in-progress review draft market... · extensive import/export trade data was fed through a...

TARGET MARKET OPPORTUNITIES IN ASIA FOR PORK Part of Asia Market Success, April 2016

IN-PROGRESS REVIEW DRAFT Pre-release copy of significant commercial value to industry Document contains incomplete & in-progress research for comment For named reviewer/firm only; do not duplicate or distribute

RECIPIENT

FIRM

IINNHHEERREENNTT LLIIMMIITTAATTIIOONNSS

This work was commissioned by the Department of Agriculture and Food Western Australia (DAFWA), with funding through the State Government’s Royalties for Regions program and prepared by Coriolis. This work is based on secondary market research, analysis of information available or provided to Coriolis by our client, and a range of interviews with industry participants and industry experts. Coriolis have not independently verified this information and make no representation or warranty, express or implied, that such information is accurate or complete.

Projected market information, analyses and conclusions contained herein are based (unless sourced otherwise) on the information described above and on Coriolis’ judgement, and should not be construed as definitive forecasts or guarantees of future performance or results. Neither Coriolis nor its officers, directors, shareholders, employees or agents accept any responsibility or liability to readers or recipients of this report other than DAFWA or people other than DAFWA who rely upon it (described below as Recipients) with respect to this document.

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2

FFIINNAALL vv110000;; AApprriill 22001166

SCREENING OVERVIEW In Phase One of the Target Market Opportunities in Asia for WA Premium Products Report (TMO Report), extensive import/export trade data was fed through a multi-stage screening process to “hone-in” on potential opportunities for Western Australia; stakeholder interviews also fed into this process

3

STRUCTURE OF MULTI-STAGE SCREENING PROCESS USED IN THIS PROJECT Model; 2016

INDIVIDUAL FIRM ROLE & RESPONSIBILITY STAGE I STAGE II STAGE III STAGE IV

PLATFORM PRODUCT POSITIONING TARGET MARKET

FIT WITH WA

WA INDUSTRY-GOOD RESEARCH

9 PLATFORMS

679 TRADE CODES

47 QUAL/QUANT

SCREENS

Project does not attempt to address firm-level operational or executional activities: -  R&D

-  Product development

-  Sourcing & supply chain

-  Production & operations

-  Marketing & branding

-  Sales & sales structure

-  Capital structure

-  Negotiation

-  Distributor appointment

20 OPPORTUNITIES

YOU ARE

HERE

4 This project is focused on “market demand” from the following twenty-four Asian/Middle Eastern markets

Note: Complete list for analysis purposes, some countries excluded from list if no/limited trade data available (e.g. Iran)

24 COUNTRIES DEFINED AS HIGH POTENTIAL TARGET MARKETS FOR WESTERN AUSTRALIA Target markets; 2015

MIDDLE EAST

Bahrain Egypt Israel

Jordan Kuwait

Lebanon Oman Qatar

Saudi Arabia UAE

24 defined target markets for this project

4

SOUTH ASIA

India Pakistan Sri Lanka

Western Australia

SE ASIA

China Hong Kong

Japan South Korea

Taiwan Indonesia Malaysia

Philippines Singapore Thailand Vietnam

PRODUCT PROFILE

HS Codes 020311, 020312, 020319, 020630

Product All fresh/chilled meat of pigs (pork); all forms (carcasses, half-carcasses, bone-in cuts/primals, boneless cuts/primals, chilled offal)

Out-of-scope Live; frozen; dried; processed/cured; canned; ready-meals; other processed foods

Origin Among the first animals to be domesticated by humans; domesticated approximately 13,000 BC in the Middle East

Example ingredients

Pig meat

Forms/usage -  Roasted or barbecued (part or whole)

-  Fried; stir fried; similar

-  Baked

-  Ingredient or flavouring in a wide range of processed foods (e.g instant noodles)

-  Wide range of other uses

Drivers of consumer/market success

-  Very strong cultural component to consumption; very high consumption in East Asia and non-Muslim parts of SE Asia, particularly China

-  Suitable for processing into a wide range of value-added products

-  Rich, strong, distinctive flavour; comfort food for some people (e.g. bacon)

WHAT IS THE PRODUCT? Chilled pork emerged in Phase I as one of twenty “high growth, high potential” opportunities for Western Australia; pork is a meat used in a wide range of dishes and cuisine styles

5 Source: photo credit (Dollar Photo); Coriolis analysis

PRODUCT OVERVIEW Example; 2016

DOCUMENT STRUCTURE

What is the global situation?

What is the strategic situation in the market?

In this environment, what is the opportunity for Western Australia?

Who are the potential in-market partners?

Who are the key firms in Western Australia capable of delivering?

6

Global pork production occurs predominantly in China, Europe and the Americas

7 Source: UN FAO AgStat database; Coriolis classification and analysis

DISTRIBUTION OF GLOBAL PORK MEAT PRODUCTION Tonnes; 000; 2013

Australia Americas Europe Other E Asia

SE Asia

19,662

Brazil 3,280

361

Australia 361

Canada 1,977

7,653 56,181 1,992

Mexico 1,284

27,185

USA 10,510

Philippines 1,681

Spain 3,431

Other SE A

sia 1,787

Viet Nam 3,218

China 52,733

Other Europe 13,323

Russia 2,816

Thailand 967

Other

1,992 Other Americas

1,646

Other E Asia 1,132

Argentina 416

Chile 550

Germany 5,494

Japan 1,309

France 2,121

S. Korea 1,007

Global pork production is increasing long term, with all major producers, including Australia, increasing production

8 * Data is meat production; excludes live exports (measured at destination); Source: UN FAO AgStat database; Coriolis classification and analysis

52 YEAR DISTRIBUTION OF GLOBAL PORK MEAT PRODUCTION* Tonnes; 000; 1961-2013

Other E Asia

USA

Other Europe

Philippines

Canada

Brazil

Russia

Argentina

Other

1974

1975

1976

1973

1970

1971

1972

1977

1982

1983

1984

1981

1978

1979

1980

Mexico

1961

1962

52y ABS

Japan

Viet Nam

Australia 1963

1967

1968

1969

China

1964

1965

1966

1985

200

3

200

4

200

5

200

2

1999

200

0

200

1

200

6

2011

2012

2013

2010

200

7

200

8

200

9

1989

1990

1991

1988

1986

1987

Germany

1992

1996

1997

1998

1995

1993

France

1994

Spain

S. Korea

Other SE Asia

Other Americas

Thailand

60,723

63,425

59,968

55,480

57,489

70,556

72,340

69,655

66,897

67,976

40

,752

42,950

41,672

40

,472

42,4

32

52,993

53,199

52,677 45,64

4

50,0

86

73,791

99,991

102,94

4 97,187

92,762

94,4

85

111,398

113,035

108,0

17

104

,965

107,571

78,279

83,159 77,546

76,105

77,171

88,921

92,270 86,4

63

84,4

99

86,036

40

,625

521 229

2,746

1,443 862

933

6,875

3,192

1,287 2,823

251

5,336

-888

31,285

32,413

28,678

26,056

28,017

35,797

39,418 34

,122

33,865

34,4

03

838 1,560

1,475

1,580 2,968

51,363

24,74

9

1,103 846

944

Over the past decade, pork production growth has been driven by China


10 YEAR PORK PRODUCTION GROWTH MATRIX: ABSOLUTE CHANGE VS. RATE OF CHANGE VS. CURRENT NUMBER Tonnes; 000; 2003 vs. 2013

4,000 -2,000 -2%

6,000 12,000 0 10,000 14,000 2,000 8,000

6%

5%

1%

3%

4%

2%

-1%

0%

7%

5,000 France

Other Americas

Spain

Vietnam

Germany

Argentina

Canada

USA

Australia

Brazil

Mexico

China

Other E Asia

S. Korea

Philippines

Chile

Japan

Russia

Other Europe

Thailand

Other SE Asia

Other

10 year CAGR

tonnes; 03-13

10 year absolute change in tonnes 03-13

Bubble scale: tonnes (000); 2014 in 2013; A bubble this size =

SHRINKING

GROWING

All major producers are achieving yield improvements; Australia clearly has yield upside potential

35

45

55

65

75

85

95

1961 1962 1963 1964

1965 1966 1967 1968 1969 1970

1971 1972 1973 1974

1975 1976 1977 1978 1979 1980

1981 1982 1983 1984

1985 1986 1987 1988 1989 1990

1991 1992 1993 1994

1995 1996 1997 1998 1999 20

00

20

01

200

2 20

03

200

4

200

5 20

06

200

7 20

08

200

9 20

10

2011

2012

2013


MEAT YIELD PER ANIMAL: AUSTRALIA VS. SELECT COUNTRIES Kg/head; 1961-2013 Chile

Australia China

Vietnam

0.8%

0.8% 1.1%

0.7%

52y CAGR

Canada 0.8% USA 0.8%

+25%

Kg/head

DOCUMENT STRUCTURE






11

Companies identified chilled pork as the opportunity, with an increasing focus on case ready

“Opportunity for more shelf-ready pork products.”

“We need to look for chilled opportunities beyond Singapore, no access for chilled pork into China.”

“Free range pork into Asia is an opportunity. We need to sell the story, the message around the whole system.”

“Fresh pork into Asia is an opportunity.” “Mixed success with chilled carcasses.”

12

Within the Pork Opportunity, chilled pork was identified as the largest opportunity for Western Australia; the trade codes are defined as follows

13

IN SCOPE OUT OF SCOPE

Pork, chilled carcass Pork, frozen carcass

Pork, chilled cuts Pork, frozen cuts

Pork, chilled nes Pork, frozen nes

Pork, chilled offal Pork, frozen offal

TRADE DESCRIPTION BY TEMPERATURE STATE

Western Australia has the potential to grow chilled pork exports to Asia

14

-  Asian chilled pork import value is rising, driven by a combination of increased volumes and growing prices -  Asian/Middle East chilled pork import growth is coming across a range of products; however, chilled nes (Not Elsewhere

Specified; a catch-all other code) is the largest -  Asian/Middle East chilled pork import supply is currently dominated by the US and Canada

-  The USA and Canada have been capturing most value growth over the past decade -  While the USA and Canada stand out for driving total export growth over the past five years, Chile and a number

of European countries stand out for rate of growth -  Average FOB price to target Asian markets vary by supplier, with the USA appearing to set the pricing lead

-  Japan is currently the key Asian/Middle East market for chilled pork; other Tier II markets include South Korea, Hong Kong, Singapore and China

-  Over the past ten years, value growth in chilled pork trade into Asia/Middle East has come predominantly from Japan

-  Japan is driving absolute trade growth, while China stands out for strong growth off a low base; all other markets shrinking or microscopic in size

-  Average chilled pork import prices vary by country, with Japan standing out as a large market paying premium prices

-  Imported chilled pork consumption and aggregate chilled pork imports appear correlated with income per capita in East Asian countries with some form of “S-Curve” take-off at $30k/capita; South Korea, Taiwan and China stand out as having strong long-term growth potential

-  Market share varies by country; Australia is strong in Singapore and has extensive opportunities elsewhere -  Western Australia has a strong position in Singapore and good potential for further share growth across a number of

large markets -  Data supports new high value, premium chilled pork opportunities being initially launched in (1) Singapore, (2) Hong

Kong and (3) South Korea -  As a “Straw Man” for discussion, we identify an export market roll-out plan

$-

$500

$1,000

$1,500

$2,000

$2,500

200

4

200

5

200

6

200

7

200

8

200

9

2010

2011

2012

2013

2014

Asian chilled pork import value is rising, driven by a combination of increased volumes and growing prices

0

50

100

150

200

250

300

350

400

450

200

4

200

5

200

6

200

7

200

8

200

9

2010

2011

2012

2013

2014

15 * Compound Annual Growth Rate; Source: UN Comtrade database; Coriolis analysis and classifications

VOLUME T; 000; 2004-2014

$-

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

200

4

200

5

200

6

200

7

200

8

200

9

2010

2011

2012

2013

2014

AVERAGE PRICE PER KILOGRAM US$; 2004-2014

VALUE US$m; 2004-2014

CAGR* 4%

CAGR 3%

CAGR 7%

TOTAL IMPORTS TO ASIA/MIDDLE EAST TARGET REGION (24 COUNTRIES)

Asian/Middle East chilled pork import growth is coming across a range of products; however, chilled nes (Not Elsewhere Specified; a catch-all other code) is the largest

16 Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications

EXPORT VALUE TO TARGET REGION BY TRADE SUB-CODE US$m; FOB; 2004-2014

2014 2010 2013

10y ABS

Pork, offal chilled

Pork, chilled carcass

2009

Pork, chilled nes

2011 2006 2007

Pork, chilled cuts

2005 2004 2012 2008

$1,930

$15 $15 $19

$1,179

$1,845

$1,073

$1,272

$1,437

$1,523 $1,518

$952

$1,836 -$83

$18

-$17

$1,864

+$15

+$1,062

$22

$63

$97

$64

$65

$99

$117

$131

$136 $121

$33

$168

$192

$148

$145

$90

$58 $30

$59

$53

$133

$1,800

$2

$1,682 $1,731

$7 $19 $16 $9 $7

$1,640

$737

$857

$56

$48

$906

$1,241 $1,331

$975

$1,274

CAGR 7%

Asian/Middle East chilled pork import supply is currently dominated by the USA and Canada

17 NA/ME/CA = North Africa/Middle East/Central Asia; Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications

EXPORT VALUE BY SUPPLIER TO TARGET REGION US$m; FOB; 2014

Europe

Australia Americas

Other

E/SE Asia

$1,701 $44

Ireland $28

$0

USA $1,045

Australia $4

4

$140

Other Americas $0

$43

Other Europe $23

Spain $18

Other E/SE Asia $0

Vietnam $0

Other $0

Thailand $2

France $6

Chile $13

Mexico $63

Denmark $41

China $41

Canada $581

Italy $24

TOTAL = US$1,930m

The USA and Canada have been capturing most value growth over the past decade


EXPORT VALUE BY SUPPLIER TO TARGET REGION US$m; FOB; 2004-2014

2009 Other E/SE Asia

2005 2013 2004

Australia

Thailand

2010

Vietnam

2008

Other

USA

2007 2011 2012

China

Other Americas

2014 2006

Canada

Ireland

Mexico

France Spain

10y ABS

Chile Denmark

Other Europe Italy

+$379

-$44

$0

$4

$1,836

+$62

$1

$1,845

+$426

$0

$0

$0

$0

$1,864

$6 $1

$5

$8 $11 $8 $9 $5 $0

$2

$11 $19

$41 $12

$13

$1,930

$4 $2

$13

$0 -$0 -$21 $68

$1,179

+$20 +$5 $1

$52 $55

$952

$24 $47 +$41 $49

$1,073

-$4 -$0 $5

$46

+$37 +$0

$1,437

$0 $0

+$13

$0 $0

$1,523

$0

$1,272

$41

+$23 $1

+$14

$0

+$27

$0

$1,518

$44 $46

$23 $32

$41 $39 $34 $34

$1 $0 $1 $11 $6 $13

$28 $14 $13

$10 $23 $13 $10

$294

$322

$201

$254

$4 $3 $2

$36

$63

$7 $9 $3

$5

$618

$680

$40

$44

$927

$888

$715

$748

$45

$76

$73

$89

$61

$59

$56

$61

$60

$0 $0 $0

$0

$6 $16

$0

$1

$0

$1,147 $1,134

$916

$1,133

$0 $0

$1,045

$0

$397

$0 $0 $2 $1 $0

$21 $0 $0 $1 $3 $4 $5

$4

$1 $1

$24

$1 $9 $6

$0 $6

$1 $0 $4

$5 $0 $23 $0 $21 $11

$1 $0 $11 $5 $4 $3 $2 $3 $3 $6 $5 $4

$2

$487 $506

$364 $428

$1 $2

$506

$581

$1 $1 $10

$18 $5 $4

$1 $1

$17

$8 $10

$4 $3 $5

$12 $5 $3

CAGR 7%

+978

While the USA and Canada stand out for driving total export growth over the past five years, Chile and a number of European countries stand out for rate of growth


FIVE YEAR EXPORT GROWTH MATRIX: CHANGE IN VALUE VS. RATE OF GROWTH VS. ABSOLUTE VALUE US$m; 2009 vs. 2014

$100

20%

$200

30%

$150 $0 -10%

10%

0%

$-50

50%

$250 $50

40% Denmark

Canada

Italy

Ireland

France

USA

Australia $200m

Mexico

Other Americas

Other E/SE Asia

Thailand

Chile

China

Other Europe

Spain

Vietnam Other

5y absolute change in value

5y CAGR

Bubble scale: US$m; 2014 A bubble this size=

Average FOB price to target Asian markets vary by supplier, with the USA appearing to set the pricing lead


AVERAGE EXPORT VALUE COST CURVE BY SUPPLIER US$/kg; t; FOB; 2014

Italy

China

Other

Thailand

Mexico

Spain

Canada

Australia

Denm

ark

Other Europe

Other A

mericas

Ireland

USA

France

Chile

Other E/SE A

sia

Vietnam

$2.21

$2.06

$2.75

$2.35

$1.87

$2.22

$4.56

$3.70

$3.04

$4.87

$2.92

$5.12

$4.10

$5.60

$2.95

$4.22

$5.26

Average FOB

value

Volume imported by defined target market

Japan is currently the key Asian/Middle East market for chilled pork; other Tier II markets include South Korea, Hong Kong, Singapore and China


IMPORT VALUE BY MARKET BY REGION US$m; FOB; 2014

SE Asia

NA

/ME/C

A

Indian Sub

East Asia

Qatar $0

$0

Kuwait $0

$2

Bahrain $0

Vietnam $0

UAE $2

$56

Indonesia $0

$1,871

Philippines $7

Hong Kong SAR $62

South Korea $106

India $0

Malaysia $1

Taiwan $1

Singapore $46

Japan $1,675

Saudi $0

Other $0

China $27

Thailand $2

Other $0

TOTAL = US$1,930m

Over the past ten years, value growth in chilled pork trade into Asia/Middle East has come predominantly from Japan


IMPORT VALUE BY MARKET BY REGION US$m; FOB; 2004-2014

2012

South Korea

2010

China Taiwan

2011 2009

Other SE Asia

2013 2005 2004

Singapore

Japan

Philippines

Mid-East/Indian Sub

10y ABS

Hong Kong SAR

2008 2007 2006 2014

$1,864

$73

$32

$1,836

$78

$78

$1,930

$26

$56

$88

+$837

$37 +$92

$38

$1,073

$47

$952

$27

+$6

-$3 +$2

-$9

+$33

+$1

+$19

$8

$1,523

$8

$1,437

$62

$70

$1,845

$62

$12

$13

$1,179

$8

$5

$1,518

$6

$1,272

$58

$67

$60

$59

$69

$4

$4

$47

$55

$55

$1

$1

$7

$4

$2

$40 $45

$1

$46

$4

$2

$2

$2 $1

$2

$1

$2

$2

$2

$2

$3

$16

$5

$2

$2

$2

$2

$1

$4

$106

$80

$5

$4

$122

$78

$98

$152

$74

$3

$2 $7

$29

$1

$13

$1

$1

$5

$2

$83

$931

$838

$1,055 $1,007

$7

$10

$20

$3 $7

$1,248

$14 $1,675

$64

$38

$1,606

$1,280 $1,199

$1,569

$1,474

CAGR 7%

Size of bubble = US$m; 14 A bubble this size=

Japan is driving absolute trade growth, while China stands out for strong growth off a low base; all other markets shrinking or microscopic in size


FIVE YEAR IMPORT GROWTH MATRIX: CHANGE IN VOLUME VS. RATE OF GROWTH VS. ABSOLUTE VALUE US$m; t; 2009 vs. 2014

30,000 20,000

20%

10,000 -20,000

30%

-10,000 0

25%

80,000

5%

0%

-5%

-10% 70,000 50,000 40,000

15%

60,000

10%

Jordan

South Korea

Sri Lanka China

$200m

Bahrain

Indonesia

Japan

Hong Kong SAR

Thailand Qatar

Vietnam

India

Singapore

UAE

Philippines

Malaysia

Lebanon

Taiwan

Oman

5y absolute change in volume

5y CAGR Value

Average chilled pork import prices vary by country, with Japan standing out as a large market paying premium prices


AVERAGE IMPORT VALUE COST CURVE BY MARKET/REGION US$/kg; t; FOB; 2014

Malaysia

Qatar

Vietnam

Bahrain

Singapore

Om

an

Indonesia

Sri Lanka India

United A

rab Emirates

Lebanon

South Korea

Hong K

ong SAR

Thailand

Japan

Taiw

an Philippines

China

$5.03

$4.21

$1.71 $2.50

$1.80

$3.80

$3.77

$5.19

$3.05

$4.11

$12.54

$1.70

$1.46

$5.86

$2.15

$3.75

$2.75 $2.07

Volume imported

Average import

value

Imported chilled pork consumption and aggregate chilled pork imports appear correlated with income per capita in East Asian countries with some form of “S-Curve” take-off at $30k/capita; South Korea, Taiwan and China stand out as having strong long-term growth potential

25 Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Wikipedia (GDP/capita); Coriolis analysis and classifications

MARKET SIZE DRIVERS: GDP PER CAPITA VS. IMPORTS PER CAPITA VS. MARKET SIZE Kg; US$; t; 2014

2.0

$10,000

1.0

$60,000 $0

2.5

1.5

$30,000

0.5

$40,000

3.0

0.0 $20,000 $50,000

Jordan

UAE

South Korea

Kuwait

Sri Lanka

China Bahrain

50,000

Indonesia

Japan

Hong Kong SAR

Saudi Arabia

India

Taiwan Oman

Philippines

Qatar

Malaysia

Thailand

Lebanon

Singapore

Vietnam GDP per capita

Imports per capita

Bubble scale: tonnes; 2014 A bubble this size=

Market share varies by country; Australia is strong in Singapore and has extensive opportunities elsewhere


IMPORT VALUE MARKET SHARE BY SUPPLER US$m; FOB; 2014

South Korea

Hong K

ong SAR

Japan

Other E/SE A

sia M

id-East/India

Singapore

China

Other $0

Other $1

$62

$46

$1,675

$106

$27

China $41

Other $2

$11 $2

Europe $78

USA $33

USA $3

USA $0

USA $1,004

Canada $8

Canada $1

Canada $0

Australia $2

Australia $42

Australia $0

Australia $0

USA $4

USA $1

USA $0

Europe $9

Europe $2

Chile $12

Europe $15

Europe $22

Europe $12

Europe $2

Canada $26

Canada $1

Canada $1

Canada $543

Chile $0

Mexico $51

Mexico $12

TOTAL = US$1,930m

Western Australia has a strong position in Singapore and good potential for further share growth across a number of large markets


AUSTRALIAN IMPORT VALUE MARKET VS. MARKET VALUE % value share; US$m; FOB; 2014

South Korea

Thailand

Kuw

ait

Hong K

ong SAR M

alaysia

Singapore

Indonesia

Japan

Taiw

an

Jordan India

Saudi Arabia

UA

E

Philippines

China

Lebanon Q

atar Bahrain

Vietnam

Sri Lanka

Om

an 0

%

0%

0%

0%

0

%

0%

0%

0

%

0%

0

%

93%

0%

0%

9%

5% 0

%

0%

0%

0%

3%

Total value of imports

Australian market share

Bubble scale: US$m; 2014 A bubble this size=

Data supports new high value, premium chilled pork opportunities being initially launched in (1) Singapore, (2) Hong Kong, (3) South Korea


WHERE TO FOCUS FOR NEW HIGH VALUE, PREMIUM PRODUCTS: AU SHARE VS. AVERAGE VALUE VS. MARKET SIZE % of value; US$; US$m; 2014

0.0% 0.1%

$4.00

0.0%

$1.00

0.0%

$5.00

$2.00

100.0%

$6.00

10.0% $0.00

1.0%

$3.00

Taiwan

Oman

Vietnam

Qatar

Indonesia

Hong Kong SAR

$200

Malaysia

UAE

Bahrain

China

Sri Lanka Singapore

Japan

Thailand

Philippines

India

Lebanon

AU share of total import value [NOTE: LOGARITHMIC]

VALUE Average

FOB $/kg 2014

1

2

South Korea 3

As a “Straw Man” for discussion, we identify an export market roll-out plan

29

PRELIMINARY “STRAW MAN” DEVELOPMENT & ROLLOUT PLAN FOR CHILLED PORK OPPORTUNITY Model; 2016

1 Export launch in Singapore

2 Export launch in Hong Kong

3 Export launch in South Korea

0 Product development and testing

-  High income, sophisticated market and consumers

-  AU already has a strong market position on which WA can build

DOCUMENT STRUCTURE






30

Western Australia can grow chilled pork exports to Asia

31

IS THE MARKET DEVELOPED & COMPETITIVE?

-  The flow of chilled pork from the farm through to the consumer is relatively straight forward and simple

-  Chilled pork prices are attractive in Asia

-  Asian supermarkets generally have a much less developed chilled pork range and offer than key Western countries

WHAT IS WA CAPABLE OF DELIVERING?

-  Western Australian processors need to continue to move forward through improved product development and presentation

-  Multiple potential positions exist to develop a premium chilled pork offer for Asia

-  Products from other processors in other markets demonstrate what is possible in terms of developing a premium Western Australian chilled pork offer

-  There are a wide range of potential product positions or claims available for a premium chilled pork product from Western Australia targeting Asia

-  As a “Straw Man” for discussion, we identify an opportunity for a high value, premium chilled pork product with select characteristics for export market launch

HOW IS THE MARKET STRUCTURED? The flow of chilled pork from the farm through to the consumer is relatively straight forward and simple

32 Source: Coriolis

SIMPLIFIED MODEL OF SUPPLY CHAIN: CHILLED PORK Model; 2016

Retailers

Foodservice & Institutional

Exports

Wholesalers

Distributor(s) (multi-layered in large markets)

Domestic Processor

Agent/Broker/ Distributor

Packer/Processor Sales/Marketing

In-Market Farmer

Logistics Providers

(Airfreight, Seafreight, Trucking)

WA Pork Processor

Other Australian Processor

WA Farmer

US Processor

Canadian Processor

European Processor

South American Processor

Other Processor

This stage branches and adds multiple layers in large markets

WHO IS THE COMPETITION? PRICING Chilled pork prices are attractive in Asia

$20.97

$26.24

$9.82

$17.15

33 Source: Coriolis from store checks

EXAMPLE: SHELF PRICE PER KG ACROSS SELECT WESTERN & ASIAN MARKETS: PORK LOIN US$/kg; Jan 2016

SELECT SE ASIAN RETAILERS SELECT WESTERN

AU Singapore Hong Kong Australia United Kingdom

WHAT IS ON THE SHELF? RANGE IN MARKET Asian supermarkets generally have a much less developed chilled pork range and offer than key Western countries

74

43

12

9

0

Waitrose (UK)

Wegmans (NY)

Wellcome

Cold Storage

Park'N Shop

34 Source: Coriolis from store checks; photo credit (fair use/fair dealing; low resolution; complete product/brand for illustrative purposes); Coriolis analysis

NUMBER OF CHILLED PORK ITEMS/SKUS AVAILABLE ON SHELF Feb 2016

Driven by current predominance of frozen and continued strength of

wet markets

WHAT IS WA CAPABLE OF DELIVERING? STRATEGIC DIRECTION Western Australian processors need to continue to move forward through improved product development and presentation

35

SUGGESTED STRATEGIC DIRECTION: WESTERN AUSTRALIAN CHILLED PORK Model; 2016

Chilled & frozen carcass sent

Vacuum packed primal/sub-

primal

Australian branded

Marinated, flavoured or

smoked

Free range/organic Ready-meal

India/Pakistan suppliers are here

WA suppliers are here in Asia

High growth, high potential opportunities

are here

EU suppliers are here

Case-ready

WHAT IS WA CAPABLE OF DELIVERING? CLAIMS Multiple potential positions exist to develop a premium chilled pork offer for Asia

36 Source: Coriolis; photo credit (Dollar Photo and Southern Forests Food Council Inc.)

IDENTIFIED POTENTIAL PREMIUM POSITIONS Model; 2016

Identified source region Gift packaging Serving for one High in protein

Organic

Specialty breed

Marinated

Track & trace

HEALTH PROVENANCE INDULGENCE CONVENIENCE

Free to graze/free range

Tender guarantee

Smoked flavour

Oven ready

Ready-to-cook

High in iron

Farmer’s story

Gluten free

Antibiotic free

No added hormones

All natural

No preservatives

No artificial ingredients

WHAT IS WA CAPABLE OF DELIVERING? GLOBAL PEERS Products from other processors in other markets demonstrate what is possible in terms of developing a premium Western Australian chilled pork offer

37 Source: photo credit (fair use/fair dealing; low resolution; complete product/brand for illustrative purposes); Coriolis analysis

EXAMPLES OF PREMIUM PRODUCTS FROM OTHER MARKETS Select; 2016

Case-ready Case-ready Case-ready Case-ready

British pork Free range Extra Lean All natural

British flag British pork Teriyaki marinade Product of USA

“Finest” Simply grill for 18-22 min

Hampshire Cross Bred

No preservatives

No added steroids or growth hormones

Working towards true sustainability

From a small group of carefully selected farmers

Outdoor bred Succulent Always Tender No artificial ingredients

Sustainable farming

Sired by pedigree Hampshire boars

Assured food standards

Plain pork

WHAT IS A POTENTIAL WA OFFER? There are a wide range of potential product positions or claims available for a premium chilled pork product from Western Australia targeting Asia

38 Source: Coriolis; photo credit (Dollar Photo and Southern Forests Food Council Inc.)

HYPOTHETICAL EXAMPLE OF POTENTIAL PREMIUM PRODUCT FROM WA Model; 2016

High in protein High in iron

From Margaret River

Farmer’s story Australian

Flag

Marinated with local flavours

Case-ready

HEALTH

PROVENANCE

INDULGENCE

CONVENIENCE

Bred for tenderness

WHAT IS THE IDENTIFIED OPPORTUNITY? As a “Straw Man” for discussion, we identify an opportunity for a high value, premium chilled pork product with select characteristics for export market launch

39 Source: photo credit (fair use/fair dealing; low resolution; complete product/brand for illustrative purposes); Coriolis analysis

PRELIMINARY “STRAW MAN” DEVELOPMENT & ROLLOUT PLAN FOR CHILLED PORK OPPORTUNITY Model; 2016

CURRENT WA POSITIONING IN ASIA

IDENTIFIED HIGH GROWTH, HIGH VALUE OPPORTUNITY FOR WA

From Margaret River

Farmer’s story

POTENTIAL FUTURE PRODUCT LINE EXTENSION

Bred for tenderness

Marinated

Antibiotic free No added hormones

Certified Organic

Case-ready

Case-ready Free range

Australian flag

Australian pork

Sow stall free

Sustainable farming

Sired by pedigree boars

Assured food standards

Marinated

DOCUMENT STRUCTURE






40

FOCUS MARKET – 1 – SINGAPORE Singapore has a robust and well-developed food retailing and foodservice sector

$5.6

$3.9

$6.3

$1.9

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Turnover Purchases

41 Source: Coriolis from a wide range of sources

TURNOVER & PURCHASES US$b; 2014

ESTIMATED WHOLESALE FOOD & FMCG PURCHASES US$b; 2014

Foodservice Retail

$1.9 $3.9

Online $0.1

Traditional grocery $0.3

Supermarket $2.2

Convenience $0.4

Wet markets, etc. $0.7

Foodservice $1.9

Department stores $0.3

Petrol stations $0.1

Foodservice

Retail 6,500 restaurants,

hawker stalls, hotels, vending machines,

institutions (schools, hospitals, airline caterers,

prisons, etc.)

3.0%

5.0%

Retail

Foodservice

TURNOVER GROWTH RATE % Y-O-Y; HK$; 2013v2014

FOCUS MARKET – 1 – SINGAPORE Four potential in-market partners are identified for Western Australian firms in Singapore

Firm NTUC Fairprice Cold Storage Sheng Siong Prime Supermarkets

Ownership National Trade Union Council (Singapore)

Dairy Farm International (Hong Kong)

Listed; Singapore Private; Singapore

Website www.fairprice.com.sg www.ntuc.org.sg

www.coldstorage.com.sg www.dairyfarmgroup.com

www.shengsiong.com.sg www.allforyou.sg

www.primesupermarket.com

Annual sales US$1.83b US$1.55b US$0.55b US$0.2b

Store formats Supermarket Hypermarket Convenience (Cheers; 139) Online

Supermarket (Cold Storage, Marketplace) Hypermarket Convenience (7-Eleven; 502) Online

Supermarkets Online

Supermarkets

# of stores 285 848 38 19

Store fascia


POTENTIAL IN-MARKET PARTNERS – SINGAPORE 2015 or as available

FOCUS MARKET – 2 – HONG KONG Hong Kong has a robust and well-developed food retailing and foodservice sector

$11.5

$8.0

$12.8

$3.9

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Turnover Purchases




Retail Foodservice

$3.9 $8.0

Foodservice $3.9

CRA $0.3 CRE

$0.2

Wellcome $1.2

AEON $0.6

Drug stores $0.6

Wet markets, etc. $3.0

ParknShop $1.5

Other retail $0.6

Foodservice

Retail 14,000+ restaurants 1,000+ bars & clubs

1,050+ hotels Vending machines

Institutions (1,088 schools, 42 hospitals, 3 main airline

caterers, prisons, etc.)

6.7%

3.5%

Retail

Foodservice

TURNOVER GROWTH RATE % Y-O-Y; HK$; 2013v2014

FOCUS MARKET – 2 – HONG KONG Seven potential in-market partners are identified for Western Australian firms in Hong Kong

Firm Wellcome Park’N Shop CR Vanguard Dah Chong Hong 759 Stores AEON Stores Convenience Retail Asia

Ownership Dairy Farm International/Jardine Matheson

A.S. Watson/ Hutchison Whampoa

CRE/China Resources (SOE; China)

Dah Chong Hong/ CITIC Pacific/CITIC (SOE; China)

Private; Hong Kong (Lam Wai Chun)

AEON (Japan) Fung Group

Website www.wellcome.com.hk www.parknshop.com www.crvanguard.com.hk www.crc.com.cn

www.dch.com.hk

www.759store.com www.aeonstores.com.hk www.aeon.info

www.circlek.hk/en www.cr-asia.com

Annual sales (in HK)

$2.2b+ $2.8b ~$0.8b (food/FMCG) N/A N/A $0.8b $0.4b

Food store formats

Supermarkets 318 Convenience 921 Health & Beauty 369 Restaurants 676

Supermarkets 260+ Convenience

Supermarkets Convenience

Supermarkets Grocery 247+ Dept. stores (w/food) 8 Supermarkets 5

Convenience 600+ Bakery

# of stores Wellcome 280+ Marketplace 31 7-Eleven 900+ Olivers the Delicatessen ThreeSixty

ParknShop 175 PnS Superstore 50+ PnS Taste 10 PnS Fusion 14

CR Vanguard 100+ VanGo 79

DCH Food Mart 80+ DCH Food Mart Deluxe

759 Stores 247+ AEON 13 Circle K Saint Honore Cake

Store fascia


POTENTIAL IN-MARKET PARTNERS – HONG KONG 2015 or as available

FOCUS MARKET – 3 – SOUTH KOREA South Korea has a robust and well-developed food retailing and foodservice sector

$66.1

$46.3

$64.6

$19.4

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Turnover Purchases




Foodservice Retail

Hypermarket $13.0

$19.4

Convenience $3.8

On-Line $2.6

Other $7.7

Department stores $1.7

$46.3

Supermarket $17.5

Foodservice $19.4

Foodservice

Retail 324,000 restaurants, bars

& clubs, 47,573 hotels/motels/etc., vending

machines, institutions (schools, hospitals, airline

caterers, prisons, etc.)

1.7%

3.0%

Retail

Foodservice

TURNOVER GROWTH RATE % Y-O-Y; KRW; 2013v2014

FOCUS MARKET – 3 – SOUTH KOREA Six potential in-market partners are identified for Western Australian firms in South Korea

Firm E-Mart Homeplus Co. Lotte Shopping Co. GS Retail Co. E. Land Retail BGF Korea

Ownership Shinsegae Private Equity (MBK Partners, Canadian Pension Fund, Temasek (SG)

Lotte Group (Korea) GS Holdings (Korea; listed) E Land Group (Korea; listed)

BGF (Korea; listed)

Website www.shinsegae.com emart.ssg.com

www.homeplus.co.kr www.lottemart.com www.lottesuper.co.kr www.7-eleven.co.kr

www.gsretail.com www.gsholdings.com

www.newcore.co.kr www.eland.com

www.bgfretail.com

Annual sales (retail)

US$15.2b

US$10.6b US$18.2b US$5.1b US$2.3b US$2.6b

Store formats Hypermarket Supermarkets Department stores

Hypermarket Supermarket

Hypermarket Supermarket Department stores Convenience stores

Supermarket Convenience Petrol stations

Hypermarket 19 Department stores Clothing stores Restaurants

Convenience 7,939

# of stores E Mart 148 E Mart Everyday 132 Shinsegae

Home Plus 139 Home Plus Express 286

Lotte Mart 108 Lotte Super Market 496 7-Eleven 7,213

GS Supermarket 254 GS25 7,774 GS Caltex

New Core 19 Kim's Club NewCore Outlet, 2001 Outlet DongA Department Store

CU 8,000+

Store fascia (select)


POTENTIAL IN-MARKET PARTNERS – SOUTH KOREA 2015 or as available

DOCUMENT STRUCTURE






47

IDENTIFIED WA COMPANIES

CRAIG MOSTYN GROUP

GD PORK

MILNE AGRIGROUP

ADDRESS: Level 1, 6 Short Street, Fremantle, WA 6160 ADDRESS: 172 Collins Rd, Blythewood, WA 6208 ADDRESS: 103 Welshpool Rd, Welshpool, WA 6106

PHONE: 08 9335 6244 PHONE: 08 9534 1150 PHONE: 08 9351 0750

WEBSITE: www.craigmostyn.com.au WEBSITE: www.gdpork.com.au WEBSITE: www.milne.com.au

48 Sources: Coriolis from a wide range of sources

WESTPORK

ADDRESS: 67 Central Avenue, Redcliffe, WA 6104

PHONE: 08 9479 7456

WEBSITE: none

DARDANUP BUTCHERING COMPANY (DBC)

ADDRESS: Wimbridge Road, Picton WA 6229

PHONE: 08 9780 6000

WEBSITE: www.dbctalkabouttaste.com.au

AUSTRALIA Coriolis Australia Pty Ltd

PO Box 5831 St Georges Terrace

Perth, WA 6831 Australia

+61 8 9468 4691

NEW ZEALAND Coriolis (New Zealand) Limited

PO Box 90-509 Victoria Street West

Auckland, 1142 New Zealand

+64 9 623 1848

www.coriolisresearch.com

Coriolis is the leading Australasian management consulting firm specialising in the wider food value chain. We work on projects in agriculture, food and beverages, consumer packaged goods, retailing & foodservice. In other words, things you put in your mouth and places that sell them. WHERE WE WORK We focus on the Asia Pacific region, but look at problems with a global point-of-view. We have strong understanding of, and experience in, markets and systems in Australia, China, Japan, Malaysia, New Zealand, Singapore, South Korea, Thailand, the United Kingdom and the U.S. We regularly conduct international market evaluations and benchmarking. WHAT WE DO We help our clients assemble the facts needed to guide their big decisions. We develop practical, fact-based insights grounded in the real world that guide our clients decisions and actions. We make practical recommendations. We work with clients to make change happen. We assume leadership positions to implement change as necessary. HOW WE DO IT All of our team have worked across one-or-more parts of the wider food value chain, from farm-to-plate. As a result, our recommendations are grounded in the real world. Our style is practical and down-to-earth. We try to put ourselves in our clients’ shoes and focus on actions. We listen hard, but we are suspicious of the consensus. We provide an external, objective perspective. We are happy to link our fees to results. WHO WE WORK WITH We only work with a select group of clients we trust. We build long term relationships with our clients and more than 80% of our work comes from existing clients. Our clients trust our experience, advice and integrity.

Coriolis advises clients on growth strategy, mergers and acquisitions, operational improvement and organisational change. Typical assignments for clients include… FIRM STRATEGY & OPERATIONS We help clients develop their own strategy for growing sales and profits. We have a strong bias towards growth driven by new products, new channels and new markets. MARKET ENTRY We help clients identify which countries are the most attractive – from a consumer, a competition and a channel point-of-view. Following this we assist in developing a plan for market entry and growth. VALUE CREATION We help clients create value through revenue growth and cost reduction. TARGET IDENTIFICATION We help clients identify high potential acquisition targets by profiling industries, screening companies and devising a plan to approach targets. DUE DILIGENCE We help organisations make better decisions by performing consumer and market-focused due diligence and assessing performance improvement opportunities. EXPERT WITNESS We provide expert witness support to clients in legal cases and insurance claims. We assist with applications under competition/fair trade laws and regulations.

49

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