Land O'Lakes Inc. Annual Report 2003

FOCUS ON DAIRY FOODS

Abelardo Villegasis is the Butter Plant
Superintendent at the Tulare plant, where
they focus on high-quality, cost efficient
production of butter.

Other successes in 2003 included continued strong profit growth in the dry cheese and
seasoning businesses, as we delivered on our reputation for the highest product quality and customer service.

The International Development Division (IDD) had a record year, receiving $34 million in funding for new projects. IDD also expanded it’s participation with USAID funded school feeding program to five countries, feeding over one million school children per day.

Very importantly, in 2003 we sharpened our focus and made significant progress in improving performance in our manufacturing and supply chain. This included making tough decisions to streamline and take waste out of manufacturing systems through the closing of the Perham and Gustine cheese facilities. Additionally, the product mix was adjusted at the Melrose Dairy Protein facility to focus on higher-margin specialty Italian cheese and at the Denmark location to increase the volume of provolone cheese. Our focus on streamlining manufacturing plants and supply chain is paying off. The Grocery Manufacturers Association recognized our supply chain system as being in the top 10% in costs as compared to industry peers; in the top 25% in service level; and for having customer service cycle time a day better than the industry average.

In the East, a new partnership in the area of milk hauling and assembly was also achieved and efficiencies from shared hauling are being realized.

At CPI, our world-scale mozzarella and whey facility, there were many start-up challenges. However, improvements were achieved in all areas. By year end, customer acceptance
levels were over 97 percent and throughput was meeting or exceeding start-up expectations. CPI represents a substantial current investment and we’ll complete Phase II in 2004. CPI will be an investment that will well position Land O’Lakes for strong future earnings in the commodity whey and mozzarella markets, for the long haul.

2003 was a year of significant improvements in our business. We sharpened our focus on our strong brand, new product innovation and the relentless drive for effectiveness and efficiency in our manufacturing system. This sharp and intense focus is continuing into 2004.

AG Services-->