RAW MATERIALS COSTS

46. SENSITIVITY TO WEATHER CONDITION

47. GROWING SALES OF PRIVATE LABEL PRODUCTS LIKELYTO IMPACT THE COMPANY’S MARGINSFUEL PRICE INCREASE

48. CONTAMINATION OF THE GLOBAL RICE SUPPLY.OPPORTUNITIES:INCREASING DEMAND FOR FUNCTIONAL AND HEALTHY PRODUCTS AND FOR READY AND FROZEN MEALS WHERE EBRO HAS POTENTIAL TO EXPAND

49. INCREASING FOCUS ON ITS PASTA AND RICE BUSINESSES WILL POSITIVELY AFFECT REVENUE GROWTH

50. HORIZONTAL EXPANSION IN FROZEN FOOD WILL ENABLE EBRO TO RIDE ON THE GROWING US FROZEN FOOD MARKETINDUSTRY KSF & EP’s RESOURCES&CAPABILITIES:PERFECT MATCH!

51. BUSINESS STRATEGY

52. BUSINESS STRATEGY: Industry KSFBEYOND THE TRADITIONAL BUSINESS MODEL:“PULEVA MODEL” as the basisof EP’s COMPETITIVE ADVANTAGEPULEVA BIOTECH

53. FUNDAMENTAL ROLE OF PULEVA R&D DIVISION: BIOTECHBiotech allows to create unique, highly sought after value added products. User-friendly, differentiated products that improve consumers’ quality of life. Puleva Biotech’s scientific researchers have been generating healthy bioactive strains with a high industrial component and significant commercial valuePuleva is a leading researcher in ‘Nutraceuticals’ or ‘functional foods’: natural, bioactivechemical compounds that have health promoting, disease preventing or medicinalproperties.

54. BUSINESS STRATEGY: COMPETITIVE ADVANTAGELEVERAGE OF COMPETITIVE ADVANTAGE IN RICE INDUSTRYInnovations in the ricecategoryincluded :pre-cooked, shelf-stableplainrice and ricemixeswhichcouldbequicklyreheated in microwavesingle service portionsofprecookedproductsLEVERAGE OF COMPETITIVE ADVANTAGE IN PASTA INDUSTRYInnovation in the pasta industryincluded :shelfstableoffrozenmicrowaveable pasta meals, microwaveableofprecooked pasta, fresh and frozen pasta meals complete meal in one box

55. Functionalformulations: multi grain pasta, fortified in fiber, protein and omega 3s + pasta madefromorganicflour

56. New steam system to produce betterqualityproductCORPORATE STRATEGY

57. CORPORATE STRATEGY: INTERNATIONALIZATIONATTRACTIVENESS OF OVERSEAS MARKETSPOTENTIAL TO ESTABLISH COMPETITIVE ADVANTAGE inoverseasmarketsWHY?The industryanalysisshowedusthatboth the rice and pasta industry are globallyattractiveEbro Pulevahas the abilityto match itsdomesticstrengths in resources and capabilitiesto the key successfulfactorsof the global industries.GLOBAL STRATEGY

58. GLOBAL STRATEGY: PROS & CONSCOST BENEFITS OF SCALE AND REPLICATION replicationofknowledge-basedassetcosts a fractionof the original

59. POSSIBILITY TO SERVE GLOBAL CUSTOMERS

60. EXPLOITING NATIONAL RESOURCES  rawmaterials and low costlabor

61. LEARNING BENEFITS  integrationofknowledgefromdifferentlocations and enviroments

62. MORE STRATEGIC FORCE TO COMPETE  cross-subsidization: multinationalsfight aggressive competitive battles in individualnationalmarketsusingtheirresourcesfromothernationalmarkets.GLOBAL STRATEGYA PURELY GLOBAL STRATEGY IS NOT APPROPRIATE!!INTERNAZIONALIZATION STRATEGY HAS TO BE VIEWED AS A TRADE OFF BETWEEN THE BENEFITS OF GLOBAL INTEGRATION AND THOSE OF THE NATIONAL ADAPTATIONBECAUSE OF THE DIFFERENT PREFERENCES OF CONSUMERS IN DIFFERENT MARKETS:everynationrepresents a uniquecombinationofdistinctivecharacteristics: productsdesignedtomeet the needsof the “global customer” tendtobeunappealingtomostconsumers

63. EBRO: FROM GLOBAL to GLOCAL Stanrdardizeproductfeatures and company activitywhere scale economies are substantialGLOBAL LOCALIZATION: GLOCAL STRATEGYDifferentiatewherenationalpreferences are strongest and whereachievingthemisnotovercostly.

64. CORPORATE STRATEGY: OWNERSHIP CHOICEACQUISITIONSLow levelofuncertainty Abilitytodigestacquisitions Feasibilityofacquiring Desireto transfer knowledgeCHOICE OF ACQUISITION OVER ALTERNATIVE OWNERSHIP FORMS (PARTNERSHIP,ALLIANCES,… ETC.)

65. CORPORATE STRATEGY: ORGANIZATIONAL DESIGNMATRIX ORGANIZATIONBoardofDirectorChairmanGeographic Area1Geographic Area3Geographic Area2Geographic Area3…Dairy…Rice…PastaDISADVANTAGESSOLUTIONS TO INCREASE COORDINATIONEXCESSIVE COMPLEXITYSLOWER DECISION MAKINGDIFFUSED AUTHORITYINFORMATIONAL LOGJAMSPROLIFERATION OF COMMITTEES AND REPORTSOVERLAPPING RESPONSABILITIES* due totheir strong management team Herbamanaged the europeanricebrandswhilePanzanimanaged the european pasta business

66. CORPORATE STRATEGY: NEXT STEPSYES!WHY?NO!WHY?YES!WHERE?HOW?

67. CORPORATE STRATEGY: NEXT STEPS - DRIVERSYES!THE CHANGE IN THE RETAIL FOOD MARKETNO!YES!

68. Changes In RetailFoodMkt: the threatof private labelsWHAT ARE Private Labelproducts or services: manufactured or provided by one company to be offered under another company's brand.

69. available in a wide range of industries from food to cosmetics to web hosting.

70. often positioned as lower cost alternatives to regional, national or international brands (although recently some private label brands have been positioned as "premium" brands to compete with existing "name" brands)usually SUPPLIED by:Large national brand manufacturers that utilize their expertise and excess plant capacity to supply store brands (ErbaPuleva) Small, quality manufacturers who specialize in particular product lines and concentrate on producing store brands almost exclusively  Major retailers and wholesalers that own their own manufacturing facilities and provide store brand products for themselves.

71. Changes In RetailFoodMkt: the threatof private labelsThe effectof the Global Financial Crisis:Private label has received a BOOSTfrom the weakened economy as consumers look to make cutbacks: consumers’ price sensitivity has strongly increased; shoppers are seeking out cheaper deals for their food and drink suppliesShare of private labelproductsin traditionalretailersshelfs(94% in discounters)Share of private labelproductspurchasedoverallfoods and beverageproducts18%34%48 %19 %19992009199920092010..2010..

72. Changes In RetailFoodMkt: the threatof private labelsNEGATIVE CORRELATION BETWEEN MARKET SHARE OF PRIVATE LABELS AND PERSONAL DISPOSABLE INCOME:1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

73. Changes In RetailFoodMkt: the threatof private labelsThe consumers’ change in purchasingbehavior:Share of private labelproductspurchasedoverallfoods and beverageproductsHowoften do youpurchasestore-brandproducts?34 %18 %2010..19992009

74. Changes In RetailFoodMkt: the threatof private labelsThe newretailers’ strategy:Share of private labelproducts in traditionalretailersshelfs (94% in discounters)Retailers have recognized that they cannot simply rely on national branded products to draw consumers into their stores and sustain loyalty.48%19%2010..19992009Manufacturers’ product brandswith their pervasive presence everywhereconsumers don’t need to have a strong relationship with a particular store setting to have access to these products.can be a magnet to draw people into its store versus others and accrue direct meaning and loyalty to the overarching banner. Proprietary brands (private labels) exclusively available at a specific retailer

75. Changes In RetailFoodMkt: the threatof private labelsThe sustainablesuccess of Private Labels:Today's retail marketers are managing their proprietary brands with the same combination of care and innovation as manufacturers of national brands!!the poor relative of national brand consumer goodsgood alternative in terms of both price and quality to brand productsTRADITIONAL DEFINITION: NEW DEFINITION: The current success of the private labelsisnottemporaryanymoreand not just relatedto the business cycle, as in the past, asHernandezargued in the case.63%33%Brandnamemanufacturermustdevelop a clear and long termorientedstrategyto face the new challenge of Private Labels!

76. Optimal strategy to face Private Label challengeThe three dimensions that define a branded manufacturer’s starting position:Leading BrandWEAK3rd or 4th tier brandManufacturer brand shareStrength of RETAILER relationshipPrivate Label SupplierSTRONGLOWRole of private label in that categoryHighSource: Competing in the New World of Brands: McKinsey&Company