AGM Statement

Associated British Foods PLC
15 December 2000

15 December 2000

                         Associated British Foods plc

                                AGM statement

At the Annual General Meeting of Associated British Foods plc held today, the
Chairman, Harry Bailey, made the following statement:

As you will have read, because of his continuing poor health, Garry Weston has
made the decision to stand down from the board of ABF at the close of this
meeting. It marks the end of a period of 51 years continuous service as a
director of this company.

I would like to take this opportunity to give you a brief review of the
immense contribution which he has made to the growth of your company in that
time.

Associated British Foods, or Allied Bakeries as it was then known, was created
and built up through the 1930's, 40's and 50's by Garry's father Garfield, a
man of great vision and possessed of a fierce energy and determination to
create in Britain and overseas a flourishing business empire based on food.

By 1967, when Garry returned to this country from Australia to take over the
chairmanship from his father the company had been built mainly through
acquisition into a widespread range of activities in food manufacturing and
retailing throughout the United Kingdom, Europe, South Africa and Australia.

In 1967 Garry Weston was just 40 years of age and the task he took on was a
daunting one. Whilst Garfield his father had been a great visionary and
acquirer of companies, he was not so concerned or involved with their day to
day management. Garry was faced with a spread of businesses engaged in
everything from baking to bird seed supply, from making light bulbs to
hospital beds. However despite this broad spread of activities ABF was then in
a weak financial state with a high level of debt.

Garry set about divesting all those businesses which he regarded as non-core
to concentrate on the company's mainstream activities of milling, baking and
food retailing. Much needed investment was channelled into these areas and the
result was steadily increased profitability and cash flow and reduced
indebtedness. From pre-tax profit of £13 million in 1967, by 1980 profits had
climbed to £100 million and earnings per share had increased by 600 per cent.

Garry's expressed philosophy was 'our discipline is to expand the business
from within - to stop looking over our shoulder at other people's activities
and to become professional at building our own business'.

With the benefit of hindsight, what was achieved seems logical and
straightforward but as one who worked with him throughout those years I can
tell you it took enormous strength of will and a very determined vision to
achieve such a transformation. There was continuing pressure to go out and
make more acquisitions - pressure which Garry rejected in favour of focussing
on his core businesses. Had that been all, the record would have been one to
be proud of. But Garry also had the rare ability to recognise that there was a
right moment in time both to sell and to buy major businesses.

In 1983 he chose to sell the company's investment in Premier Milling of South
Africa, in 1986 the investment in food retailing trading under the Fine Fare
name and in 1996 the Irish supermarket interests. In successfully completing
these transactions he not only raised some £1.5 billion to enormously
strengthen the company's finances he avoided the need to invest
ever-increasing sums of capital to compete with stronger players in those
market places, thus freeing up cash flow to invest in the group's core
activities.

In 1990 he completed the purchase of British Sugar for £850 million and in
that one move secured the profit growth and cash flow generation of this
company for the whole of the 1990's.

He has handed on to those men who are following him one of the most solidly
financed companies in the United Kingdom, one of those best placed to survive
and grow in the industries in which it operates and to meet the challenges of
achieving further growth in the decade to come.

Many of you here today are or were executives who worked with Garry. You will
know that his commitment to this business was total, his belief in and support
of his managers was inspiring and his accessibility to all constant.

In all of this, Garry never sought credit for himself and was content to
maintain as low a profile as he could. I remember in the early days of his
chairmanship he had on his desk a motto which said 'there is no limit to what
we can achieve if we are prepared to let others take the credit'. He really
lived up to that tenet.

In creating wealth for his shareholders he also created one of the largest
charitable foundations in this country. Through that medium he has been,
mostly anonymously, the benefactor of countless good causes large and small
throughout this country. Ploughing back into its fabric and people a great
proportion of the wealth earned from his enterprise.

Ladies and gentlemen, this is a tribute to a great man and businessman. One
who had a clear vision and who led from the front by example.

I hope you will join with me in sending our heartfelt best wishes to Garry and
his family for a continued recovery in health and a long and happy retirement.

Ladies and gentlemen in my opening remarks last year I said that there had
been no let up in the pricing pressures on the agricultural sector and on food
manufacturing, or in the continued strength of the pound sterling.

As you will have read in the annual report, those pressures have not abated;
rather in the past year they intensified. I do not propose to re-visit the
detail of our operations last year but I do wish to illustrate the economic
environment in which your companies are operating.

In the past 10 years retail price inflation in this country has totalled 33
per cent. That is, if you applied it uniformly to those items in the index,
for something which cost you a £1 in 1990 today it would cost you £1.33p.

In that time the average weekly wage in the UK has increased by 44 per cent.
Those people in work and their families are better off in real terms. They
have more spending power and more ability to consume. Against this background
let me give you some comparative prices of food products on the supermarket
shelf.

In 1990 a 28 oz standard loaf would have cost 48 pence in your local
supermarket. This year you can buy the same loaf for 30 pence. A kilo of sugar
would have cost you then 63 pence and today, 46 pence. A packet of 80 teabags
in 1990 cost £1.39 pence and today costs £1.39 pence. In every case a fall in
real terms and in some cases severe price deflation.

This is the background against which the UK food manufacturing industry and
also UK agriculture has been operating.

The stock market value of the total sector known as Food Manufacturers,
excluding Unilever, Cadbury Schweppes and Associated British Food (the 3
largest quoted stocks) was in 1990 £9.6 billion and today, 10 years later, is
£5.0 billion. We are not complaining about this situation - to do so would be
to miss the point.

During the past 10 to 15 years the developed countries of the world have
enjoyed a prolonged period of economic expansion underpinned by low inflation
which has produced increases in real G.D.P. and people's material living
standards. Britain in particular has enjoyed sustained economic growth and is
now, on some counts, the fourth largest economy in the world.

This golden scenario has been driven by new technology, by trade
liberalisation and the development of a global supply chain accompanied by
excess capacity. An environment of fierce competition has produced dramatic
benefits for the consumer not only in terms of price but also in terms of
quality and range of choice.

New technology and the consequent rapid communication of information has
resulted in accelerating speed of change not only in the way we do things but
in the way markets are perceived by the consumer.

In such a world, existing large size and market leadership are no guarantee of
long-term success. We can all think of companies whether manufacturers,
retailers or service providers who have declined from a position of
pre-eminence to being also-rans in their market place and who have as a
consequence destroyed shareholder value on a colossal scale. Indeed it seems
that size, in many instances, has been a disadvantage as it either paralyses
the ability or the will to react swiftly and decisively to a changing market
place.

It is against this background that ABF companies have to operate not only in
the UK, but equally so in the rest of Europe in the United States and in
Australia.

10 years ago we employed over 36,000 people in UK food manufacturing and today
that number is just 15000. And yet during that time we have raised profits
earned in our UK food manufacturing companies by 42 per cent.

Competition in the market place doesn't take a holiday. It is with us every
day and we ignore it at our peril. I stated a year ago that if we are to
compete effectively, serve our customers and grow our business we needed in a
number of cases to sell fewer and newer products.

This year we have moved down that path. As you will have read in your report
and accounts in the past twelve months we have disposed of our manufacturing
interests in ice cream, biscuits, starch and industrial margarine. The total
consideration for the businesses sold was £192 million and the total operating
profit from those businesses in the last year represented a return of less
than 5 per cent. So, yes, we now make fewer products, but more profitable
products.

And we also make newer products. In the past year British Sugar has introduced
silk sugar - a new milled sugar with a very fine particle size for the food
ingredient market. It enables the production of consistently smooth fondant
based products whilst reducing costs for the manufacturer and improving his
product. Silk sugar has recently won first prize in the highly prestigious
Awards for Ingredients Manufacturer(s).

Twinings has successfully introduced flavoured iced teas in the UK and next
year will be launching this product into its overseas markets. Both here and
in the health conscious US market, Twinings has launched green teas with
growing success in both markets.

Our Abitec subsidiary in the US has designed and installed new plant to
manufacture a zinc oxide based lotion for Procter & Gamble's worldwide diaper
business. This is the first diaper lotion to make a medically proven claim.

Rohm Enzyme and our US company Roland Industries have developed an enzyme
based formulation to replace Potassium Bromate in the US bakery industry. This
toxic chemical, which is banned in Europe, is now being eliminated from US
bread products and we are now leaders in this product area.

In grocery we have introduced a new Allinson organic wholemeal bread and a new
organic crispbread.

Our seed coating company, Germains, has introduced a revolutionary large scale
priming treatment for sugar beet seed that increases yields by up to 5%.

These are just some of the new developments which our companies have brought
to their markets in the past year. In almost every area where we introduce a
new product it will have an improved functional capability and customer
benefit. Adding value not only for our own companies, but also our own
customers.

I have talked about the competitive pressures on food manufacturers and the
impact of the deflationary environment in which our food companies operate.

But as you know, we are more than just a food company; we are now also one of
the most successful clothing retailers in the British Isles. At this present
time we operate 98 stores trading from almost 1.5 million square feet of
selling space. Operating profits this year were £51 million up 19 per cent on
the previous year.

Yet the impact of deflation in the UK and Irish clothing market has been
similar to that experienced in food. A poly/cotton shirt such as the one I am
wearing today (from Primark, Ladies and Gentleman) cost £6 10 years ago, that
same shirt today cost £4. A pair of men's denim jeans was £12 and today can be
bought for £8. A ladies fleece dressing gown was £13 and today costs £8. I
could give many more examples.

The outcome of change in the retail marketplace is familiar to you all.
Household names, some of them regarded as retailing icons, have fallen by the
wayside with resulting massive destruction in shareholder value.

Others have prospered and Primark is one of that group. In fact, Primark and
its philosophy of everyday low prices, combined with value for money, has been
one of the drivers of change in the marketplace. In the past 3 months, C&A a
famous name has exited the UK clothing market completely. We have already
acquired 6 of their stores and expect to acquire more. One of those stores,
now our largest, is already open and trading under the Primark name in
Newcastle upon Tyne. It opened at the beginning of December and is already
trading with great success.

I mention this as an introduction to the video which we are going to show you
today. It is an exciting success story and I hope you will enjoy it.

Ladies and gentlemen, I hope you found that film both interesting and relevant
to the ABF of today. Primark is a growth company with plenty of opportunity to
grow further. Although we have now expanded our presence to achieve a critical
mass in terms of a market presence, many of the major cities in this country
have no Primark. In other towns where we are present we could trade even more
successfully from larger selling space.

The mission of the Primark management and staff has been to supply quality
clothing at prices perceived to offer real value. The ultimate driver has
been, and will be, consumer satisfaction. As Arthur Ryan said in the film
'They keep coming back.'

What of the future? If we are to go on enjoying the benefits of expanded
choice, better quality and lower prices in the products and services we buy we
need to be aware that those benefits were driven by liberalisation of trading
throughout the world, an acceptance of technological change and a scaling back
of government interference in the workings of the marketplace. It seems to me
that there is once again an increasing trend for more regulation, ever more
bureaucracy and more protectionism. One of the fastest growth industries has
been that of the N.G.O. The non-governmental organisation backed up by
well-funded, well-organised pressure groups each with its own agenda.

As we have seen with the violent confrontations at the Nice and Seattle
inter-governmental conferences earlier this year, some of those pressure
groups are in fundamental opposition to the workings of free-market
capitalism.

In Europe in particular we face increasing regulation whether it be on:

  * Environment;
  * occupational health and safety;
  * terms and conditions of hiring and employment, or
  * in corporate governance.

I read in the Financial Times this week that British businesses are likely
soon to be faced with a new directive proposed by the European Commission.
This will require companies such as ours to consult the workforce before
implementing the sale of subsidiary companies.

One market where we operate without increasing regulation, but in a framework
of increasing liberalisation is China where we are reaping encouraging returns
on our recent investment. Economic performance in that country over the past
decade has been outstanding and the standard of living of the population has
benefited accordingly. It would be ironic if economic performance in an
increasingly regulated Europe was outstripped by a China determined to sweep
away the effects of decades of centralised bureaucracy.

You might well be asking what does this future hold for ABF, your company?

In those areas of our business which are identified as core there will be no
let-up in the programme to narrow the focus, to operate more efficiently and
to reduce cost. We shall only invest where we can earn a sustainable return
and where that business can make a meaningful contribution to real profit
growth. At the same time we shall work to extend our product range, to develop
new products and to build better relationships with our customers so that we
remain, or become, their supplier of choice. Where we perceive opportunities
for faster growth, as with Primark, we shall work and invest to achieve that
growth.

At the same time we recognise the need to invest in new areas of growth and
this must inevitably include acquisitions. But we intend that these moves will
be focussed into areas where we have adjacent skills and culture. As I have
said the acquisition of British Sugar secured ABF's growth for the 1990's. I
cannot guarantee an equally stunning acquisition for this year or next but the
same rigorous due diligence process continues to be and will be applied to any
future acquisition. We seek to identify companies which will provide good
management and the opportunity to generate sustainable future profit growth
and also to add a substantial value added segment to this company's
operations.

It would be relatively easy to make a substantial acquisition by agreeing to
pay a premium that would dilute future earnings for several years. We will not
do this. The right acquisition is the right company acquired at the right
price at the right time for ABF. Another focus for your executive management
is to build for the future a strong and talented management team. This is
being done both by internal development and external recruitment. A programme
is in place to promote the development of our younger and abler managers and
to benchmark their performance. As of this year, we have implemented, company
wide, a demanding but rewarding management incentive scheme based on annual
performance targets over a three year vesting period. This will be backed up
by the new executive share option plan which will be put to you for approval
at this meeting.

As you will have gathered from reading your annual report and from what you
have seen and heard today, there is a great deal happening in your company.

It is happening because if we don't change this company, events will change
us. And not for the better.

At the present time, it is too early to forecast the outturn for the year. We
set our budgets to achieve an increase in like for like operating profits
ahead of inflation. As you are aware, this autumn in the UK has been one of
almost continuous disruption from weather, fuel blockades and transport chaos.
This has inevitably reflected itself in falling consumer confidence.
Nevertheless, at the present time we are in line with our overall budgets.

We live in demanding and difficult times but they are also exciting times and
bring great opportunities.

The founder of this business, Garfield Weston had, as his personal motto, 'tis
not the gales, but the set of the sails that determines the way you go'.

We have set our course and plan to hold to it.

                                     ENDS

For further information, please contact:

Harry Bailey, Chairman

Tel: [phone]