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RECIPIENT
FIRM
TARGET MARKET OPPORTUNITIES IN ASIA FOR WINE Part of Asia Market Success, April 2016 INHERENT LIMITATIONS
This work was commissioned by the Department of Agriculture and qualifications and limitations included in the Coriolis Document Forest Food Council photo or (3) are low resolution, complete Food Western Australia (DAFWA), with funding through the State and Coriolis Commentary, and are subject to significant uncertainties product/brand for illustrative purposes used under fair dealing/fair Government’s Royalties for Regions program and prepared by and contingencies, some of which, if not all, are outside the control of use for both “research and study” and “review and criticism”. Our Coriolis. This work is based on secondary market research, analysis of Coriolis; and usage of them complies with Australian law or their various license information available or provided to Coriolis by our client, and a range agreements (© Dollar Photo Club). of interviews with industry participants and industry experts. 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DAFWA does not make any representations or warranties about its limitations of the Coriolis document “Target Market Opportunities in quality, accuracy, reliability, currency, completeness or suitability for Asia for the Western Australian Premium Products” (the Coriolis The Coriolis document and any Coriolis Commentary may not be any particular purpose. Before using the information, you should Document) including any accompanying presentation, appendices relied upon by the Recipient, and any use of, or reliance on that carefully evaluate these things. and commentary (the Coriolis Commentary): material by the Recipient is entirely at their own risk. Coriolis shall have no liability for any loss or damage arising out of any such use. The information is general in nature, is not tailored to the a. Coriolis has not been asked to independently verify or audit the circumstances of individuals or businesses, and does not constitute information or material provided to it by or on behalf of the Client or ACCESSIBILITY financial, taxation, legal, business or management advice. We any of the parties involved in the project; recommend before making any significant financial or business Coriolis seeks to support the widest possible audience for this decisions, you obtain such advice from appropriate professionals who b. the information contained in the Coriolis Document or any Coriolis research. This document has been designed to be as accessible to as have taken into account your individual circumstances and objectives. Commentary has been compiled from information and material many users as possible. supplied by third party sources and publicly available information The information in this report should not be presumed to reflect or which may (in part) be inaccurate or incomplete; Any person – with or without any form of disability – should feel free indicate any present or future policies or decisions by the to call the authors if any of the material cannot be understood or Government of Western Australia. c. Coriolis makes no representation, warranty or guarantee to accessed. Recipients, whether express or implied, as to the quality, accuracy, reliability, currency or completeness of the information provided in We welcome the opportunities to discuss our research with our the Coriolis Document and any Coriolis Commentary or that readers and users. reasonable care has been taken in compiling or preparing them; All photos used in this discussion document were either (1) d. the analysis contained in the Coriolis Document and any Coriolis purchased by Coriolis from a range of stock photography providers as Commentary are subject to the key assumptions, further documented, (2) received written permission to use Southern FINAL v100; April 2016
2 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 STRUCTURE OF MULTI-STAGE SCREENING PROCESS USED IN THIS PROJECT Model; 2016 WA INDUSTRY-GOOD RESEARCH INDIVIDUAL FIRM STAGE I STAGE II STAGE III STAGE IV ROLE & RESPONSIBILITY
PLATFORM PRODUCT FIT WITH WA POSITIONING Project does not attempt to TARGET MARKET address firm-level operational or executional activities:
- R&D
- Product development
- Sourcing & supply chain
- Production & operations
- Marketing & branding 679 47 9 20 TRADE QUAL/QUANT PLATFORMS OPPORTUNITIES - Sales & sales structure CODES SCREENS - Capital structure
- Negotiation
- Distributor appointment
YOU ARE HERE
3 This project is focused on “market demand” from the following twenty-four Asian/Middle Eastern markets4
24 COUNTRIES DEFINED AS HIGH POTENTIAL TARGET MARKETS FOR WESTERN AUSTRALIA Target markets; 2016
SOUTH ASIA SE ASIA
India China Pakistan Hong Kong Sri Lanka Japan South Korea Taiwan Indonesia Malaysia Philippines Singapore Thailand MIDDLE EAST Vietnam
Bahrain Egypt Israel Jordan Western Kuwait Australia Lebanon Oman Qatar 24 defined target Saudi Arabia markets for this project UAE
Note: Complete list for analysis purposes, some countries excluded from list if no/limited trade data available (e.g. Iran) 4 WHAT IS THE PRODUCT? Wine emerged in Phase I as one of twenty “high growth, high potential” opportunities for Western Australia; wine is an alcoholic beverage typically consumed in social occasions
PRODUCT OVERVIEW Example; 2016
PRODUCT PROFILE HS Code 220421 Product Wine of fresh grapes, including fortified wines and grape must with fermentation prevented or arrested by the addition of alcohol, in containers holding 2 litres or less Out-of-scope Sparkling wine, bulk containers of wine, other grape must, vermouth and other wine flavoured with plant or aromatic substances, mixtures of fermented beverages, grape juice, etc. as all are covered under other screened trade codes Origin Earliest archaeological evidence from Georgia c. 6000 BC, likely from early humans Example Grapes, yeasts, malolactic bacteria, calcium carbonate, sulphur dioxide ingredients
Forms/usage - Drinking at home or out in restaurants - Cellaring - Gift giving Drivers of - Luxury product consumer/ - Status conferring market success - Ideal gift, especially for corporate - Potential to increase value through cellaring
Source: photo credit (Dollar Photo); Coriolis analysis 5 DOCUMENT STRUCTURE
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 Western Australia is well-positioned to grow wine exports to Asia
- Asian wine imports are rising, with import value growth being driven by increasing volume; average FOB (free-on-board) prices are showing moderate growth - Asian wine imports come from the “Old World” (France, Italy and other European countries), the “New World (Australia, Chile, the USA, etc.) and Asian inter-regional trade - France stands out for driving wine import value growth in Asia & the Middle East over the past decade; Australia follows in second place - Average FOB price to target Asian markets vary by supplier, with France appearing to set the pricing lead - East Asia dominates the Asian/Middle East market for wine; China, Hong Kong and Japan stand out for size - East Asia is driving growth in wine imports - China stands out for growing volume and value - Average wine import prices vary by country, with Hong Kong standing out as a large market paying premium prices - Imported wine consumption and aggregate wine imports appear driven – in part - by income per capita; a number of markets appear to have long-run penetration upside - Market share varies by country; European countries stronger in Middle East than E/SE Asia; New World has strength across East and South East Asia - Western Australia has opportunities for wine export growth in select Asian markets; SE Asia stands out as a region that pays good prices (page earlier) and where Australia already has a strong position - Data supports new high value, premium wine opportunities being initially launched in (1) Singapore, (2) Hong Kong and (3) China - As a “Straw Man” for discussion, we identify an export market roll-out plan
7 Asian wine imports are rising, with import value growth being driven by increasing volume; average FOB (free-on-board) prices are showing moderate growth
TOTAL IMPORTS TO ASIA/MIDDLE EAST TARGET REGION (24 COUNTRIES) VOLUME AVERAGE PRICE PER LITRE VALUE L; m; 2004-2014 US$; 2004-2014 US$m; 2004-2014
800 $7.00 $5,000 CAGR 4% $4,500 700 $6.00
$4,000
600 $5.00 CAGR* $3,500 11%
500 CAGR $3,000 15% $4.00
400 $2,500
$3.00 $2,000 300
$1,500 $2.00 200
$1,000
$1.00 100 $500
0 $- $- 2010 2011 2010 2011 2010 2011 2004 2004 2004 2014 2014 2014 2008 2008 2008 2006 2006 2009 2009 2006 2009 2007 2007 2007 2005 2005 2005 2012 2012 2012 2013 2013 2013
* Compound Annual Growth Rate; Source: UN Comtrade database; Coriolis analysis and classifications 8 Asian wine imports come from the “Old World” (France, Italy and other European countries), the “New World (Australia, Chile, the USA, etc.) and Asian inter-regional trade
EXPORT VALUE BY SUPPLIER TO TARGET REGION TOTAL = US$4,536m US$m; FOB; 2014 $528 $725 $2,770 $23 $490
South Africa Other E/SE Asia $50 $44
Singapore $91
Chile France $345 $1,688
Other Australia $23 $449
Hong Kong SAR $235 Argentina $51
Italy $341
United Kingdom USA $302 $278 Spain China $208 $120 New Zealand Germany $78 $88 Other Europe $143 Other Australasia Key New World Europe E/SE Asia
NA/ME/CA = North Africa/Middle East/Central Asia; Note: data is as reported by sender(FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 9 France stands out for driving wine import value growth in Asia & the Middle East over the past decade; Australia follows in second place 10y ABS
EXPORT VALUE BY SUPPLIER TO TARGET REGION US$m; FOB; 2004-2014
$4,501 $4,536 $4,420 $4,302 $431 $449 Australia +$333 $459 $426 $62 $78 New Zealand +$69 $44 $50 South Africa +$40 $76 $224 $54 $72 $51 $345 Chile +$295 $42 $261 $300 $51 Argentina +$45 $326 $51 $50 $278 USA +$201 $311 CAGR $3,142 $299 15%
$320
$45$36 $172 $32 $226 $1,929 $1,688 France +$1,151 $2,236 $2,192 $1,820 $1,765 $231 $239 $1,844 $24$29 $123 $34$26 $24 $133 $206 $126 $24 $138 $1,287 $21 $99 $18 $1,372 $109 $341 Italy +$208 $1,178 $147 $299 $1,120 $14 $330 $63$13 $971 $343 $127 $13 $899 $302 United Kingdom +$258 $116 $14$11 $101 $50$10$9 $55$9 $802 $6 $91 $218 $456 $315 $78 $289 $208 Spain +$178 $627 $88 Germany +$53 $290 $188 Other Europe $537 $541 $201 $180 $147 $191 $143 +$111 $89 $23 Other +$18 $181 $98 $91 $90 $44 Other E/SE Asia $159 $215 $73 $145 $91 +$36 $143 $100 $71 $176 $148 Singapore +$76 $128 $72 $144 $19 $20$23 $28 $133 $65 $43$54 $53 $45 $46 $68 $20 $235 Hong Kong SAR +$227 $44 $53 $38 $64 $80 $35$15 $75 $71 $30 $33 $43 $17$11 $25$11 $72$10 $57 $136 $35$32 $38$31 $43$8 $30 $50 $46$20 $74 $116 $123 $120 China +$119 $15$9$6$8$1 $17$11$6$1 $20$16$12$7 $46$22 $47$11 $37$2 $21 $17 $72 $34 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Note: data is as reported by sender(FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 10 France leads in driving absolute growth over the past five years
FIVE YEAR EXPORT GROWTH MATRIX: CHANGE IN VALUE VS. RATE OF GROWTH VS. ABSOLUTE VALUE US$m; 2009 vs. 2014
35%
China Hong Kong SAR
30%
25% Spain
Chile 5y CAGR 20% Other E/SE Asia Other New Zealand Argentina 15% USA Singapore Australia France South Africa Italy Other Europe Germany 10%
United Kingdom
5%
Bubble scale: US$m; 2014 $200m A bubble this size=
0% $0 $100 $200 $300 $400 $500 $600 $700 $800 $850
5y absolute change in value
Note: data is as reported by sender(FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 11 Average FOB price to target Asian markets vary by supplier, with France appearing to set the pricing lead
AVERAGE EXPORT VALUE COST CURVE BY SUPPLIER US$/l; l; FOB; 2014 $85.08
Collecting wine
Average $43.11 FOB value $12.40 $12.16
$12.42$12.30 $7.22 $5.80 $4.00 $8.51 $7.78 $4.12 $5.23 $4.44 $3.66 $3.38 $2.78 United Kingdom China Other Singapore Other E/SE Asia Hong Kong SAR Other Europe Germany New Zealand Argentina South Africa France Italy USA Australia Chile Spain
Volume imported by defined target market Note: data is as reported by sender(FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 12 East Asia dominates the Asian/Mid-East market for wine; China, Hong Kong and Japan stand out for size
IMPORT VALUE BY MARKET BY REGION TOTAL = US$4,536m US$m; FOB; 2014 $173 $15 $536 $3,812
Japan $994
Singapore $230 South Korea $160 Taiwan UAE $138 $123
India $11 Hong Kong SAR Malaysia $1,096 $77
Thailand $70
Bahrain Philippines $3 $34 Kuwait Qatar Indonesia $0 $13 $32 China Egypt $1,425 $2 Saudi Israel $17 $0 Other Vietnam $4 $94 Other $14 NA/ME/CA Indian Sub SE Asia East Asia
Note: data is as reported by sender(FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 13 East Asia is driving growth in wine imports
IMPORT VALUE BY MARKET BY REGION US$m; FOB; 2004-2014 United Arab Emirates Bahrain Qatar Kuwait Saudi Arabia $4,536 Egypt $4,501 Israel $4,420 Other ME $84 $123 $11$3 $3 India $10$19$18$0$2 $89 $4,302 $14$13$17$0$2 $4 $0$7$2$1 $11$4 Other Ind. Sub $14$12$17$4 $217 $112 $230 Singapore $12$0$3$1 $209 $17$13$11$4 Malaysia $66 $77 Thailand $73 $69 $223 $70 Philippines $27 $79 $34 $61 $31 $32 Indonesia $30 $70 $94 Vietnam $52 $76 $26$32 $56
$870 CAGR $1,012 $994 Japan 15% $3,142 $66 $1,009 $0$2$7 $18$16$11$4 $163 $111 $56 $116 $57 $26 $131 $160 South Korea $46$13 $126 $143 $138 Taiwan $134 $2,236 $2,192 $731 $85 $45 $16$8$0$7$3$1 $10$14$9$0$5$3$1 $12$3 $2 $1,428 $166 $127 $1,068 $1,844 $42 $1,096 Hong Kong SAR $44 $48$21 $94 $58 $22$19 $1,019 $54$3 $22$21 $12$13$6$0$2$5 $27 $86 $158 $36 $50 $1,372 $18$14$15 $691 $40 $823 $10$9$0$4$2$5$3$1 $1,178 $976 $1,120 $109 $30 $27 $8$9$0$2$5$3 $34$13 $24$9$0$2$5$1 $85 $12$17 $761 $94 $77 $29 $60 $32 $30$15$13 $28$12$15 $11 $8 $136 $86 $707 $533 $1,468 $1,425 China $1,354 $1,342 $149 $667 $663 $86 $384 $768 $83 $208 $64 $69 $445 $57 $62 $114 $331 $55 $249 $77 $87 $39 $58 $112 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Note: data is as reported by sender(FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 14 China stands out for growing volume and value
FIVE YEAR IMPORT GROWTH MATRIX: CHANGE IN VOLUME VS. RATE OF GROWTH VS. ABSOLUTE VALUE US$m; l; 000; 2009 vs. 2014 35% Vietnam
30% Pakistan
China 25%
United Arab Emirates
20% Qatar Taiwan
5y CAGR Value Hong Kong SAR 15% Sri Lanka
Malaysia Indonesia Singapore South Korea 10% Oman Philippines Lebanon Thailand Japan
India 5% Israel Egypt
0% Bubble scale: US$m; 2014 $200m Saudi Arabia Jordan A bubble this size =
Bahrain Kuwait -5% -50,000 0 50,000 100,000 150,000 200,000 250,000
5y absolute change in volume
Note: data is as reported by sender(FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 15 Average wine import prices vary by country, with Hong Kong standing out as a large market paying premium prices
AVERAGE IMPORT VALUE COST CURVE BY MARKET/REGION US$/l; l; FOB; 2014 $15.48 $13.24 $12.48 $8.48 $8.24 $8.20 $7.80
Average $7.43 $6.97 import $6.95 $6.64 value $7.10 $6.48 $5.91 $5.56 $5.23 $5.08 $4.39 $4.23 $3.77 $3.58 $3.52 Hong Kong SAR Indonesia Vietnam Singapore Qatar Taiwan UAE Malaysia Thailand South Korea Japan Israel China Philippines India Sri Lanka Lebanon Pakistan Oman Saudi Jordan Egypt Bahrain
Volume imported Note: data is as reported by sender(FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 16 Imported wine consumption and aggregate wine imports appear partially driven by income per capita; a number of markets appear to have long-run penetration upside
MARKET SIZE DRIVERS: GDP PER CAPITA VS. IMPORTS PER CAPITA VS. MARKET SIZE L; US$; l; 000; 2014
10.0 Hong Kong SAR
9.0
8.0
7.0
Imports per 6.0 capita
5.0 Singapore
4.0
3.0
2.0 Jordan Japan United Arab Emirates China Philippines 1.0 Bubble scale: l; 000; 2014 Vietnam Taiwan A bubble this size= 100,000 Qatar Malaysia South Korea India Bahrain Israel Thailand Lebanon Oman 0.0 Saudi Arabia $0 $10,000 $20,000 $30,000 $40,000 Kuwait $50,000 $60,000 Pakistan Egypt Sri Lanka GDP per capita Indonesia Note: data is as reported by sender(FOB), not receiver; Source: UN Comtrade database; Wikipedia (GDP/capita); Coriolis analysis and classifications 17 Market share varies by country; European countries stronger in Middle East than E/SE Asia; New World has strength across East and South East Asia
IMPORT VALUE MARKET SHARE BY MARKET BY KEY SUPPLIER % of value in US$m; FOB; 2014
100% China
Hong Kong SAR 90% Singapore
80% Other E/SE Asia Other
70% USA
Argentina 60% Chile
South Africa 50% New Zealand
40% Australia
Other Europe 30% Germany
Spain 20% United Kingdom
10% Italy France 0% Qatar Japan Kuwait Egypt Hong Kong SAR UAE Bahrain China South Korea Singapore Thailand Vietnam Taiwan Oman Lebanon India Philippines Indonesia Saudi Jordan Pakistan Israel Malaysia Sri Lanka
Note: data is as reported by sender(FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 18 Western Australia has opportunities for wine export growth in select Asian markets; SE Asia stands out as a region that pays good prices (page earlier) and where Australia already has a strong position
AUSTRALIAN IMPORT VALUE MARKET VS. MARKET VALUE US$m; FOB; 2014 40% 27%
21% Australian
19% market share 15% 13%
10% 12% 9% 8%
8% 10% 6% 6% 4% 4% 3%
2% 3% 0% 0% 0% 0% Thailand Israel Egypt Vietnam Taiwan Philippines India South Korea Indonesia Singapore Malaysia Japan Hong Kong SAR UAE China Pakistan Kuwait Jordan Lebanon Bahrain Sri Lanka Qatar Saudi Oman
Total value of imports Note: data is as reported by sender(FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 19 Data supports new high value, premium wine opportunities being initially launched in (1) Singapore, (2) Hong Kong and (3) China
WHERE TO FOCUS FOR NEW HIGH VALUE, PREMIUM PRODUCTS: AU SHARE VS. AVERAGE VALUE VS. MARKET SIZE % of value; US$; US$m; 2014 $17.00
$16.00 Hong Kong SAR 2
$14.00 Pakistan
Lebanon Indonesia $12.00
$10.00 Value Vietnam Average FOB $/l Qatar Singapore $8.00 1 2014 Taiwan Oman Egypt Saudi UAE Malaysia Bahrain Thailand $6.00 South Korea Jordan China 3 Japan $4.00 Israel Philippines India Sri Lanka
$2.00
Bubble scale: US$m; 2014 $200 A bubble this size = $0.00 0% 5% 10% 15% 20% 25% 30% 35% 40%
AU share of total import value Note: data is as reported by sender(FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 20 As a “Straw Man” for discussion, we identify an export market roll-out plan
PRELIMINARY “STRAW MAN” DEVELOPMENT & ROLLOUT PLAN FOR WINE OPPORTUNITY Model; 2016
0 1 2 3 Product Export launch in Export launch in Export launch in development and Hong Kong Singapore China testing
- High income, sophisticated market and consumers - Manageable sized test bed - AU already has a strong market position (21% value share) on which WA can build
21 DOCUMENT STRUCTURE
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?
22 Western Australia is well-positioned to grow wine exports to Asia
IS THE MARKET DEVELOPED & COMPETITIVE? - The flow of wine from the farm through to the consumer is relatively straight forward and simple - Wine prices vary across different markets; prestigious brands can command premium - Asian markets have a much less developed WA wine range and offer than Western countries - “Leading indicator” Western markets strongly suggest depth of range in Asian wine markets will increase going forward - All markets have a greater range of red wines than white wines; up to double the amount in larger markets - WA’s varieties of strength (Chardonnay & Cabernet Sauvignon) are present in both Western and Asian markets
WHAT IS WA CAPABLE OF DELIVERING? - Western Australian wine producers need to continue to move forward and improve through improved branding - Multiple potential positions exist to develop a premium wine offer for Asia - Products from other processors in other markets demonstrate what is possible in terms of developing a premium Western Australian wine offer - There are a wide range of potential product positions or claims available for a premium wine product from Western Australia targeting Asia - As a “Straw Man” for discussion, we identify an opportunity for a high value, premium wine product with select characteristics for export market launch
23 HOW IS THE MARKET STRUCTURED? The flow of wine from the farm through to the consumer is relatively straight forward and simple
SIMPLIFIED MODEL OF SUPPLY CHAIN: WINE Model; 2016
Filler/Packer Wholesalers Retailers
Distributor(s) WA Winery Own Agent/Broker/ Foodservice & WA Winery Bulk Wine (multi-layered in Vineyard Distributor Hospitality large markets)
WA Contract Other Australian Bottle Wine Cellar Door Grape Grower Winery
AU Exports Grape Grower
Logistics Providers (Airfreight, Seafreight, Trucking)
Source: Coriolis 24 WHO IS THE COMPETITION? PRICING Wine prices vary across different markets; prestigious brands can command premium
SHELF PRICE PER LITRE ACROSS SELECT SE ASIAN MARKETS AND AUSTRALIA: WINE US$/l; Jan 2016
Thailand Hong Kong Singapore
$161.70
$134.93
$100.10 $90.76
$64.83 $61.12 $53.72 $50.94 $47.28 $45.85 $39.97 $42.46 $41.49 $34.10 $33.34 $33.01 $30.42 $29.34 $32.10 $22.00 $23.70 $18.59 $19.17 $15.18 $13.75 Dona Paula Malbec Neil Ellis Cab Sav (SA) Brancott Estate Marlb Evans & Tate Broadway Atalon Cab Sav (US) Wolf Blass Cab Sav Stags Leap Cab Sav Katnook Estate Cab Sav Nederburg Chardonnay Beringer Cab Sav (US) Chardonnay ( US) Jacob's Creek Reserve Jacob's Creek Reserve Xanadu Chardonnay Domaine De L'A Cote Xanadu Cab Sav (WA) Cloudy Bay Chardonnay Cloudy Bay Chardonnay Cloudy Bay Chardonnay Chardonnay (AU) Evans & Tate Redbrook Cape Mentelle Cab Sav Leeuwin Estate Prelude Chateau Hyot Castillon Concha y Toro Cab Sav Wente Vineyards Rawson Retreat Chardonnay (AU) De Castillon (FR) Chardonnay (WA) Chardonnay (WA) Sav Blanc (NZ) d bordeaux (FR) Cab Sav (AU) Cab Sav (WA) Merl (WA) (AU) (AR) (WA) (US) (AU) (SA) (CL) (NZ) (NZ) (NZ)
AU
SELECT SE ASIAN RETAILERS AUSTRALIA
Source: Coriolis from store checks 25 WHAT IS ON THE SHELF? RANGE IN MARKET Asian markets have a much less developed WA wine range and offer than Western countries
EXAMPLE: ACTUAL WA WINE RANGE ON SHELF Jan 2016
London: GDP/Capita US$75,200 Singapore: GDP/Capita US$83,100
Source: Coriolis from store checks; photo credit (fair use/fair dealing; low resolution; complete product/brand for illustrative purposes); Coriolis analysis 26 IS THE MARKET DEVELOPED & COMPETITIVE? RANGE “Leading indicator” Western markets strongly suggest depth of range in Asian wine markets will increase going forward
NUMBER OF LINES ON SHELF: SELECT RETAILERS FROM ACROSS MULTIPLE MARKETS SKU; actual; Jan 2016
7,990
Average 3,305 sku/store
4x 4,358
Average 776 sku/store 2,035 2,013 1,591
551 649 623 384 212
Dan Murphy Wegmans Slurp First Choice Waitrose Wine Now Carrefour Century Cellars Wellcome Cold Storage (AU) (NY) (UK) (AU) (UK) (TH) (CN) (SG) (HK) (SG)
Anglo-American SE Asia
Source: Coriolis from store checks 27 IS THE MARKET DEVELOPED & COMPETITIVE? SEGMENTATION All markets have a greater range of red wines than white wines; up to double the amount in larger markets
NUMBER OF LINES ON SHELF BY WINE TYPE: SELECT RETAILERS FROM ACROSS MULTIPLE MARKETS SKU; actual; Jan 2016
White Red
2,610
1,532
5,380
814 645 2,826 656
1,221 1,368 935 252 100 206 417 125 299 397 259 13082 Dan Murphy Wegmans Slurp First Choice Waitrose Wine Now Carrefour Century Cellars Wellcome Cold Storage (AU) (NY) (UK) (AU) (UK) (TH) (CN) (SG) (HK) (SG)
Anglo-American SE Asia Source: Coriolis from store checks 28 IS THE MARKET DEVELOPED & COMPETITIVE? SEGMENTATION WA’s varieties of strength (Chardonnay & Cabernet Sauvignon) are present in both Western and Asian markets
MARKET SHARE BY VARIETY: SELECT RETAILERS FROM ACROSS MULTIPLE MARKETS % of SKU; actual; Feb 2016
Wegmans (NY) Slurp (UK) Dan Murphy’s (AU)
Cabernet Shiraz/Syrah Sauvignon 15% 13% Other Shiraz/Syrah Chardonnay 30% Other 20% Cabernet Other 12% 40% Sauvignon 46% 14% Chardonnay 11% Pinot Noir Chardonnay 8% 11% Riesling Cabernet 4% Sauvignon Pinot Noir Merlot 9% 9% 7% Pinot Noir Merlot Sauvignon Riesling Sauvignon Sauvignon 7% 1% blanc Shiraz/Syrah 6% blanc Merlot blanc Riesling 5% 3% 9% 10% 5% 5%
Carrefour (CN) Wellcome (HK) Century Cellars (SG) Merlot 4% Chardonnay Cabernet 3% Sauvignon Sauvignon Blanc Chardonnay Chardonnay Sauvignon 6% 3% 11% 11% blanc 8% Shiraz/Syrah Merlot 2% Pinot Noir 10% Pinot Noir 2% Riesling 8% 1% Shiraz/Syrah Other 9% 57% Cabernet Other Other Sauvignon 79% Pinot Noir 51% 8% 5% Shiraz/Syrah Cabernet 6% Sauvignon Sauvignon Riesling Blanc 5% Merlot 4% 3% 4% Source: Coriolis from store checks 29 WHAT IS WA CAPABLE OF DELIVERING? STRATEGIC DIRECTION Western Australian wine producers need to continue to move forward and improve through improved branding
SUGGESTED STRATEGIC DIRECTION: WESTERN AUSTRALIAN WINE Model; 2016
Low price point Australian Renowned Prestigious Wine sent in bulk WA branded Regional branded bottled wine branded regional varieties wineries
Chinese suppliers WA suppliers EU suppliers are are here are here in Asia here
High growth, high potential opportunities are here
30 WHAT IS WA CAPABLE OF DELIVERING? CLAIMS Multiple potential positions exist to develop a premium wine offer for Asia
IDENTIFIED POTENTIAL PREMIUM POSITIONS Model; 2016
HEALTH PROVENANCE INDULGENCE CONVENIENCE
High in antioxidants Identified source region Gift packaging Picnic size
Reduces heart attack risk Organic Limited edition Tasting notes
Promotes longevity Specialty variety Winery tour tie in QR code
Lowers risk of heart disease Track & trace Prestigious winery Food pairing suggestions
Lowers risk of stroke Winemaker’s story Home delivery service
Cuts risk of cataracts
Slows brain decline
Lowers stress
Source: Coriolis; photo credit (Dollar Photo and Southern Forests Food Council Inc.) 31 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 wine offer
EXAMPLES OF PREMIUM PRODUCTS FROM OTHER MARKETS Select; 2016
Carrefour China Gift box Asia New Year Edition Gift pack
French Bordeaux Gift Box Two wine glasses Specially released Italian Red Blend
750ml x 2 Winery branding on box Red: prosperity & happiness Attractive box
Passion for wine Traditional look Green: harmony & balance Wine knife etc included
Red colour Black: power & balance Branded box
Able to choose contents Inspired by 1890 gate at winery Magnum size
Source: photo credit (fair use/fair dealing; low resolution; complete product/brand for illustrative purposes); Coriolis analysis 32 WHAT IS A POTENTIAL WA OFFER? There are a wide range of potential product positions or claims available for a premium wine product from Western Australia targeting Asia
HYPOTHETICAL EXAMPLE OF POTENTIAL PREMIUM PRODUCT FROM WA NEED TO GET PHOTO PERMISSION ON SOUTHERN FOREST IMAGE Model; 2016
High in antioxidants Lowers stress Promotes longevity
HEALTH
From Renowned regional Winemaker’s story Margaret River variety
PROVENANCE
Gift packaging Prestigious winery
Plain wine INDULGENCE
Tasting notes on label
CONVENIENCE
Source: Coriolis; photo credit (Dollar Photo and Southern Forests Food Council Inc.) 33 WHAT IS THE IDENTIFIED OPPORTUNITY? As a “Straw Man” for discussion, we identify an opportunity for a high value, premium wine product with select characteristics for export market launch
PRELIMINARY “STRAWMAN” DEVELOPMENT & ROLLOUT PLAN FOR WINE OPPORTUNITY Model; 2016
CURRENT WA IDENTIFIED HIGH GROWTH, POTENTIAL FUTURE POSITIONING IN ASIA HIGH VALUE OPPORTUNITY FOR WA PRODUCT LINE EXTENSION
From From Winemaker’s story Wine tourism Targeted gift packaging Australia Margaret River
Renowned regional High in antioxidants Prestigious winery Renowned wine region variety
Gift packaging
Tasting notes
Source: photo credit (fair use/fair dealing; low resolution; complete product/brand for illustrative purposes); Coriolis analysis 34 DOCUMENT STRUCTURE
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?
35 FOCUS MARKET – 1 – SINGAPORE Singapore has a robust and well-developed food retailing and foodservice sector
TURNOVER & PURCHASES ESTIMATED WHOLESALE FOOD & FMCG PURCHASES US$b; 2014 US$b; 2014
$3.9 $1.9 100% 90% $1.9 Foodservice 80% $6.3 70% 60% 50% 40% 6,500 restaurants, $3.9 Retail Supermarket 30% hawker stalls, hotels, $5.6 $2.2 vending machines, 20% institutions (schools, 10% hospitals, airline caterers, 0% prisons, etc.) Turnover Purchases
TURNOVER GROWTH RATE Foodservice % Y-O-Y; HK$; 2013v2014 $1.9
Convenience $0.4 Online $0.1 Retail 3.0% Traditional grocery $0.3 Department stores $0.3 Petrol stations $0.1
Foodservice 5.0% Wet markets, etc. $0.7
Retail Foodservice
Source: Coriolis from a wide range of sources 36 FOCUS MARKET – 1 – SINGAPORE Four potential in-market partners are identified for Western Australian firms in Singapore
POTENTIAL IN-MARKET PARTNERS – SINGAPORE 2015 or as available
Firm NTUC Fairprice Cold Storage Sheng Siong Prime Supermarkets
Ownership National Trade Union Council Dairy Farm International Listed; Singapore Private; Singapore (Singapore) (Hong Kong)
Website www.fairprice.com.sg www.coldstorage.com.sg www.shengsiong.com.sg www.primesupermarket.com www.ntuc.org.sg www.dairyfarmgroup.com www.allforyou.sg
Annual sales US$1.83b US$1.55b US$0.55b US$0.2b
Store formats Supermarket Supermarket (Cold Storage, Supermarkets Supermarkets Hypermarket Marketplace) Online Convenience (Cheers; 139) Hypermarket Online Convenience (7-Eleven; 502) Online
# of stores 285 848 38 19
Store fascia
Source: Coriolis from a wide range of sources 37 FOCUS MARKET – 2 – HONG KONG Hong Kong has a robust and well-developed food retailing and foodservice sector
TURNOVER & PURCHASES ESTIMATED WHOLESALE FOOD & FMCG PURCHASES US$b; 2014 US$b; 2014
$8.0 $3.9 100% 90% $3.9 Foodservice 80% ParknShop $12.8 $1.5 70% 60% 50% 40% 14,000+ restaurants $8.0 Retail Wellcome 1,000+ bars & clubs 30% $1.2 1,050+ hotels $11.5 20% Vending machines Institutions (1,088 schools, 10% AEON 42 hospitals, 3 main airline 0% $0.6 caterers, prisons, etc.) Turnover Purchases CRA CRE $0.3 TURNOVER GROWTH RATE $0.2 Foodservice Other retail $3.9 % Y-O-Y; HK$; 2013v2014 $0.6
Drug stores $0.6
Retail 6.7%
Wet markets, etc. $3.0
Foodservice 3.5%
Retail Foodservice
Source: Coriolis from a wide range of sources 38 FOCUS MARKET – 2 – HONG KONG Seven potential in-market partners are identified for Western Australian firms in Hong Kong
POTENTIAL IN-MARKET PARTNERS – HONG KONG 2015 or as available
Firm Wellcome Park’N Shop CR Vanguard Dah Chong Hong 759 Stores AEON Stores Convenience Retail Asia
Ownership Dairy Farm A.S. Watson/ CRE/China Resources Dah Chong Hong/ Private; Hong Kong AEON (Japan) Fung Group International/Jardine Hutchison Whampoa (SOE; China) CITIC Pacific/CITIC (Lam Wai Chun) Matheson (SOE; China)
Website www.wellcome.com.hk www.parknshop.com www.crvanguard.com.hk www.dch.com.hk www.759store.com www.aeonstores.com.hk www.circlek.hk/en www.crc.com.cn www.aeon.info www.cr-asia.com
Annual sales $2.2b+ $2.8b ~$0.8b (food/FMCG) N/A N/A $0.8b $0.4b (in HK)
Food store Supermarkets 318 Supermarkets 260+ Supermarkets Supermarkets Grocery 247+ Dept. stores (w/food) 8 Convenience 600+ formats Convenience 921 Convenience Convenience Supermarkets 5 Bakery Health & Beauty 369 Restaurants 676
# of stores Wellcome 280+ ParknShop 175 CR Vanguard 100+ DCH Food Mart 80+ 759 Stores 247+ AEON 13 Circle K Marketplace 31 PnS Superstore 50+ VanGo 79 DCH Food Mart Deluxe Saint Honore Cake 7-Eleven 900+ PnS Taste 10 Olivers the Delicatessen PnS Fusion 14 ThreeSixty
Store fascia
Source: Coriolis from a wide range of sources 39 FOCUS MARKET – 3 – CHINA China has a robust and well-developed food retailing and foodservice sector
TURNOVER & PURCHASES ESTIMATED WHOLESALE FOOD & FMCG PURCHASES PRELIMINARY US$b; 2014 US$b; 2014 PRELIMINARY $421 $135 100%
90% $135 Foodservice Hypermarkets 80% $450 $63 70% 60% 50% 7m+ restaurants 40% $421 Retail plus bars & clubs, 30% $601 Supermarkets hotels/motels/etc., 20% $126 vending machines, institutions (schools, 10% hospitals, airline 0% caterers, prisons, etc.) Turnover Purchases Convenience $8 TURNOVER GROWTH RATE Foodservice % Y-O-Y; HK$; 2013v2014 $135 PRELIMINARY Traditional $71
Online $8 Retail 6.0%
Wet markets $143 Foodservice 7.0%
Retail Foodservice
Source: Coriolis from a wide range of sources 40 FOCUS MARKET – 3 – CHINA Eighteen potential in-market partners are identified for Western Australian firms in China…
POTENTIAL IN-MARKET PARTNERS – CHINA 2015 or as available
Firm CR Vanguard Sun Art Retail Group Wal-Mart China Lianhua Carrefour China Yonghui Superstores Nonggongshang
Ownership China Resources Listed; HK; Auchan and Listed; USA Listed; HK; Bailian Listed; France Listed; Shanghai; Dairy China (SOE; China) Ruentex group Group Co. Farm 20%; JD.com 10%;
Website www.crvanguard.com.hk www.sunartretail.com www.wal-martchina.com lianhua.todayir.com www.carrefour.cn www.yonghui.com.cn www.ngs1685.com www.crc.com.cn www.rt-mart.com.tw www.samsclub.cn www.carrefour.com.cn www.carrefour.com
Annual sales US$15.2b (13) US$14.0b (14) US$11.0b (13) US$10.5b (13) US$7.1b (13) US$5.3b US$4.6b Total/Food
Food store Hypermarket Hypermarket Hypermarket Hypermarkets Hypermarket 236 Supermarket Supermarkets 2,644 formats Supermarket Online Warehouse Club Supermarket 4,600 Convenience 3 Convenience 1,700 Convenience Compact HM Convenience 1,905 Online Supermarket
# of stores 4,637 264 423 6,900+ 239 351 2,644
Store fascia
- Alldays - Kedi
Source: Coriolis from a wide range of sources 41 FOCUS MARKET – 3 – CHINA … continued
POTENTIAL IN-MARKET PARTNERS – CHINA 2015 or as available
Firm HNA Group Wumart Stores Better-Life Jiajiayue Group A. Best Supermarket Metro Cash & Carry Lotte Mart
Ownership Private; China Public; China Public; China Public; China Public; China Listed; Germany Listed; Korea
Website www.hnagroup.com/ www.wumart.com www.bbg.com.cn www.jiajiayue.com.cn www.abest-xyj.com www.metro.com.cn www.lotte.co.kr www.metrogroup.de
Annual sales US$4.0b (13) US$3.3b (13) US$3.2b (13) US$2.9b US$2.7b US$2.7b (13) US$2.4b (13) Total/Food
Food store Hypermarkets Hypermarkets Hypermarkets Hypermarket Hypermarket Cash & Carry Hypermarkets formats Supermarkets Convenience Department stores Supermarket Supermarket Supermarkets Convenience Online Department store Convenience
# of stores 482 547 445 601 116 75 110
Store fascia Le Wan Jia Supermarket
Jiangsu Chaoyue Supermarket
Hunan Joindoor Supermarket
Source: Coriolis from a wide range of sources 42 FOCUS MARKET – 3 – CHINA … continued
POTENTIAL IN-MARKET PARTNERS – CHINA 2015 or as available
Firm Sinopec Group PetroChina Co. Dongguan Sugar & Seven & I Holdings Liquor Group
Ownership Chinese government Chinese government Japan; listed (SOE) (SOE)
Website english.sinopec.com www.meiyijia.com.cn www.7-11.cn www.7andi.com www.sej.co.jp www.itoyokado.co.jp
Annual sales US$455b (14) US$49.1b Total/Food US$17.5b
Food store Easy Joy uSmile Meiyijia Seven&I 301 formats Area licensees 1,763 - DairyFarm 740 - Others ~1,063
# of stores 23,300 14,000 5,580 2,064
Store fascia
Source: Coriolis from a wide range of sources 43 DOCUMENT STRUCTURE
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?
44 IDENTIFIED WA COMPANIES
ACCOLADE WINES BURCH FAMILY WINES CAPE MENTELLE
ADDRESS: 148 Dale Rd, Middle Swan, WA 6056 ADDRESS: 2 Birksgate Road, N Fremantle, WA 6159 ADDRESS: Wallcliffe Rd, Margaret River, WA 6285
PHONE: 08 9274 9522 PHONE: 08 9336 9600 PHONE: 08 9757 0888 WEBSITE: www.accolade-wines.com WEBSITE: www.burchfamilywines.com.au WEBSITE: www.estates-and-wines.com
FERNGROVE WINES FOGARTY WINE GROUP LEEUWIN ESTATE
ADDRESS: 11/100 Mill Point Rd, South Perth, WA 6151 ADDRESS: Level 1, 5 Ord St, West Perth, WA 6005 ADDRESS: 18 High Street, Fremantle, WA 6160 PHONE: 08 9363 1300 PHONE: 08 9282 5499 PHONE: 08 9430 4099 WEBSITE: www.ferngrove.com.au WEBSITE: www.fogartywines.com.au WEBSITE: www.leeuwinestate.com.au
TREASURY WINE ESTATE VASSE FELIX VOYAGER ESTATE
ADDRESS: 4/128 Main St, Osborne Park, WA 6017 ADDRESS: Caves Road, Margaret River, WA 6284 ADDRESS: 81 Stirling Hwy, Nedlands, WA 6009
PHONE: 08 9201 3908 PHONE: 08 9756 5000 PHONE: 08 9385 3133 WEBSITE: www.treasurywineestate.com WEBSITE: www.vassefelix.com.au WEBSITE: www.voyagerestate.com.au
Sources: Coriolis from a wide range of sources 45 IDENTIFIED WA COMPANIES
Address Address
5/28 Hammond Rd, 15 York St, Cockburn Central, WA 6164 Subiaco, WA 6008 08 9417 5633 08 9382 2379
57 Labouchere Road, 14591 Vasse Hwy, South Perth, WA 6151 Eastbrook, WA 6260 08 9368 4555 08 9776 1251
380 Mount Shadforth Rd, 926 Metricup Road, Denmark, WA 6333 Wilyabrup, WA 6280 08 9364 0400 08 9755 6266
8 Gale Road, Lot 45 Albany Hwy, Metricup, WA 6280 Mount Barker,WA 6324 08 9755 7200 08 9851 3111
4323 Caves Rd, 3210 W Swan Rd, Wilyabrup, WA 6280 Caversham WA 6055 08 9755 5277 08 9374 9374
3314 Caves Rd, Darch Rd, Wilyabrup, WA 6282 Margaret River, WA 6285 08 9755 6323 08 9758 8633
Metricup Roads 14923 Muir Hwy, Wilyabrup, WA 6280 Mount Barker, WA 6324 08 9755 6244 08 9892 1444
1564 S Coast Hwy, Gardincourt Dr, Denmark, WA 6333 Henty, WA 6236 08 9848 0000 08 9728 0055
Frankland Rd, 3948 Caves Rd, Frankland, WA 6396 Wilyabrup, WA 6280 08 9855 1544 08 9755 6226
511 Harmans Mill Rd, Boodjidup Rd, Wilyabrup, WA 6280 Margaret River, WA 6285 08 9755 6046 08 9758 9500
3193 Bussell Hwy, Cowaramup, WA 6284 08 9756 5656
Sources: Coriolis from a wide range of sources 46 AUSTRALIA Coriolis is the leading Australasian management consulting firm Coriolis advises clients on growth strategy, mergers and acquisitions, Coriolis Australia Pty Ltd specialising in the wider food value chain. We work on projects in operational improvement and organisational change. Typical PO Box 5831 agriculture, food and beverages, consumer packaged goods, retailing & assignments for clients include… St Georges Terrace foodservice. In other words, things you put in your mouth and places Perth, WA 6831 that sell them. FIRM STRATEGY & OPERATIONS Australia +61 8 9468 4691 WHERE WE WORK We help clients develop their own strategy for growing sales and profits. We have a strong bias towards growth driven by new products, new NEW ZEALAND We focus on the Asia Pacific region, but look at problems with a global channels and new markets. Coriolis (New Zealand) Limited point-of-view. We have strong understanding of, and experience in, PO Box 90-509 markets and systems in Australia, China, Japan, Malaysia, New MARKET ENTRY Victoria Street West Zealand, Singapore, South Korea, Thailand, the United Kingdom and Auckland, 1142 the U.S. We regularly conduct international market evaluations and We help clients identify which countries are the most attractive – from a New Zealand benchmarking. consumer, a competition and a channel point-of-view. Following this we +64 9 623 1848 assist in developing a plan for market entry and growth. WHAT WE DO www.coriolisresearch.com VALUE CREATION We help our clients assemble the facts needed to guide their big decisions. We develop practical, fact-based insights grounded in the We help clients create value through revenue growth and cost reduction. real world that guide our clients decisions and actions. We make practical recommendations. We work with clients to make change TARGET IDENTIFICATION happen. We assume leadership positions to implement change as necessary. We help clients identify high potential acquisition targets by profiling industries, screening companies and devising a plan to approach targets. HOW WE DO IT DUE DILIGENCE 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 We help organisations make better decisions by performing consumer recommendations are grounded in the real world. Our style is practical and market-focused due diligence and assessing performance and down-to-earth. We try to put ourselves in our clients’ shoes and improvement opportunities. focus on actions. We listen hard, but we are suspicious of the consensus. We provide an external, objective perspective. We are EXPERT WITNESS happy to link our fees to results. We provide expert witness support to clients in legal cases and WHO WE WORK WITH insurance claims. We assist with applications under competition/fair trade laws and regulations. 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.