AGM Statement

Associated British Foods PLC
7 December 2001

7 December 2001

                         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:

The report and accounts for the year to 15th September have been in your hands
for some weeks. The content of the report has been expanded this year to
assist shareholders to understand the widespread activities of the group and
the contribution made by each of its operating sectors. I do not propose to
re-visit the detail contained in the accounts before you, but rather to
highlight some of the driving forces behind the changes which are taking place
in your company as it seeks to focus on future growth.

The challenge for any mature business in the low inflation environment of
recent years has been to achieve sustainable real growth. During the 1990's
growth in the developed economies was largely driven by the technology-based
sectors. From 1995 to 2000 technology linked output in this country rose by 37
per cent whilst output in the rest of manufacturing fell 1 per cent. For
companies such as ours primarily involved in the staple food industries with
flat or even declining consumption, excess industry capacity, relentless
competition and powerful retail customers, the challenge has been to adapt
constantly.

One of the great strengths of ABF throughout its history has been its
diversity. Diversity in terms of activity and in geography. Today, however,
diversity can be a source of weakness as well as strength if some parts act as
a drain on the investment and management resources of the combined group.

In the past two years the thrust has been to reduce diversity and to increase
the concentration on those parts of the group which will add value to the
whole. This has been accompanied by a clear communication of our growth
objectives to senior managers and by obtaining their commitment to those
objectives, with a significant element of remuneration being linked to
achievement of plan objectives.

As you have seen from your annual report, the company is now segmented into
five business categories:


  * Primary foods and agriculture

  * Ingredients and oils

  * Grocery

  * Retail and packaging and

  * Australia and New Zealand representing our 80 per cent interest in
    George Weston Foods.

Representing as they do, every aspect of the food supply chain from the farm
gate to the supermarket shelf, together with the facility to clothe the family
at everyday low prices, the operations of our company offer a unique
diversity. But there is an underlying philosophy which runs through all of
these activities.


  * Each of our business segments must enjoy a sustainable and
    differentiated business advantage against its competition.

  * The offer to our customers must be such that the customer is as eager to
    trade with us as we are with the customer.

In primary foods and agriculture, whether in the UK, or overseas in China and
Poland, our competitive position is based on the complete customer service
offered by our companies from know-how through to application and procurement
and on to processing and distribution.

In the UK:


  * With a turnover in excess of £1.7 billion, we have the largest
    representation in UK agribusiness.

  * Working with farmers, growers, processors and retailers, we are today:


        No.1. in arable products

        No.1. in animal feed, and

        No.1. in grain processing.


  * Through Clickagri, we have created one of the first purchasing sites for
    agricultural farming inputs.

  * We are leading the way in setting up partnerships for safe and traceable
    farming supplies in the UK food chain.

  * We are working closely with all the links in the food supply chain to
    promote greater trust and co-operation and a better perception of UK
    farming in the eyes of the consumer.

Overseas, in China and Poland:


  * We produce the highest quality sugar at lowest cost.

  * We operate from highly efficient factories with technology that is
    superior to our competitors.

In ingredients and oils, here in the UK and overseas:

Our Abitec companies operate a policy of constant new product development
focussing clearly on particular customer needs. If we can supply an
ingredient, specifically tailored to solve a customers problem, that gives us
the opportunity to develop long-term relationships and profit growth.

An example of this has recently occurred in our enzymes company. One of our
customers had developed a novel (chemical free) oil refining process giving a
purer product with reduced effluent. However, their existing enzyme technology
did not perform the task efficiently enough to make this process economic and
they asked us for help. Using our knowledge skills in microbiology and
biochemistry we were able to develop an enzyme that fulfilled their
requirements. As a result, our customer has been able to patent this novel
technology in a variety of countries and they expect it to be the dominant
technology for the next decade. Every customer using this process will be
using an enzyme produced by our company - a base for our future growth.

Similarly in the USA we have through our expertise in solubalising large
protein molecules been able to develop a variant of a major drug treatment for
a pharmaceutical customer which enables that drug to be delivered orally
rather than by injection. This development has improved the delivery
effectiveness and lowered treatment costs giving us a long-term relationship
with the customer and a road to further sales and profit growth.

These are but two examples which illustrate the continued successful
development of this very exciting part of our business.

In grocery, we have committed to leadership positions in the markets or
product sectors in which our grocery businesses operate. Thus our quality
brands:

Twinings

Ryvita

Silver Spoon

Allinson & Kingsmill

are recognised and trusted by the consumer, being well differentiated from
competitive products and capable of delivering long-term growth in market
share and profitability. We are constantly seeking innovation in our product
range and packaging to sustain customer interest and loyalty to these products
over the long term.

Twinings (founded in 1706) is now the largest quality tea company in the world
marketing its products in over 100 countries.


  * It has developed the largest range of speciality teas in the world with
    a philosophy of continuous innovation in its products and blends.

  * Innovating outside its traditional markets, it is the number one UK
    brand for herbal and fruit teas and is now market leader in the rapidly
    growing green tea market.

  * The distinctive black and gold packaging has been developed not only to
    sustain consumer interest, but also to prolong product freshness.

Silver Spoon, the leading brand in the sweetener market now has the largest
range of sweeteners in the UK including a new generation low calorie
sweetener.

Through the growth of its Kingsmill and Allinson brands, Allied Bakeries has
now expanded its branded volumes to a 70 per cent share of total output from
less than 60 per cent 3 years ago.

Critical to our success with these grocery brands are our relationships with
the retailer, the wholesaler and the foodservice distributor, understanding
the crucial roles they play in presenting our brands and product ranges to the
end consumer.

In retailing our competitive advantage has been sustained through the unique
value of our clothing offer in terms of price, quality and fashion.

Even two years ago, Primark as a retail brand was largely unknown. Today, the
name Primark is synonymous in much of the country with the value range of the
rapidly growing discount clothing market. Our modern well located stores are
now a feature of the high street in many of the UK's major cities and towns.
It would be no exaggeration to say that we are the standard setters in the
high street discount clothing market. As the Financial Times stated in an
article as recently as 7th November 'Primark has built a reputation for
competitive prices the customer finds difficult to resist'.

The recent growth in sales, profits and market share of this remarkable
company are a perfect demonstration of:


  * having a differentiated and sustainable business advantage, and

  * having customers as eager to trade with us as we are with them.

In each of these business categories that I have reviewed with you this
morning, we target that each segment generates positive cash flow and develops
a critical mass which can make a meaningful contribution to ABF's future
growth.

In selecting these building blocks of our future growth, we have had to divest
other businesses which whilst perfectly viable did not meet our criteria.

In the past two years we have sold our interests in:


  * rice and edible oils processing

  * ice cream, starch, jam and biscuit manufacture and

  * pig breeding and growing

realising proceeds in excess of £200 million and generating an overall profit
on sale.

As well as disposing, we have re-structured and invested to increase the focus
and efficiency of those activities which now form our new business categories.

In the space of two and a half years we will have reduced:


  * the number of flour mills from 13 to 9

  * the number of sugar factories from 9 to 6

  * the number of bakeries from 19 to 13

Despite these closures, we have retained the same production volume capacities
whilst significantly lowering our cost base.

At the same time we have put in place a programme to implement purchasing
synergies across our UK operating companies. This initiative has included
trialling internet ordering aimed at direct cost reductions, increased
information flow and lower administrative costs. Savings in our last financial
year were running at an annual level in excess of £12 million.

But whilst restructuring to reduce our cost base, we have also invested for
future growth.

British Sugar has:


  * invested in a new resin separation plant at its Wissington factory at a
    cost of £25 million to improve yields and release new products, and

  * acquired 4 sugar factories in Poland and 2 in China and we now produce
    half a million tonnes of sugar across both countries.

Primark will have:


  * opened some 30 new stores, taking the total number of stores to 114
    trading from some 2 million square feet of selling space.



In all, we have invested some £400 million in new facilities equipment and
technology in the last two years. In that same period we have spent a further
£200 million on acquiring businesses to complement and extend our existing
activities.

You have heard of the background to the decisions which have shaped ABF as it
is today and going forward. What of that future?

The seemingly endless growth in consumer spending of the 1990's promoted by
technology-led productivity gains, declining inflation and rising stock
markets was bound to falter eventually. As the saying goes: 'no tree grows to
the sky'.

Even before the terrorist atrocities of September 11th, in the US, the level
of consumer confidence in the developed economies was under pressure. Growth
in the US, the euro-zone and Japan has stagnated against a background of
excess capacity falling investment and declining stock markets.

The effect of the terrorist attacks in September has been to exacerbate the
decline in confidence not only of the consumer but of industry and commerce at
large.

Although we have witnessed some recovery from the lows reached in October, in
my view the world is in for a period (perhaps prolonged) of low inflation,
flat demand and declining growth. There may even be a threat of deflation, as
is now being experienced in Japan where due to deep-rooted consumer
uncertainty about the future the resistance to spending becomes endemic.

I believe, however, that the economies of the US and Europe are sufficiently
soundly based and the consumer sufficiently resilient to make this a remote
eventuality. In addition, US and European central banks including the Bank of
England have moved swiftly and decisively to reduce interest rates.

As a company, we are fortunate to be involved in supplying the basic
essentials of people's lives. Our task is to deliver those basic essentials at
best cost and best quality with best efficiency and in doing so to add value
for our shareholders. As you heard in the video, Thomas Twining's advice 270
years ago was:

            'Always sell the best but always sell it at a profit'.

You have heard today just how much effort is going into achieving that
objective.

We have made great strides in improving the focus of our activities. We will
continue this programme. We must continue to increase our responsiveness to
the customer, we must increase the speed of product innovation and development
and we must continue to lower our costs. And we will.

Current Year

It is still early in our current financial year and the all important
Christmas period lies ahead. Despite the uncertain outlook, we have budgeted
for a further increase in operating profit. The programme to strengthen our
management focus is on target and I believe will continue to deliver improved
operating results. I have already referred to the general reduction in
interest rates and this must adversely affect the level of investment income
in the current year. However, in the absence of major unforeseen events
outside our control we are planning to deliver further growth in earnings.

Because we have concentrated on those businesses which add value and generate
a positive cash flow, Associated British Foods operates from a uniquely strong
financial base. We will broaden and strengthen further our operating base and
we will use our financial resources to acquire new businesses to complement
and enhance our selected growth segments.

I often read in press and analysts reports that ABF won't be re-rated until it
invests its cash pile. Well, other companies have spent cash balances but they
haven't always enjoyed the re-rating.

It is our job to invest wisely and if that means being patient - then patient
we will be.

Ladies and gentlemen I stand before you each year and talk of the problems
which this company has had to meet and warn of the challenges that lie ahead.
The other side of this particular coin is that we are used to adversity, we
are used to challenges and we are receptive to change. The history of ABF has
been one of successfully adapting to change. This is why it has continued to
grow and prosper and why I believe it will continue to grow in the future.

                                   - End -

For further information, please contact:

Harry Bailey, Chairman

Tel: [phone]