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TARGET MARKET OPPORTUNITIES IN ASIA FOR BEEF Part of Asia Market Success, April 2016 INHERENT LIMITATIONS
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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; 2015
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? Beef emerged in Phase I as one of twenty “high growth, high potential” opportunities for Western Australia; Beef is a meat used in a wide range of dishes and cuisine styles
PRODUCT OVERVIEW Example; 2016
PRODUCT PROFILE HS Codes 020110, 020120, 020130, 020423, 020610 Product All fresh/chilled meat of cattle (beef); all forms (carcasses, half-carcasses, bone-in cuts/primals, boneless cuts/primals, chilled offal) Out-of-scope Live; frozen; dried; canned; extracts; ready-meals and other processed foods Origin Among the first animals to be domesticated by humans; domesticated approximately 8,500 BC in both the Middle East (Taurus sp) and India (Indicus sp) Example Cattle meat ingredients
Forms/usage - Roasted or barbecued - Hot pot/steamboat restaurants - Stewed, curries, similar - Ingredient or flavouring in a wide range of processed foods (e.g instant noodles) - Wide range of other uses Drivers of - Premium meat consumer/ - Acceptable to Abrahamic religions and most cultures (other than Hindu) market success - Spread of Western fast-food restaurants
Source: photo credit (Dollar Photo); Coriolis analysis 5 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 While global beef production is spread across all regions, the USA, Brazil and China stand out for absolute size, followed by Argentina and Australia
DISTRIBUTION OF GLOBAL BEEF CATTLE MEAT PRODUCTION Tonnes; 000; 2013
2,882 30,874 11,033 3,918 4,345 2,075 1,526 7,331
France 1,400 Uzbekistan South Africa 851 813 Indonesia
Germany 546 USA 1,106 11,698 Kenya India United Kingdom Egypt 425 967 847 472 Italy Nigeria 842 Kazakhstan 403 Australia Canada Spain 383 2,318 1,056 Mexico 581 China Ireland 1,807 6,394 518 Other SE Asia Other SS Africa Other NA/ME/CA Brazil Other Europe Pakistan
9,675 3,236 813 980 2,666 2,250
Turkey Argentina 869 2,822 NZ Colombia 848 Venezuela Japan 564 Uruguay Russia Other Indian Sub 508 503 516 1,633 275 Other Americas S. Korea 336 1,948 Other Other E Asia 93 Indian Sub 20 SE Asia Australasia Americas Europe NA/ME/CA SS Africa E Asia
Source: UN FAO AgStat database; Coriolis classification and analysis 7 Global beef production is increasing long term, with all major producers, including Australia, increasing production
52 YEAR DISTRIBUTION OF GLOBAL BEEF CATTLE MEAT PRODUCTION* Tonnes; 000; 1961-2013 52y ABS 63,984 62,746 63,071 63,177 62,408
62,525 36,299 62,518
60,923 365
59,246 -2 Japan 315 58,015 57,096 56,740
56,066 6,351
55,437 China 55,178 54,580 54,428 53,998
53,629 Other SE Asia 432 53,029 53,067
52,742 770 52,583 Other 52,125
51,559 Other Indian Sub 106 50,985 51,341 50,941 12 Pakistan 682 49,308 India 461 48,485 Other SS Africa
46,990 Nigeria 1,769 47,161 46,486 45,954
46,091 Kenya 45,785 45,915 45,567 247313 South Africa 461 Other NA/ME/CA 388 43,735 Kazakhstan 1,791
41,850 Egypt 383 Uzbekistan 813 Russia 38,839 38,539 38,349
38,073 Turkey 775 37,929 36,965 Other Europe 1,066 Ireland 35,269 Spain 373
33,554 403 Italy 165 UK -60 31,858
30,856 Germany -190 31,277 France -48
29,203 Other Americas Uruguay 1,166 27,685 Venezuela 380233 Colombia 520 Argentina 677
Brazil 8,306
Mexico 1,434 Canada 401
USA 4,273
NZ 327 Australia 1,675 1976 1985 2008 2012 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1977 1978 1979 1980 1981 1982 1983 1984 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2009 2010 2011 2013
* Data is meat production; excludes live exports (measured at destination); Source: UN FAO AgStat database; Coriolis classification and analysis 8 Over the past decade, beef production has been shrinking across most of Europe and North America – with Australia as the main exception – and growing in the developing world, particularly Brazil and China
10 YEAR BEEF PRODUCTION GROWTH MATRIX: ABSOLUTE CHANGE VS. RATE OF CHANGE VS. CURRENT NUMBER Tonnes; 000; 2003 vs. 2013 7% Turkey
Pakistan 6% S Korea Uzbekistan
Egypt 5% Other SE Asia GROWING
4% Indonesia
South Africa 3% Colombia Other SS Africa Brazil 10 year Nigeria Mexico CAGR Kenya Other Americas China 2% Kazakhstan tonnes; UK Other NA/ME/CA 03-13 Uruguay Venezuela Australia 1% Other E Asia Other Indian Sub
Japan Argentina 0% India USA Other Ireland -1% Germany Canada Other Europe NZ -2% Spain Bubble scale: tonnes; 2014 5,000 SHRINKING Russia France in 2013; A bubble this size = Italy -3% -1,000 -500 0 500 1,000 1,500 2,000 2,500
10 year absolute change in tonnes 03-13 Source: UN FAO AgStat database; Coriolis classification and analysis 9 All major producers are achieving yield improvements; Australia clearly has yield upside potential
MEAT YIELD PER ANIMAL: AUSTRALIA VS. SELECT COUNTRIES 52y Kg/head; 1961-2013 CAGR
Japan 1.7% 420
370 USA 0.9%
United Kingdom 0.8% 320 S. Korea 1.4% Germany 1.1% France 1.0% South Africa 0.9%
270 Australia 1.1%
Brazil 0.4% Indonesia 0.7% 220 Argentina 0.1% Mexico 0.4%
Uzbekistan N/A 170 New Zealand 0.8% China 1.0%
120 India 0.5%
70 1962 2002 2003 2005 2006 2007 2008 1974 1976 1978 1979 2012 2013 1961 1963 1964 1965 1966 1967 1968 1969 1970 1971 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2009 1972 1975 1977 1973 2000 2001 2010 2011 2004
Source: UN FAO AgStat database; Coriolis classification and analysis 10 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?
11 Companies identified chilled beef as the opportunity, with an increasing focus on value added cuts
“We need to improve the quality, like the Angus 100 day beef, or premium “We need to export really high quality beef. It needs to be grain fed to get the 12 organic. There is a market for hormone-free, grain fed.” Management, Medium, month supply.” Management, Medium, Meat Company Meat Company
“There is an opportunity for Western Australia to be in retail ready chilled beef. We need branded beef with a strong Australian story.” Management, Large, “Online gift meat boxes, direct.” Management, Medium, Meat Company Meat Company
”We need research into packaging to extend the shelf life of chilled.” ”Its hard to compete in boxed beef or live. USA and Brazil are both strong.” Management, Large, Meat Company Management, Large, Agribusiness Company
“We can airfreight chilled restaurant ready beef into Singapore, Vietnam, into restaurants and hotels.” Management, Medium, Meat Company
Source: Industry interviews 12 This section analyses the chilled beef market and opportunity for Western Australia, defined as follows
TRADE DESCRIPTIONS BY TEMPERATURE STATE
IN SCOPE OUT OF SCOPE
Beef, chilled carcass Beef, frozen carcass
Beef, chilled bone-in Beef, frozen bone-in
Beef, chilled boneless Beef, frozen boneless
Beef, chilled offal Beef, frozen tongues
Beef, frozen livers
Beef, frozen offal
13 Western Australia is well-positioned to grow chilled beef exports to Asia
- Asian chilled beef imports are rising, driven by increasing volumes and growing prices - Asian/Middle East chilled beef import growth is coming across a range of products; however, chilled boneless is the largest - Asian/Middle East chilled beef imports are dominated by Australia and the US - Australia and the United States have captured the “lion’s share” of growth in chilled beef over the past decade - However, the US stands out for driving total export growth over the past five years, while India stands out for rate of growth - Average FOB price to target Asian markets vary by supplier, with Australia appearing to set the pricing lead - Japan, South Korea and the UAE are the key Asian/Mid-East markets for chilled beef - Over the past ten years, value growth in chilled beef meat trade into Asia/Middle East has come from Japan, South Korea, Taiwan and the UAE - Thailand, Taiwan, the UAE and Saudi stand out for driving growth over the past five years - Average chilled beef import prices vary by country, with Taiwan, South Korea and Japan standing out as a large market paying premium prices - Imported chilled beef consumption and aggregate chilled beef imports appear highly correlated with income per capita; China – in particular – stands out as having strong medium term growth potential - Market share varies by country; Australia is strong in East and South East Asia; the US has pockets of strength, particularly in Taiwan, Japan, Hong Kong and South Korea; India only a force in local markets and some Middle East markets - Western Australia has a potential for further share growth across most markets in Asia/Mid-East - Data supports new high value, premium chilled beef opportunities being initially launched in (1) Hong Kong, (2) South Korea and (3) Japan - As a “Straw Man” for discussion, we identify an export market roll-out plan 14 Asian chilled beef imports are rising, driven by increasing volumes and growing prices
TOTAL IMPORTS TO ASIA/MIDDLE EAST TARGET REGION (24 COUNTRIES) VOLUME AVERAGE PRICE PER KILOGRAM VALUE T; 000; 2004-2014 US$; 2004-2014 US$m; 2004-2014
600 $8.00 $4,000
$7.00 $3,500 500 CAGR CAGR* 4% 5% $6.00 $3,000 CAGR 8% 400 $5.00 $2,500
300 $4.00 $2,000
$3.00 $1,500 200
$2.00 $1,000
100 $1.00 $500
0 $- $- 2010 2011 2010 2011 2010 2011 2004 2004 2004 2014 2014 2014 2008 2008 2008 2006 2009 2006 2006 2009 2009 2007 2007 2007 2005 2005 2005 2012 2012 2012 2013 2013 2013
* Compound Annual Growth Rate; Source: UN Comtrade database; Coriolis analysis and classifications 15 Asian/Middle East chilled beef import growth is coming across a range of products; however, chilled boneless is the largest
10y ABS EXPORT VALUE TO TARGET REGION BY TRADE SUB-CODE US$m; FOB; 2014 $3,383 +$1,877 $83 Beef, chilled carcass +$212 $121 Beef, chilled bone-in +$132 $3,092 $84 $2,932 $116 $2,841 CAGR $99 $76 8% $98 $109 $2,534 $74 $64 $2,270 $29 $97 $2,124 $2,036 $46 $78 $22$45 $1,857 $1,801 $17 $34$5 $52 $2,955 Beef, chilled boneless +$154 $1,506 $3 $2,705 $25 $2,542 $2,498
$2,279 $2,053 $1,887 $1,897 $1,670 $1,711
$1,424
$158 $192 $187 $224 Beef, chilled offal +$31 $53 $91 $77 $81 $91 $103 $116 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 16 Asian/Middle East chilled beef imports are dominated by Australia and the US
EXPORT VALUE BY SUPPLIER TO TARGET REGION TOTAL = US$3,383m $20 US$m; FOB; 2014 $24 $1,625 $1,486 $2 $180 $47
Other E/SE Asia $5
Pakistan Malaysia $99 Other $20 $2 South Africa USA $21 Australia $1,240 $1,489
Europe $20 Japan $20 India $81 Canada $39 Mexico $25 Brazil Other SS Africa New Zealand $161 $3 $136 Other Americas China $21 $1 Europe SS Africa Indian Sub E/SE Asia Australasia Americas Other
NA/ME/CA = North Africa/Middle East/Central Asia; Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 17 Australia and the United States have captured the “lion’s share” of growth in chilled beef over the past decade
EXPORT VALUE BY SUPPLIER TO TARGET REGION 10y ABS US$m; FOB; 2004-2014 $3,383 +$1,877
$3,092
$2,932 CAGR $2,841 8%
$1,489 Australia +$141 $2,534
$1,387 $2,270
$2,124 $1,471
$2,036 $1,542
$1,857 $1,801 $1,417 $136 New Zealand +$58
$135 $1,506 $1,483 $1,269 $131 $1,451 $126
$1,474 $1,240 USA +$1,237 $128 $1,547 $1,125
$879 $1,348 $99 $752 $99 $597
$100 $425 +$37 $384 $39 Canada $25 Mexico +$25 $31 $26 $17 $29$19 $33 $11 $161 Brazil +$118 $86 $257 $9 $20$7 $187 $142 Other Americas +$7 $23$12 $190 $21 Europe +$16 $106 $186 $20 $20$21 South Africa $81 $20$10 $183 $15 $16$0$8$1 $2$3 +$21 $19$9 $153 $8 $24$9$0$2 $99 Pakistan +$96 Other SS Africa +$3 $39 $105 $30$8 $42$2$1 $111 $78 $11$6 $77 $17 $2$1 $101 India +$80 +$1 +$4 $59 $17 $18$4$7$1 $11$0$2$1 $63 $72 $81 Other $0$2$3 $17$0$5$3$1 $19$0$2$7 $33 $44 $77 Other E/SE Asia Malaysia +$20 $43 $22$0$5$3$1 $18$0$8 $0$9$3 $7$5$3 $11$0$4 $12$13$2 $26$13$0$1 $33$1 $20$5 $15$0$2$7$5$1 $19$0$4$3 $32 $34 $36 $22$8 $33 $27 $14$15 $16$4$2$1 $20$1 Japan +$20 China -$6 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 18 However, the USA stands out for driving total export growth over the past five years, while India stands out for rate of growth
FIVE YEAR EXPORT GROWTH MATRIX: CHANGE IN VALUE VS. RATE OF GROWTH VS. ABSOLUTE VALUE US$m; 2009 vs. 2014
50% Other SS Africa Malaysia India South Africa
40%
30% Mexico
USA 5y CAGR Japan 20% Other Pakistan Canada Europe
10%
New Zealand Other E/SE Asia Australia
0% Other Americas Brazil Bubble scale: US$m; 2014 $200m A bubble this size= China -10% $-100 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900
5y absolute change in value
Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 19 Average FOB price to target Asian markets vary by supplier, with Australia in the middle of the curve
AVERAGE EXPORT VALUE COST CURVE BY SUPPLIER US$/kg; t; FOB; 2014 $51.32
Average FOB value $14.17 $6.59
$8.79 $5.46 $8.50 $5.20 $5.07
$7.79 $4.44 $7.51 $7.01 $4.32 $3.06 $3.15 $1.66 $0.68 Japan China Mexico Canada New Zealand Europe Brazil South Africa Other E/SE Asia Other Americas India Malaysia Pakistan Other SS Africa Other USA Australia
Volume imported by defined target market Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 20 Japan, South Korea and the UAE are the key Asian/Mid-East markets for chilled beef
IMPORT VALUE BY TARGET MARKET BY REGION US$m; FOB; 2014 TOTAL = US$3,383m $608 $1 $193 $2,583
India $0
United Arab Emirates Singapore $205 $64
Bahrain Malaysia Japan $17 $1,831 Qatar $21 $39 Kuwait $46
Thailand $40 Saudi Arabia $114 Other $1
Philippines IsraelEgypt $8 $3$1
South Korea Indonesia $393 $41 Other $183 Taiwan $195 Vietnam Hong Kong SAR $17 $134 China
NA/ME/CA Indian Sub $29 SE Asia East Asia
Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 21 Over the past ten years, value growth in chilled beef meat trade into Asia/Middle East has come from Japan, South Korea, Taiwan and the UAE
IMPORT VALUE BY MARKET BY REGION US$m; FOB; 2004-2014 10y ABS
$3,383 +$1,877
$205 United Arab Emirates +$183 Bahrain $17 +$14 $3,092 $39 Qatar +$35 $46 Kuwait +$38 $2,932 $187 $114 Saudi Arabia +$94 +$3 $3$1 Egypt Israel +$1 $2,841 CAGR $33$21 $183 Other ME +$149 -$0 $163 $45 8% Other Ind. Sub +$1 $121 $19 $93 $0$1 $27 $64 Singapore India +$47 $29$13 $44 $0$2 $21 +$15 $38 $40 Philippines MalaysiaThailand +$37 $77 $162 $41$8 +$6 $2,534 $65 $10$9 $17 Vietnam Indonesia +$33 $14$13 $0 +$15 $156 $61 $104 $182 $23$19 $12 $0 $9 $18 $60 $37$13 $37 $0 $19 $2,270 $62 $55 $17$5 $6$7 $14 $18$31 $41$4 $83 $19 $7 $2,124 $172 $29$19 $2,036 $46 $44$0 $2$1 $85 $14 $7 $10$5 $58 $126 $16 $45 $32 $42 $22$13$5 $0 $42 $1,857 $34 $35$11 $3$1 $2$1 $27$4$8 $1,801 $86 $14 $159 $37$5 $25 $18$8 $31$0$1 $14$5$3 $30$2 $10$6$3 $34$0 $24$1 $0 $23$5 $11$7 $55$0 $74 $35$3 $19$0 $23$0$5 $32 $1,831 Japan +$623 $4$9$7$3$1 $11$6$7$3$1 $1,506 $1,682 $21$4$3 $21$0$8 $34$18$0 $1,601 $1,708 $8$6$2$3$1
$1,489 $1,488 $1,345 $1,326 $1,329 $1,392
$1,208
$317 $393 South Korea +$298
$362 $312 $280 $166 $256 $223 $195 Taiwan +$152 $201 $191 $116 $131 $136 $105 $143 $95 $90 $68 $62 $79 $67 $99 $116 $134 Hong Kong SAR +$109 $42 $50 $53 $68 $79 $25$5 $33$5 $39$6 $48$6 $8 $9 $15 $20 $26 $29 China +$24 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 22 Thailand, Taiwan, the UAE and Saudi stand out for driving growth over the past five years
FIVE YEAR IMPORT GROWTH MATRIX: CHANGE IN VOLUME VS. RATE OF GROWTH VS. ABSOLUTE VALUE US$m; t; 2009 vs. 2014 45% Sri Lanka Thailand
40%
30% Pakistan China Taiwan Saudi
Philippines 20% Bahrain Hong Kong SAR Qatar UAE Oman 5y CAGR Singapore Value South Korea Malaysia Jordan
10%
Kuwait Japan Egypt Indonesia
0%
Lebanon Israel
-10% Vietnam Bubble scale: US$m; 2014 $200m A bubble this size=
India -20% -15,000 -10,000 -5,000 0 5,000 10,000 15,000
5y absolute change in volume
Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 23 Average chilled beef import prices vary by country, with Taiwan, South Korea and Japan standing out as large markets, paying premium prices
AVERAGE IMPORT VALUE COST CURVE BY MARKET/REGION US$/kg; t; FOB; 2014 $16.31 $12.10 $10.19 $9.16 $9.16
Average $7.83 import $7.82 value
$7.33 $6.58 $5.87 $5.66
$5.95 $5.19 $5.01 $4.89 $4.76 $4.62 $4.50 $4.36 $4.29 $4.76 $3.48 $0.52 Singapore Malaysia Taiwan Hong Kong SAR Indonesia S. Korea Qatar Jordan Bahrain Thailand Kuwait Oman Vietnam Sri Lanka Philippines India Pakistan Japan China Lebanon UAE Egypt Saudi
Volume imported
Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 24 Imported chilled beef consumption and aggregate chilled beef imports appear highly correlated with income per capita; China – in particular – stands out as having strong medium term growth potential
MARKET SIZE DRIVERS: GDP PER CAPITA VS. IMPORTS PER CAPITA VS. MARKET SIZE Kg; US$; t; 2014
4.0
Lebanon UAE
3.5 Qatar
Kuwait
3.0
Bahrain
2.5 Imports per capita
Hong Kong SAR 2.0 Jordan Japan
1.5
Taiwan South Korea 1.0 Oman Singapore
Saudi Arabia 0.5 Philippines Bubble scale: tonnes; 2014 Thailand $50,000 Vietnam A bubble this size= Malaysia China Israel 0.0 $0 Indonesia $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 India Pakistan Egypt Sri Lanka GDP per capita Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Wikipedia (GDP/capita); Coriolis analysis and classifications 25 Market share varies by country; Australia is strong in East and South East Asia; the USA has pockets of strength, particularly in Taiwan, Japan, Hong Kong and South Korea; India only a force in local markets and some Middle East markets
IMPORT VALUE MARKET SHARE BY MARKET BY KEY SUPPLIER % of value in US$m; FOB; 2014
100%
90%
Indian Sub 80%
70% Other
60% Brazil
50%
USA 40%
30% New Zealand
20% Australia
10%
0% Bahrain Kuwait UAE Hong Kong SAR Thailand Qatar Japan Saudi Arabia Egypt Singapore South Korea China Vietnam Taiwan Oman Lebanon India Philippines Indonesia Jordan Pakistan Israel Malaysia Sri Lanka
Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 26 Western Australia has a potential for further share growth across most markets in Asia/Mid-East
AUSTRALIAN IMPORT VALUE MARKET VS. MARKET VALUE US$m; FOB; 2014 97% 97% 94% 93% 76% 68% 57%
Australian
48% market share 40% 40% 46% 36% 30%
27%
20% 14% 11% 10% 8% 7% 1% 0% Pakistan Lebanon Jordan Bahrain Israel Oman Kuwait Hong Kong SAR Vietnam Thailand Qatar Saudi Arabia Singapore Indonesia Malaysia China Egypt India Philippines Taiwan UAE Japan South Korea Sri Lanka
Total value of imports
Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 27 Data supports new high value, premium chilled beef opportunities being initially launched in (1) Singapore, (2) Hong Kong and (3) Japan
WHERE TO FOCUS FOR NEW HIGH VALUE, PREMIUM PRODUCTS: AU SHARE VS. AVERAGE VALUE VS. MARKET SIZE % of value; US$; US$m; 2014 $13.00 Sri Lanka
$12.00 Singapore 1
$11.00
Malaysia $10.00
Taiwan Hong Kong SAR $9.00 2 South Korea VALUE Average $8.00 FOB $/kg Indonesia 2014 Japan 3 $7.00 Lebanon China
$6.00 India Israel UAE Qatar Egypt $5.00 Philippines Jordan Bahrain Saudi Arabia Thailand Kuwait $4.00 Oman Bubble scale: US$m; 2014 $200 Vietnam A bubble this size= Pakistan $3.00 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
AU share of total import value Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 28 As a “Straw Man” for discussion, we identify an export market roll-out plan
PRELIMINARY “STRAW MAN” DEVELOPMENT & ROLLOUT PLAN FOR CHILLED BEEF OPPORTUNITY Model; 2016
0 1 2 3 Product Export launch in Export launch in Export launch in development and Singapore Hong Kong Japan testing
- High income, sophisticated market and consumers - AU already has a strong market position on which WA can build
29 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?
30 Western Australia is well-positioned to grow chilled beef exports to Asia
IS THE MARKET DEVELOPED & COMPETITIVE? - The flow of chilled beef from the farm through to the consumer is relatively straight forward and simple - Chilled beef prices vary significantly by market and by retailer across Asia - Asian supermarkets generally have a much less developed chilled beef range and offer, than key Western countries
WHAT IS WA CAPABLE OF DELIVERING? - Western Australian beef processors need to continue to move forward and improve through improved product development and presentation - Multiple potential positions exist to develop a premium chilled beef offer for Asia - Products from other processors in other markets demonstrate what is possible in terms of developing a premium Western Australian chilled beef offer - There are a wide range of potential product positions or claims available for a premium chilled beef product from Western Australia targeting Asia - As a “Straw Man” for discussion, we identify an opportunity for a high value, premium chilled beef product with select characteristics for export market launch
31 HOW IS THE MARKET STRUCTURED? The flow of chilled beef from the farm through to the consumer is relatively straight forward and simple
SIMPLIFIED MODEL OF SUPPLY CHAIN: CHILLED BEEF Model; 2016 This stage branches and adds multiple layers in large markets
In-Market Domestic Wholesalers Retailers Farmer Processor
Distributor(s) WA WA Beef Agent/Broker/ Foodservice (multi-layered in Farmer Processor Distributor & Institutional large markets)
Other Australian Processor
US Packer/Processor Exports Processor Sales/Marketing
Logistics Providers New Zealand (Airfreight, Processor Seafreight, Trucking)
European Processor
South American Processor
Other Processor
Source: Coriolis 32 WHO IS THE COMPETITION? PRICING Chilled beef prices vary significantly by market and by retailer across Asia
EXAMPLE: SHELF PRICE PER KG ACROSS SELECT WESTERN & ASIAN MARKETS: BEEF LOIN US$/kg; Feb 2016
$41.89
$23.58
$16.70 $16.64
Hong Kong Singapore AU United Kingdom Australia
SELECT SE ASIAN RETAILERS SELECT WESTERN
Source: Coriolis from store checks 33 WHAT IS ON THE SHELF? RANGE IN MARKET Asian supermarkets generally have a much less developed chilled beef range and offer than key Western countries
NUMBER OF CHILLED BEEF ITEMS/SKUS AVAILABLE ON SHELF Feb 2016
Wegmans (NY) 108
Waitrose (UK) 97
Cold Storage 8
Driven by current predominance of frozen and continued strength of wet markets Park'N Shop 6
Wellcome 3
Source: Coriolis from store checks; photo credit (fair use/fair dealing; low resolution; complete product/brand for illustrative purposes); Coriolis analysis 34 WHAT IS WA CAPABLE OF DELIVERING? STRATEGIC DIRECTION Western Australian beef processors need to continue to move forward and improve through improved product development and presentation
SUGGESTED STRATEGIC DIRECTION: WESTERN AUSTRALIAN CHILLED BEEF Model; 2016
Vacuum packed Chilled & frozen Australian Regional Specific primal/sub- Case-ready Ready-meal carcass sent branded branded breed primal
India/Pakistan WA suppliers Leading US/EU suppliers are here in Asia suppliers are here are here
High growth, high potential opportunities are here
35 WHAT IS WA CAPABLE OF DELIVERING? CLAIMS Multiple potential positions exist to develop a premium chilled beef offer for Asia
IDENTIFIED POTENTIAL PREMIUM POSITIONS Model; 2016
HEALTH PROVENANCE INDULGENCE CONVENIENCE
High in protein Identified source region Gift packaging Serving for one
High in iron Organic Hand trimmed Oven ready
Gluten free Specialty breed Wagyu Suitable for freezing
Antibiotic free Track & trace Marinated or flavoured
No added hormones Free range
Grass fed Farmer’s story
Source: Coriolis; photo credit (Dollar Photo and Southern Forests Food Council Inc.) 36 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 beef offer
EXAMPLES OF PREMIUM PRODUCTS FROM OTHER MARKETS Select; 2016
Case-ready Case-ready Case-ready From Aberdeen
Natural USDA-Choice grade Product of UK Angus breed
No antibiotics, ever Double R Ranch Soil Association Organic Serves 1
No added hormones, ever Northwest Region Beef Black packaging British flag
Black Angus breed Signature Picture of green fields Assured food standards
Premium quality For grilling Suitable for home freezing
93% lean With garlic and herb crust
USDA inspected
Source: photo credit (fair use/fair dealing; low resolution; complete product/brand for illustrative purposes); Coriolis analysis 37 WHAT IS A POTENTIAL WA OFFER? There are a wide range of potential product positions or claims available for a premium chilled beef product from Western Australia targeting Asia
HYPOTHETICAL EXAMPLE OF POTENTIAL PREMIUM PRODUCT FROM WA Model; 2016
GMO, hormone and High in protein & iron Grass-Fed antibiotic free
HEALTH
From Australian Free Range Western Australia Flag
PROVENANCE
“Premium” Named, specific breed Dry aged Grade Plain beef INDULGENCE
Case-ready
CONVENIENCE
Source: Coriolis; photo credit (Dollar Photo and Southern Forests Food Council Inc.) 38 WHAT IS THE IDENTIFIED OPPORTUNITY? As a “Straw Man” for discussion, we identify an opportunity for a high value, premium chilled beef product with select characteristics for export market launch
PRELIMINARY “STRAW MAN” DEVELOPMENT & ROLLOUT PLAN FOR CHILLED BEEF OPPORTUNITY Model; 2016
CURRENT WA IDENTIFIED HIGH GROWTH, POTENTIAL FUTURE POSITIONING IN ASIA HIGH VALUE OPPORTUNITY FOR WA PRODUCT LINE EXTENSION
From From 100% Grass-Fed 14 day dry aged 100% Australian Australia Western Australia
Hormone Free Free Range Prime Beef Case-ready
Assured Food GMO Free Sustainably raised Fuller flavour Standards
Humanely raised Picture of source area Exceptional tenderness Award winner
Australia Graded Track and trace
Source: photo credit (fair use/fair dealing; low resolution; complete product/brand for illustrative purposes); Coriolis analysis 39 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?
40 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 41 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$0.2b
Store formats Supermarket Supermarket (Cold Storage, Supermarkets Supermarkets Hypermarket Marketplace) Online Convenience (Cheers; 139) Hypermarket Online Convenience (7-Eleven; 502) Online
# of stores 285 848 38 19
Store fascia
Source: Coriolis from a wide range of sources 42 FOCUS MARKET – 2 – HONG KONG Hong Kong has a robust and well-developed food retailing and foodservice sector
TURNOVER & PURCHASES ESTIMATED WHOLESALE FOOD & FMCG PURCHASES US$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 43 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 $0.4b (in HK)
Food store Supermarkets 318 Supermarkets 260+ Supermarkets Supermarkets Grocery 247+ Dept. stores (w/food) 8 Convenience 600+ formats Convenience 921 Convenience Convenience Supermarkets 5 Bakery Health & Beauty 369 Restaurants 676
# of stores Wellcome 280+ ParknShop 175 CR Vanguard 100+ DCH Food Mart 80+ 759 Stores 247+ AEON 13 Circle K Marketplace 31 PnS Superstore 50+ VanGo 79 DCH Food Mart Deluxe Saint Honore Cake 7-Eleven 900+ PnS Taste 10 Olivers the Delicatessen PnS Fusion 14 ThreeSixty
Store fascia
Source: Coriolis from a wide range of sources 44 FOCUS MARKET – 3 – JAPAN Japan has a robust and well-developed food retailing and foodservice sector
TURNOVER & PURCHASES ESTIMATED WHOLESALE FOOD & FMCG PURCHASES US$b; 2014 US$b; 2014
$287.1 $93.0 100% 90% $93 Foodservice 80% $310 70% 60% Supermarkets 50% $102.3 40% 711,000 restaurants, $232 Retail bars & clubs, 87,927 30% $331 hotels/motels/etc., 20% vending machines, institutions (schools, 10% hospitals, airline 0% caterers, prisons, etc.) Turnover Purchases
TURNOVER GROWTH RATE Foodservice % Y-O-Y; HK$; 2013v2014 $93.0 Convenience $112.9
Retail 0.0%
Online $5.3 Small grocers $27.5
Foodservice 2.4% Specialists $22.5 Other grocery $16.6 Retail Foodservice
Source: Coriolis from a wide range of sources 45 FOCUS MARKET – 3 – JAPAN Eight potential in-market partners are identified for Western Australian firms in Japan
POTENTIAL IN-MARKET PARTNERS – JAPAN 2015 or as available
Firm AEON Retail Seven & I Holdings Uny Group Holdings Izumi Co. Ltd. Life Arcs Lawson Family Mart
Ownership Japan; listed Japan; listed Japan; listed Japan; listed Japan; listed Japan Japan; listed Japan; listed
Website www.aeon.info www.7andi.com www.unygroup- www.izumi.co.jp www.lifecorp.jp www.arcs-g.co.jp www.lawson.jp www.family.co.jp www.maxvalu.co.jp www.sej.co.jp hds.com www.daiei.co.jp www.itoyokado.co.jp www.uny.co.jp www.ministop.co.jp www.circleksunkus.jp
Annual sales US$61.2b US$49.1b US$9.0b US$4.7b US$4.7b US$4b US$17.4b US$14b Total/Food US$16.8b US$17.5b US$6.7b US$2.1b US$3.8b US$4b
Food store Hypermarket Convenience 17,900 Supermarket Supermarkets Supermarket Convenience 12,254 Convenience 9,975 formats Supermarket (41% share) Convenience Hypermarkets (20.5% share) (19% share) Department stores Supermarkets 185 (9.6% share) Malls Convenience Department stores HBC (3.4% share) Foodservice Pharmacy/HBC
# of stores 1,882 18,262 226 102 239 290 12,254 9,975 (JP) 16,970 (Global)
Store fascia
Source: Coriolis from a wide range of sources 46 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?
47 IDENTIFIED WA COMPANIES
ELDERS LIMITED HARVEY BEEF MARGARET RIVER PREMIUM MEAT EXPORTS
ADDRESS: L2 195 Great Eastern Highway, Belmont ADDRESS: Lot 113 Seventh St, Harvey, WA 6220 ADDRESS: 104 Pinjarra-Williams Rd, Pinjarra, WA 6104 6208 PHONE: 08 8425 4000 PHONE: 08 9729 0000 PHONE: 08 9531 1086 WEBSITE: www.elders.com.au WEBSITE: www.harveybeef.com.au WEBSITE: www.mrpme.com.au
MILNE AGRIGROUP V&V WALSH WESTERN MEATPACKERS
ADDRESS: 2 Alumina Road,East Rockingham, WA ADDRESS: South Western Hwy, Bunbury, WA 6230 ADDRESS: 37 King Edward Rd, Osborne Park WA 6017 6168 PHONE: 08 9351 0750 PHONE: 08 9725 4488 PHONE: 08 9241 4600 WEBSITE: www.milne.com.au WEBSITE: www.vvwalsh.com.au WEBSITE: www.wmpg.com.au
Sources: Coriolis from a wide range of sources 48 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.