The East Asia Food Programme-Integrating NZ suppliers into the East Asian Supply Chain

Presented by:

Natasha D’Costa

Associate Director, Food & Beverages , APAC

June 2015

EAST ASIA FOOD PROGRAMME- NZTE

2

Tactical Activities

Food Connections

Series of 8 NZ exclusive trade shows around the region to support existing and/or find new distributors

NZ Taste Promotions

Ongoing supermarket ins tore NZ promotions supported with online, competitions, product demonstrations. Also excellent tool to launch new SKUs

Strategic Activities

Competitor Landscapes

A category overview across the region to select/prioritise markets

Value Chain Analysis (this report)

An overview of the channels, margins and competition in a particular market.

Consumer Testing

To assist with product localisation of packaging, taste profiles, etc

Product Registration

Speeding up the process for exporters and distributors.

Coming Up

Webinars on markets, (eg: wine and bakery categories)

Other research in more detail with NZTE’s local in market F&B experts exploring the marketplace and opportunities for NZ companies.

(more info contact Viv Williams- NZTE)

East Asia Macroeconomic OverviewJapan dominates the East Asian market by the sheer size of its economy, while Indonesia is a key market among developing nations

3

Nominal GDP, East Asia, 2014

GD

P, U

SD

Bil

lio

n

Indonesia Malaysia Philippines Singapore Thailand Vietnam Japan S Korea Taiwan Hong Kong0

1000

2000

3000

4000

5000

6000

856

337 290 307 380188

4770

1449

293505

Source: Frost & Sullivan Analysis

Japan dominates the region and is a key influencer of F&B trends

ASEAN’s growing affluent consumer population is becoming increasingly attractive to foreign investors

The F&B industry is a key contributor to GDP growth to economies in this region, and improving food security remains a high priority in East Asia

East Asia F&B Sector Overview

Japan, South Korea, Indonesia lead the East Asian F&B Market in terms of demand

4

Source: Frost & Sullivan Analysis

Indonesia

MalaysiaPhill ipines

Singapore

Thailand

Vietnam

Japan

South Korea

TaiwanHong Kong

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

- 50.00 100.00 150.00 200.00 250.00 300.00

F &B Domestic Consumption, East Asia

CA

GR

201

4-20

20F

Domestic Consumption (2014), US$ Billions

Bubble size denotes total domestic consumption

Japan leads the market while Indonesia is the fastest-growing market fuelled by Japanese FDI

Philippines is a fast-emerging market; FDI grew by over 100% from 2013 to 2014.

South Korea aims to become the “food hub” of East Asia via aggressive expansion

Understanding East Asian needs-Glocalisation is KingCoca-Cola is an example of a company that has nailed the idea of customising global products to local needs at reasonable costs

5

10% 15% 20% 25% 30% 35% 40% 45% 50% 55%-1%

1%

3%

5%

7%

9%

11%

13%

Mexico

USA

Brazil

Japan

China

India

Argentina

Spain

South Africa

Germany

Turkey

PhilippinesUnited KingdomM

arke

t G

row

th R

ate

(Un

it C

ase

Vo

lum

es)

Concentration of local products in Overall Product Portfolio

Coca- Cola Largest Country markets, Key Growth Countries, 2014

Understand the local story• Product requirements vary from country to country• Beware of the single message- there is more to us than the “green New Zealand” story

Respect cultural intricacies• People buy concepts not products so cultural sensitivity is imperative• Coca-Cola changed their name in China as the English version meant something completely

different

Identify what makes consumers tick• Understand the need for formats such as “on-the-go” versions• We may not like “tall poppies” but the Asians love them

6

Understanding East Asian needs-Aspirational living drives demandRise of Airpork- Australian chilled pork dominates Singapore meat consumption

Singapore50%

New Zealand

20%

Hong Kong6%

Japan4%

Others20%

50 % of Australia’s chilled pork is exported to Singapore

Over 90 % of pig meat in Singaporean supermarkets is Australian produced

Australia90%

Others10%

Singaporean consumers are 5X likely to buy chilled pork over frozen pork

Qantas flies in over 1000 split carcases from Australia (mainly WA, NSW and SA) to Singapore each day as ‘Airpork’

Singaporean consumers pay almost 15% higher for “Air Pork”

While Brazilian and American pork is considerably cheaper, consumers prefer to spend on the Australian image of quality and strict biosecurity standards

*Note: QAF a Singaporean company purchased Bunge Meat Industries (BMI) in 2001, Australia's largest fully integrated pork producer who accounts for 30 per cent of pigmeat exports.

7

Understanding East Asian needs-Surmounting logistical barriersJapanese companies such as Suntory and Asahi have learned to work around distribution channels in East Asia

.

Over 30% of the cost of product in Indonesia is attributed to distribution

costs

Indonesia consists of an archipelago of over 18,000 islands. This causes a high

variance in logistic costs

Indonesia produces enough food for its population but due to logistical inefficacies

over 30 per cent is lost leading to food insecurity

Most foreign manufacturers thus tie-up with local companies to provide

distribution networks

Distributor and retailer support via infrastructure and logistic support (solar powdered freezers) is seen as a priority to

ensure continued patronage.

Conclusions

Overall Market Strategy• Increase focus on market penetration via strategic distribution tie-

ups with local distributors and retail chains.

Distribution Strategy• Organised retail (convenience stores) set to thrive; however,

improvements in product delivery is important. • Innovative product delivery and packaging strategies to engage

the youth market are the key to improving product demand and distribution.

Country Focus Strategy• While Indonesia and Vietnam have large markets with immense

potential, accessibility remains low due to high levels of corruption.

• New Zealand companies would benefit from initially conducting business with developed markets and using these countries as a base to venture into developing markets.

8

Frost & Sullivan, the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today’s market participants. For more than 50 years, we have been developing growth strategies for the Global 1000, emerging businesses, the public sector and the investment community. Is your organization prepared for the next profound wave of industry convergence, disruptive technologies, increasing competitive intensity, Mega Trends, breakthrough best practices, changing customer dynamics and emerging economies? Contact Us: Start the Discussion

ww.frost.com