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RECIPIENT
FIRM
TARGET MARKET OPPORTUNITIES IN ASIA FOR SAUSAGES 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? Sausages emerged in Phase I as one of twenty “high growth, high potential” opportunities for Western Australia; sausages are processed meat products that are typically served cooked
PRODUCT OVERVIEW Example; 2015
PRODUCT PROFILE HS Code 160100 Product Sausages Out-of-scope Fresh cuts of meat, mince, salted, brined, dried or smoked meat, homogenised preparations, liver products, ham and processed ham, blood products etc. as all are covered under other screened trade codes Origin Ancient Europe; mentioned by Homer and well established in Roman times Example Pork (76%), Water, Potato Starch, Sea Salt, Mineral Salt (451), Dextrose (Tapioca, ingredients Maize), Preservative (223), Dehydrated Vegetables (Onion, Garlic), Herb & Spices, Flavours, Mustard Flour, Natural Colouring (Fermented Red Rice), Canola Oil, Fruit Oil, Antioxidant (306).
Forms/usage - Market stall/convenience store snack - Hot dogs - Ingredient in western cuisines Drivers of - Global trend towards snacking consumer/ - Emerging middle class eating more meat market success - Increasing Westernisation of diet - Less expensive means of increasing meat consumption
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 sausage exports to Asia
- Asian sausage imports are increasing, with import value growth being driven by rising tonnage and increasing average FOB (free-on-board) prices - Asian & Middle Eastern sausage imports come from both Western countries (USA & Europe) and Asia (primarily China & Thailand) - China & the USA stand out for driving sausage trade value growth in Asia & the Middle East - China leads in absolute volume growth over the last five years, while Thailand, Jordan and other Middle Eastern suppliers stand out for rate of growth; USA retrenching - Average FOB price to target Asian markets vary significantly by supplier with Italy leading, followed by Australia, Thailand and China; Brazil is the low cost price fighter - While sausages go to a number of the target markets, Japan and Hong Kong stand out - Growth in sausage imports has been driven by East Asia - China, South Korea and Saudi Arabia standing out for market growth - Average sausage import prices vary by region, with East Asia generally paying more; Japan and Hong Kong both stand out as a large markets that pay well - Imported sausage consumption and aggregate imports appear partially driven by income per capita; Middle East stands out as higher in general - Market share varies by country; the USA is strong in East Asia; European countries stronger across the Middle East; China really only present at any level in Hong Kong and Japan - Western Australia has opportunities for sausage export growth in select Asian markets - Data supports new high value, premium sausage opportunities being initially launched in (1) Hong Kong, (2) Japan and (3) Singapore - As a “Straw Man” for discussion, we identify an export market roll-out plan 7 Asian sausage imports are increasing, with import value growth being driven by rising tonnage and increasing average FOB (free-on-board) 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
200 $4.50 $800
180 CAGR* $4.00 5% $700
CAGR 160 $3.50 6% $600
140 CAGR 12% $3.00 $500 120 $2.50
100 $400
$2.00 80 $300 $1.50 60
$200 $1.00 40
$100 20 $0.50
0 $- $- 2010 2011 2010 2011 2010 2011 2004 2004 2004 2014 2014 2014 2008 2008 2008 2006 2006 2009 2009 2006 2009 2007 2007 2007 2005 2005 2005 2012 2012 2012 2013 2013 2013
* Compound Annual Growth Rate; Source: UN Comtrade database; Coriolis analysis and classifications 8 Asian & Middle Eastern sausage imports come from both Western countries (USA & Europe) and Asia (primarily China & Thailand)
EXPORT VALUE BY SUPPLIER TO TARGET REGION US$m; FOB; 2014 TOTAL = US$657m $6 $202 $102 $43 $4 $25 $275 Other E/SE Asia $17 Denmark $21
Thailand $66 Jordan $13 Italy $22
Australia USA Brazil Other $6 $200 France $43 $4 $19
China $192
Other NA/ME/CA $13 Other Europe $40
Canada
$1 Other NA/ME/CA Australia N. America Europe Brazil E/SE Asia
NA/ME/CA = North Africa/Middle East/Central Asia; Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 9 China & the USA stand out for driving sausage trade value growth in Asia & the Middle East
10y ABS EXPORT VALUE BY SUPPLIER TO TARGET REGION US$m; FOB; 2004-2014
$720 $6 $681 $5 $657 $6 Australia -$5 $617 CAGR $6 12% $568 $251 $4 $248 $200 USA +$133
$489 $5 $261 $3 $24 $1 Canada -$11 $21 Denmark +$1 $414 $412 $265 $20 $2 $22 Italy +$13 $5 $5 $16 $23 $17 $19 France +$11 $208 $34 $20 $40 Other Europe +$29 $2 $41 $34 $312 $23 Brazil $180 $163 $11 $43 +$30 $4 $16 $8 $40 Other +$3 $17 $10 $4 Jordan $280 $3 $8 $13 +$12 $23 $24 $10 $13 Other NA/ME/CA +$12 $17 $4 $25 $15 $26 $17 Other E/SE Asia +$15 $24 $15 $119 $4 $12 $37 $16 $21 $82 $208 $5 $22 $13 $12 $66 Thailand +$65 $105 $19 $12 $18 $6 $11 $12 $10 $40 $9 $56 $10 $12 $10 $19 $48 $10 $16 $17 $4$2 $44 $68 $10 $10 $14 $8 $29 $40 $8$1 $14 $9$4 $29 $18 $7$5$1 $9$1 $12 $9 $23 $6 $7 $26 $20 $8 $5 $13 $11 $2$5$3 $190 $192 China +$140 $8$9 $20 $177 $11 $0$2$1 $146 $4 $128 $13$0$1 $113 $2$1 $92 $100 $109 $69 $51
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 10 China leads in absolute volume growth over the last five years, while Thailand, Jordan and other Middle Eastern suppliers stand out for rate of growth; USA retrenching
FIVE YEAR EXPORT GROWTH MATRIX: CHANGE IN VALUE VS. RATE OF GROWTH VS. ABSOLUTE VALUE US$m; 2009 vs. 2014 60%
Jordan 50%
40%
30% Other NA/ME/CA
5y CAGR 20% Thailand Other Europe Other E/SE Asia China 10% Italy
USA France Australia 0% Brazil Denmark
-10% Other
-20% Bubble scale: US$m; 2014 $50m Canada A bubble this size=
-30% $-15 $-10 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90
5y absolute change in value
Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 11 Average FOB price to target Asian markets vary significantly by supplier with Italy leading, followed by Australia, Thailand and China; Brazil is the low cost price fighter
AVERAGE EXPORT VALUE COST CURVE BY SUPPLIER US$/kg; t; FOB; 2014 $8.23 $6.69 $6.36 $5.72 $5.24 $4.80 $3.88 Average $3.50
FOB $3.37 $3.29 value $2.91 $2.63 $1.87 $1.82 Italy Australia Thailand China Other Other NA/ME/CA USA Other Europe Denmark Other E/SE Asia Jordan Canada France Brazil
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 While sausages go to a number of the target markets, Japan and Hong Kong stand out
IMPORT VALUE BY MARKET BY REGION TOTAL = US$657m US$m; FOB; 2014 $108 $1 $40 $508
United Arab Emirates $33
Singapore $19 Japan Bahrain $294 $3 Qatar $8 Kuwait India $5 $1 Malaysia $4 Saudi Arabia $23 Thailand $2 South Korea $27 Taiwan $3 Egypt $2 Israel $1 Philippines $10 Hong Kong SAR $142 Other $33 Indonesia Other $4 $0 China Vietnam $42 $1 Indian Sub SE Asia NA/ME/CA East Asia
Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 13 Growth in sausage imports has been driven by East Asia
IMPORT VALUE BY MARKET BY REGION US$m; FOB; 2004-2014
$720
$31 $681 $3 United Arab Emirates $13 Bahrain $6 $29 $657 Qatar $21 $3 Kuwait $2$1 $4$7 $33 Saudi Arabia $617 $32 $22 Egypt $8$3 Israel $0$1 $2$1 $5 $27 $15 Other ME CAGR $3$1 $33 $23 India $5$3 $7 12% $568 $6 $6$1 $0$1 $2$1 Other Ind. Sub $18 $18 $33 Singapore $26 $3$1 $4$2 Malaysia $11 $0$1 $3 $28 $6$1 Thailand $4$7 $19 Philippines $13 $0$2 $4$2 $1 $17 $10 Indonesia $1 $4$1 Vietnam $489 $25 $3$1 $4$5 $0$2 $1 $28 $14 $5$1 $5$3 $3$1 $8 $15 $414 $412 $0$1 $25 $18 $23 $2$1 $3 $14 $367 $7 $3 $5 $304 $10 $8$5 $5$1 $0$1 $9 $2 $19 $0$1 $20 $294 Japan $10$1 $26 $0$5$3 $2$1 $309 $312 $2 $14 $278 $38 $4$5$1 $14 $2 $280 $2$5 $28 $0$8 $11 $17 $2 $1 $6$7 $12 $0 $4 $17 $0$2$3 $224 $8$0$1 $12 $208 $0$2$5 $25 $14 $9 $20 $27 South Korea $2$5$1 $192 $24 $0$6 $3 $3 Taiwan $14 $213 $17 $8$0 $23 $6 $5 $0$2$3$1 $154 $14 $145 $113 $15 $119 $3 $142 Hong Kong SAR $110 $16 $104 $1 $133 $10 $87 $2 $40 $18 $9$1 $2 $40 $77 $5$1 $34 $33 $65 $31 $44 $46 $42 China $14 $23 $15 $23 $22 $1 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 14 China, South Korea and Saudi Arabia standing out for market growth
FIVE YEAR IMPORT GROWTH MATRIX: CHANGE IN VOLUME VS. RATE OF GROWTH VS. ABSOLUTE VALUE US$m; t; 2009 vs. 2014 40% Egypt
30%
Thailand
20% Shift to quality Growing prices on Israel Hong Kong SAR Philippines South Korea falling volumes Jordan Qatar 5y CAGR China Indonesia 10% Saudi Arabia Lebanon Singapore Japan
Bahrain UAE
0% Taiwan
Malaysia Oman
-10% Kuwait
India Bubble scale: US$m; 2014 $100m A bubble this size= Pakistan Vietnam Sri Lanka -20% -3,000 -2,000 -1,000 0 1,000 2,000 3,000 4,000 5,000
5y absolute change in volume
Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 15 Average sausage import prices vary by region, with East Asia generally paying more; Japan and Hong Kong both stand out as a large markets that pay well
AVERAGE IMPORT VALUE COST CURVE BY MARKET/REGION US$/kg; t; FOB; 2014 $7.80 $6.68 $6.00 $5.72 $5.50 $5.04 $4.94 $4.34 $4.05 $3.73 $3.45
Average $3.33 $3.22
import $3.06 value $2.56 $2.50 $2.30 $2.03 $1.92 $1.83 $1.80 $1.66 $1.46 Thailand India Vietnam Hong Kong SAR Taiwan Japan Lebanon Israel China Philippines Jordan Egypt South Korea Indonesia Malaysia Singapore UAE Qatar Saudi Arabia Kuwait Bahrain Oman Sri Lanka Pakistan
Volume imported Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 16 Imported sausage consumption and aggregate imports appear partially driven by income per capita; Middle East stands out as higher in general
MARKET SIZE DRIVERS: GDP PER CAPITA VS. IMPORTS PER CAPITA VS. MARKET SIZE Kg; US$; t; 2014
3.5 Hong Kong SAR
3.0
2.5
Imports per capita 2.0 Qatar
UAE 1.5
Bahrain Singapore
Oman 1.0 Lebanon Kuwait
0.5 Japan Jordan Saudi Arabia Bubble scale: tonnes; 2014 Vietnam Philippines 25,000 Indonesia A bubble this size= India China South Korea Thailand Malaysia Taiwan Israel 0.0 $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 Pakistan Sri Lanka Egypt GDP per capita Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Wikipedia (GDP/capita); Coriolis analysis and classifications 17 Market share varies by country; the USA is strong in East Asia; European countries stronger across the Middle East; China really only present at any level in Hong Kong and Japan
IMPORT VALUE MARKET SHARE BY MARKET BY KEY SUPPLIER % of value in US$m; FOB; 2014
100% China
90% Thailand Other E/SE Asia
80% Other NA/ME/CA
Jordan 70% Other
Brazil 60% Turkey
50% Other Europe
France 40% Denmark
Italy 30% Canada
20% USA Australia 10%
0% Egypt Bahrain Hong Kong SAR Qatar Kuwait UAE Japan Thailand China South Korea Singapore Vietnam Taiwan Oman Lebanon Philippines India Indonesia Jordan Saudi Pakistan Israel Sri Lanka Malaysia
Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 18 Western Australia has opportunities for sausage export growth in select Asian markets
AUSTRALIAN IMPORT VALUE MARKET VS. MARKET VALUE US$m; FOB; 2014 38% 24%
Australian market share 11% 6% 5% 4% 1% 1% 1% 0% 1% 1% 1% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% China Israel Kuwait Oman Thailand UAE Japan Hong Kong SAR Qatar Saudi South Korea Sri Lanka Malaysia Singapore Taiwan Indonesia Egypt Jordan Lebanon India Bahrain Philippines Vietnam Pakistan
Total value of imports Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 19 Data supports new high value, premium sausage opportunities being initially launched in (1) Hong Kong, (2) Japan and (3) Singapore
WHERE TO FOCUS FOR NEW HIGH VALUE, PREMIUM PRODUCTS: AU SHARE VS. AVERAGE VALUE VS. MARKET SIZE % of value; US$; US$m; 2014 $8.00 Vietnam
$7.00 Thailand
India $6.00 Hong Kong SAR 1 Sri Lanka $5.00 Japan 2 Taiwan Lebanon VALUE Average Israel $4.00 China FOB $/kg 2014 Philippines
South Korea Egypt Indonesia Jordan$3.00 Malaysia Singapore 3 UAE $2.00 Qatar Bahrain Saudi Kuwait Oman Pakistan $1.00
Size of bubble = value $20 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 SAUSAGE OPPORTUNITY Model; 2016
0 1 2 3 Product Export market Expand into Taiwan Roll-out in Japan development and launch in Hong Kong and South Korea testing
- High income, sophisticated market and consumers
- Large market for sausages (relatively speaking)
- Manageable sized test bed
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 sausage exports to Asia
IS THE MARKET DEVELOPED & COMPETITIVE? - The flow of sausages from the farm through to the consumer is relatively straight forward and simple - Sausage prices are competitive in Asia - Asian markets generally have a much less developed sausage range and offer than Western countries - “Leading indicator” Western markets strongly suggest depth of range in Asian sausage markets will increase going forward - Pork is the favoured protein in (almost) all Western countries but does not enjoy the same dominance in Asian markets
WHAT IS WA CAPABLE OF DELIVERING? - A wide range of premium, value-adding product attributes emerged from our cross-country retailer survey - Western Australian sausage producers need to continue to move forward and improve through new products - Multiple potential positions exist to develop a premium sausage offer for Asia - Products from other processors in other markets demonstrate what is possible in terms of developing a premium Western Australian sausage offer - There are a wide range of potential product positions or claims available for a premium sausage product from Western Australia targeting Asia - As a “Straw Man” for discussion, we identify an opportunity for a high value, premium sausage product with select characteristics for export market launch
23 HOW IS THE MARKET STRUCTURED? The flow of sausages from the farm through to the consumer is relatively straight forward and simple
SIMPLIFIED MODEL OF SUPPLY CHAIN: SAUSAGES Model; 2016 This stage branches and adds multiple layers in large markets
In-Market Domestic Wholesalers Retailers Farmer Packer/Processor
Distributor(s) WA Agent/Broker/ Foodservice WA Processor (multi-layered in Farmer Distributor & Institutional large markets)
Other Australian Processor
WA Abattoir USA Packer/Processor Exports Processor Sales/Marketing
EU Processor Logistics Providers (Airfreight, Seafreight, Brazillian Trucking) Processor
Chinese Processor
Thai Processor
Other Processor
Source: Coriolis 24 WHO IS THE COMPETITION? PRICING Sausage prices are competitive in Asia
SHELF PRICE PER KG ACROSS SELECT SE ASIAN MARKETS AND AUSTRALIA: SAUSAGES US$/kg; Feb 2016
Thailand Singapore Hong Kong $15.84 $15.40 $15.00
$13.20 $12.76 $12.22
$10.45 $9.95 $9.45 $9.63 $8.61 $8.22 $8.25
$6.88 $6.36 $6.07 Peppercorn Beef Extra Skinless Can 125g (DK) Wall's Thick Pork Betagro Classic Smoked Skinless Can 250g (DK) Woolworths Aussie Pork Chinese 250g (TH) Fairprice Oriental Pork Golden Dragon Oriental Green Pork Fresh Garlic TGM Chicken Wiener Hans Frankfurter Hot Beak & Sons Gourmet Harvest Creek Chicken Fairprice Garlic Sausage Johnsonville Bed w/Ch Chicken 500g (AU) Tesco Everyday Value Pork 680g (AU) Smoked 400g (US) Chicken 250g (SG) Wiener 200g (TH) Tulip Pork Hotdog Franks 340g (US) Tulip Pork Hotdog 500g (UK) Dog 1kg (AU) Pork Deli (TH) Lean 450g 250g (SG) Deli (TH) 200g (SG)
AU AU AU AU AU
SELECT SE ASIAN RETAILERS AUSTRALIA
Source: Coriolis from store checks 25 WHAT IS ON THE SHELF? RANGE IN MARKET Asian markets generally have a much less developed sausage range and offer than Western countries
EXAMPLE: ACTUAL SAUSAGE RANGE ON SHELF Feb 2016
London: GDP/Capita USA$75,200 Singapore: GDP/Capita USA$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 sausage markets will increase going forward
NUMBER OF LINES ON SHELF: SELECT RETAILERS FROM ACROSS MULTIPLE MARKETS SKU; actual; Feb 2016
104 Average 82.0 sku/store 96 93 93
4.5x
66 61 61
Average 17.7 sku/store 32
22 20 17 9 6
Sainsbury Safeway Wegmans Tesco Woolworths Coles Waitrose Tesco Park'N Shop Fairprice Tesco Wellcome Cold (UK) (CA) (NY) (UK) (AU) (AU) (UK) (TH) (HK) (SG) (MY) (HK) Storage (SG)
Anglo-American SE Asia
Source: Coriolis from store checks 27 IS THE MARKET DEVELOPED & COMPETITIVE? SEGMENTATION Pork is the favoured protein in (almost) all Western countries but does not enjoy the same dominance in Asian markets
NUMBER OF LINES ON SHELF BY PROTEIN: SELECT RETAILERS FROM ACROSS MULTIPLE MARKETS SKU; actual; Feb 2016
Cold Storage (SG) 1 5 Chicken/Turkey Beef Wellcome (HK) 5 4 Mix/Unspecified Tesco (MY) 14 2 1 Other
SE Asia Pork Fairprice (SG) 11 9
Park'N Shop (HK) 3 9 6 4
Tesco (TH) 3 1 14 1 13
Waitrose (UK) 1 1 1 51
Coles (AU) 4 19 17 4 17
Woolworths (AU) 7 15 34 3 7
Wegmans (NY) 38 5 10 1 39 Anglo American Tesco (UK) 6 3 1 2 82
Sainsbury (UK) 8 5 1 2 87
28 IS THE MARKET DEVELOPED & COMPETITIVE? PRODUCT ATTRIBUTES A wide range of premium, value-adding product attributes emerged from our cross-country retailer survey
PERCENT OF OBSERVED PRODUCTS ON SHELF MAKING THE CLAIM ON PACK TAKEAWAYS % of SKU; N=577; Feb 2016
- This provide very clear instruction on what product attributes are succeeding the most across Specified style 21% markets
- Western Australian sausage producers looking to Can/jar 4% grow value and share should focus in these areas
- Specifying style stands out, with ~1/4 observed Smoked 4% product SKU being labelled with a style e.g. Cumberland
Skinless 3% - Survey universe is all products in all listed retailers (across multiple countries) Gluten free 3%
Organic 3%
Reduced fat 3%
Free range 2%
Free from 1%
Source: Coriolis from store checks 29 WHAT IS WA CAPABLE OF DELIVERING? STRATEGIC DIRECTION Western Australian sausage producers need to continue to move forward and improve through new products
SUGGESTED STRATEGIC DIRECTION: WESTERN AUSTRALIAN SAUSAGES Model; 2016 PRELIMINARY
Homogenised hot Generic deli Branded retail Coarse cut Specified WA flavours Packaged ready- dog style counter pack gourmet traditional style to-eat
Chinese suppliers WA suppliers USA & UK are here are here in Asia suppliers are here
High growth, high potential opportunities are here
30 WHAT IS WA CAPABLE OF DELIVERING? CLAIMS Multiple potential positions exist to develop a premium sausage offer for Asia
IDENTIFIED POTENTIAL PREMIUM POSITIONS Model; 2016
HEALTH PROVENANCE INDULGENCE CONVENIENCE
Source of protein Organic Premium ingredients Ready-to-eat
Reduced sodium Identified source region Regional specialities Resealable packaging
Extra lean Specialty variety WA sourced flavours Single serve packs
Vitamins and minerals Track & trace Thick cut Fast cooking
Free range Traditional methods
RSPCA certified
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 sausage offer
EXAMPLES OF PREMIUM PRODUCTS FROM OTHER MARKETS Select; 2016
Bacon & Sausage Wraps Freefrom pork sausages Cocktail sausages Outback Spirit
Pigs in blankets Gluten free With tomato ketchup Provenance
Taste the Difference Dairy free Ready-to-eat Kakadu plum & lemon aspen
Outdoor Bred Pork British pork Oven baked 100% Australian pork
Dry cured smoked streaky bacon Farmed in United Kingdom EU Pork Gluten free
British pork Frozen Sow stall free
Taste tested by customers Made with 72% British pork Coarse cut pork Harvested by Aboriginal supply Ready to cook partners
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 sausage 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
Good source of protein Reduced sodium Extra lean
HEALTH
From Australian Free range West Australia Flag
PROVENANCE
Plain sausages WA sourced flavours Traditional methods
INDULGENCE
Ready-to-eat
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 sausage product with select characteristics for export market launch
PRELIMINARY “STRAW MAN” DEVELOPMENT & ROLLOUT PLAN FOR SAUSAGE OPPORTUNITY Model; 2016
CURRENT WA IDENTIFIED HIGH GROWTH, POTENTIAL FUTURE POSITIONING IN ASIA HIGH VALUE OPPORTUNITY FOR WA PRODUCT LINE EXTENSION
From From Retail pack WA flavours WA flavours Traditional methods Australia West Australia
Australian Traditional methods Ready-to-eat Pre-prepared Flag
Free range Good source of protein
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 – 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 36 FOCUS MARKET – 1 – 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 $0.4b (in HK)
Food store Supermarkets 318 Supermarkets 260+ Supermarkets Supermarkets Grocery 247+ Dept. stores (w/food) 8 Convenience 600+ formats Convenience 921 Convenience Convenience Supermarkets 5 Bakery Health & Beauty 369 Restaurants 676
# of stores Wellcome 280+ ParknShop 175 CR Vanguard 100+ DCH Food Mart 80+ 759 Stores 247+ AEON 13 Circle K Marketplace 31 PnS Superstore 50+ VanGo 79 DCH Food Mart Deluxe Saint Honore Cake 7-Eleven 900+ PnS Taste 10 Olivers the Delicatessen PnS Fusion 14 ThreeSixty
Store fascia
Source: Coriolis from a wide range of sources 37 FOCUS MARKET – 2 – JAPAN Japan has a robust and well-developed food retailing and foodservice sector
TURNOVER & PURCHASES ESTIMATED WHOLESALE FOOD & FMCG PURCHASES US$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; JPY; 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 38 FOCUS MARKET – 2 – 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$4b
Food store Hypermarket Convenience 17,900 Supermarket Supermarkets Supermarket Convenience 12,254 Convenience 9,975 formats Supermarket (41% share) Convenience Hypermarkets (20.5% share) (19% share) Department stores Supermarkets 185 (9.6% share) Malls Convenience Department stores HBC (3.4% share) Foodservice Pharmacy/HBC
# of stores 1,882 18,262 226 102 239 290 12,254 9,975 (JP) 16,970 (Global)
Store fascia
Source: Coriolis from a wide range of sources 39 FOCUS MARKET – 3 – SINGAPORE Singapore has a robust and well-developed food retailing and foodservice sector
TURNOVER & PURCHASES ESTIMATED WHOLESALE FOOD & FMCG PURCHASES US$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 $2.2 vending machines, 20% institutions (schools, 10% hospitals, airline caterers, 0% prisons, etc.) Turnover Purchases
TURNOVER GROWTH RATE Foodservice % Y-O-Y; S$; 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 40 FOCUS MARKET – 3 – 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 41 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?
42 IDENTIFIED WA COMPANIES
BRITISH SAUSAGE CO. DARDANUP BUTCHERING COMPANY (DBC) DEL BASSO SMALLGOODS
ADDRESS: 36 Selkis Rd, Bibra Lake, WA 6163 ADDRESS: Wimbridge Road, Picton WA 6229 ADDRESS: 4 Frobisher St, Osborne Park, WA 6017 PHONE: 08 9499 2100 PHONE: 08 9780 6000 PHONE: 08 9444 0811 WEBSITE: www.britishsausage.com.au WEBSITE: www.dbctalkabouttaste.com.au WEBSITE: www.delbasso.com.au
D’ORSOGNA HARVEY BEEF HARVEY PORK
ADDRESS: Leach Hwy & Stock Rd, Palmyra, WA 6157 ADDRESS: Lot 113 Seventh St, Harvey, WA 6220 ADDRESS: Alexander Road, Harvey WA 6220 PHONE: 08 6313 6990 PHONE: 08 9729 0000 PHONE: 0459 124 294 WEBSITE: www.dorsogna.com.au WEBSITE: www.harveybeef.com.au WEBSITE: www.harveypork.com.au
MILNE AGRIGROUP MONDO DORO PRINCI’S SMALLGOODS
ADDRESS: 103 Welshpool Rd, Welshpool, WA 6106 ADDRESS: 3 Sainsbury Rd, O'Connor, WA 6163 ADDRESS: 7 Irvine Drive, Malaga, WA 6090 PHONE: 08 9351 0750 PHONE: 08 9314 5445 PHONE: 08 9249 7359 WEBSITE: www.milne.com.au WEBSITE: www.mondodoro.com.au WEBSITE: www.princismallgoods.com.au
Sources: Coriolis from a wide range of sources 43 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.