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RECIPIENT

FIRM

TARGET MARKET OPPORTUNITIES IN ASIA FOR PROCESSED HAM 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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Consideration representation or warranty, express or implied, that such information of the Coriolis document will be incomplete if it is reviewed in the COPYRIGHT is accurate or complete. absence of the Coriolis Commentary and Coriolis conclusions may be misinterpreted if the Coriolis document is reviewed in absence of the Copyright © Western Australian Agriculture Authority, 2016 Projected market information, analyses and conclusions contained Coriolis Commentary. herein are based (unless sourced otherwise) on the information IMPORTANT DAFWA DISCLAIMER described above and on Coriolis’ judgement, and should not be Coriolis is not responsible or liable in any way for any loss or damage construed as definitive forecasts or guarantees of future performance incurred by any person or entity other than DAFWA relying on the The Chief Executive Officer of the Department of Agriculture and or results. 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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; 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? Processed ham emerged in Phase I as one of twenty “high growth, high potential” opportunities for Western Australia; processed ham is a preserved meat that is ready to eat or used as an ingredient

PRODUCT OVERVIEW Example; 2015

PRODUCT PROFILE HS Code 160241/160242/160249 Product Swine hams, shoulders, meat or offal and cuts of, prepared or preserved Out-of-scope Fresh, chilled or frozen pork, pork fat, salted, dried or smoked pork cuts, ham on the bone, bacon, products containing other meats, pork liver products etc. are covered under other screened trade codes Origin Pigs were domesticated in China by 4,900 BC and Europe by 1,500BC Example Pork 85%, Water, Salt, Dextrose, Honey 1%, Di-polyphosphates, Tri- ingredients polyphosphates, Sodium Ascorbate, Sodium Nitrite, Potassium Nitrate

Forms/usage - Part of meal - Ingredient in Western dishes (e.g. pasta, pizza) - Gift giving Drivers of - Emerging middle class eating more meat consumer/ - Increasing Westernisation of diet market success - Traditional protein for many of the markets - Gift giving for premium products - Traditional food for Western style Christmas

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 can grow processed ham exports to Asia

- Asian processed ham imports are increasing, with import value growth being driven by rising tonnage and increasing average FOB (free-on-board) prices - Asian & Middle Eastern processed ham imports of any volume come from only a handful of countries: China, Thailand in Asia; and the USA, Canada, Denmark and other European countries in the Western world - China, the USA and Canada stand out for driving processed ham import value growth in Asia & the Middle East over the past decade - Canada stands out for rate of growth, and China stands out for absolute growth - Average FOB price to target Asian markets vary by supplier, with Australia standing out for achieving good premiums - Processed ham goes primarily to East Asia and non-Muslim SE Asia; Japan and Hong Kong stand out as large markets, followed by the Philippines - Major growth in processed ham imports is coming from a handful of markets - Four markets stand out for creating any meaningful growth in processed ham: Vietnam, Hong Kong, the Philippines and Japan - Average processed ham import prices vary by region: Hong Kong and Japan pay ~$4.40/kg; SE Asia and China pay less; the Middle East takes tiny volumes at high prices (for expats) - Imported processed ham consumption and aggregate imports appear almost unrelated to income per capita; Hong Kong is the only market that stands out - Market share varies by country; European countries stronger in Middle East; USA strong in East Asia; China strong in Hong Kong, Indonesia, Malaysia and Singapore - Western Australia has opportunities for processed ham export growth in select Asian markets - Data supports new high value, premium processed ham opportunities being initially launched in (1) Singapore, (2) Hong Kong and (3) South Korea - As a “Straw Man” for discussion, we identify an export market roll-out plan 7 Asian processed ham 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

250 $4.50 $900

CAGR* 3% $4.00 $800

200 $3.50 $700 CAGR CAGR 6% 9%

$3.00 $600

150 $2.50 $500

$2.00 $400 100

$1.50 $300

$1.00 $200 50

$0.50 $100

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 processed ham imports of any volume come from only a handful of countries: China, Thailand in Asia; and the USA, Canada, Denmark and other European countries in the Western world

EXPORT VALUE BY SUPPLIER TO TARGET REGION US$m; FOB; 2014 TOTAL = US$849m $1 $159 $59 $34 $3 $593 Other E/SE Asia $27 Thailand $65

Hong Kong SAR $45

Denmark USA $32 Brazil $97 $21

Other $3

China $457

Other Europe Canada $27 Chile $62 $13 Australia S. America Other N. America 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 China, the USA and Canada stand out for driving processed ham import value growth in Asia & the Middle East over the past decade

10y ABS EXPORT VALUE BY SUPPLIER TO TARGET REGION US$m; FOB; 2004-2014

$849 $1 Australia -$2 $793 $782 $1 $97 USA +$73 $0 $739 $79 $0 $73 CAGR $62 Canada +$61 9% $70 $39 $47 $32 Denmark +$3 $13 $34 $36 $621 $37 $27 Other Europe +$11 $0 $24 $27 $21 Brazil +$17 $26 $583 $15 $13 $13$3 Chile +$13 $0 $64 $14 Other +$1 $21 $2 $15$2 $27 $554 $14 $22 Other E/SE Asia +$23 $45 $0 $1 $3 $29 $521 $1 $31 $12 $51 $65 Thailand +$57 $0 $40 $21 $78 $37 $1 $68 $72 $471 $18 $1 $20 $33 $14 $45 Hong Kong SAR +$29 $0 $28 $16 $2 $8 $22 $11 $32 $36 $19 $4$5 $42 $1 $9 $16 $410 $28 $6$3 $43 $13 $57 $94 $1 $8 $10$2 $24 $17 $20 $361 $1 $0$5 $46 $30 $7 $41 $3 $20 $77 $25 $19 $10 $119 $1 $0$4$3 $29 $12$4 $71 $11 $16$4 $0$8$3$1 $16 $457 China +$202 $448 $429 $379 $349 $342 $325 $301 $283 $289 $255

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 Looking at the drivers of processed ham supply growth over the past five years, Canada stands out for rate of growth and China stands out for absolute growth

FIVE YEAR EXPORT GROWTH MATRIX: CHANGE IN VALUE VS. RATE OF GROWTH VS. ABSOLUTE VALUE US$m; 2009 vs. 2014 160%

Canada 140%

120%

100%

5y CAGR 80%

60%

Australia

40%

Other E/SE Asia Other Europe 20% Brazil USA Other China Hong Kong SAR 0% Chile Thailand Bubble scale: US$m; 2014 $100m A bubble this size= Denmark -20% $-50 $0 $50 $100 $150 $200

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 Australia standing out for achieving good premiums

AVERAGE EXPORT VALUE COST CURVE BY SUPPLIER US$/kg; t; FOB; 2014 $11.38

$8.00 $5.51 Average FOB value $4.32 $4.26 $4.03

$4.17 $3.74 $3.52 $3.49 $2.72

$1.28 Australia Thailand Other Europe Denmark Brazil Other Other E/SE Asia USA China Chile Canada Hong Kong SAR

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 Processed ham goes primarily to East Asia and non-Muslim SE Asia; Japan and Hong Kong stand out as large markets, followed by the Philippines

IMPORT VALUE BY MARKET BY REGION TOTAL = US$849m US$m; FOB; 2014 $17 $1 $190 $641

Singapore $36

UAE $7 Malaysia Japan India $26 $345 Bahrain $1 Thailand $1 $1 Kuwait $0 Qatar $0

Saudi $0 Philippines South Korea $80 Taiwan Egypt $19 $1 $0 Israel $0

Other $9 Indonesia Hong Kong SAR $3 $271

Vietnam $43

Other $0 China

NA/ME/CA Indian Sub $6 SE Asia East Asia

Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 13 Growth in processed ham imports is coming from a few markets

IMPORT VALUE BY MARKET BY REGION US$m; FOB; 2004-2014 Saudi Arabia Egypt Israel $849 Other ME $0$7$1 India $0$9$1 Other Ind. Sub $793 $36 Singapore $782 $8 $0 $26 Malaysia $0$7$1 $0$9$1 $0$9$1 $1 Thailand $739 $45 $39 $0$5 $0$9$1 $80 Philippines $31 $32 $28 $1 $1 $3 Indonesia CAGR $22 $1 $66 9% $79 $43 Vietnam $621 $56 $6$3 $5 $3 $8$0 $2 $583 $0$1 $14 $28 $42 $0$5$1 $0$9$1 $554 $18 $18 $1 $0$7$5 $521 $18 $0$1 $42 $1 $27 $0$4 $19 $3 $0$8$1 $4$2 $14 $5 $16 $1 $471 $14$0 $28 $0$2 $4 $345 Japan $0$8 $25 $5 $21 $3 $17 $410 $0 $332 $400 $0$1 $26 $324 $0$8 $17 $5$1 $361 $247 $18 $279 $0$2$1 $0 $0$8 $20 $17 $5$1 $245 $20 $0 $17 $289 $5$1 $19 South Korea $1 Taiwan

$24 $18 $286 $1 $19 $1 $19 $17 $244 $17 $22 $10 $1 $192 $29 $114 $161 $15 $271 Hong Kong SAR $5 $137 $174 $223 $126 $16 $12$1 $13 $4 $102 $9 $69 $102 $75 $82 $70 $65 $36 $40 $29 $16 $2 $8 $6 $6 China 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 Four markets stand out for creating any meaningful growth in processed ham: Vietnam, Hong Kong, the Philippines and Japan

FIVE YEAR IMPORT GROWTH MATRIX: CHANGE IN VOLUME VS. RATE OF GROWTH VS. ABSOLUTE VALUE US$m; t; 2009 vs. 2014 60% Pakistan

Vietnam

Qatar 40%

Hong Kong SAR Bahrain Philippines 20% Kuwait Saudi Arabia Thailand UAE Malaysia Sri Lanka 5y CAGR India Singapore Japan Lebanon 0% Jordan Oman South Korea

Indonesia Egypt

-20%

Israel China

-40%

Bubble scale: US$m; 2014 $200m Taiwan A bubble this size=

-60% -25,000 -20,000 -15,000 -10,000 -5,000 0 5,000 10,000 15,000 20,000 25,000 30,000

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 processed ham import prices varies by region: Hong Kong and Japan pay ~$4.40/kg; SE Asia and China pay less; the Middle East takes tiny volumes at high prices (for expats)

AVERAGE IMPORT VALUE COST CURVE BY MARKET/REGION US$/kg; t; FOB; 2014 $7.95 $7.90 $7.46 $6.87 $5.98 $4.94 $4.71 $4.50 $4.40 $4.42 $4.54 $4.43 $4.09 $4.22 $3.73 Average $3.35 import $3.40 $3.13 value $3.02 $2.48 $1.89 $1.30 Qatar Oman Jordan Lebanon UAE South Korea Taiwan Hong Kong SAR Japan Pakistan Singapore Indonesia Philippines Israel Malaysia China Vietnam India Egypt Bahrain Thailand Saudi Arabia Kuwait

Volume imported Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 16 Imported processed ham consumption and aggregate imports appear almost unrelated to income per capita; Hong Kong is the only market that stands out

MARKET SIZE DRIVERS: GDP PER CAPITA VS. IMPORTS PER CAPITA VS. MARKET SIZE Kg; US$; t; 2014 9.0

Hong Kong SAR

8.0

7.0

6.0

Imports per capita 5.0

4.0 Bubble scale: tonnes; 2014 A bubble this size= 10,000

3.0

2.0 Singapore

Vietnam 1.0 Lebanon South Korea Japan India Taiwan UAE Malaysia Oman Kuwait Indonesia China Saudi Arabia Bahrain 0.0 PakistanEgypt JordanThailand Israel Qatar $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000

Sri Lanka GDP per capita Philippines 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; USA strong in East Asia; China strong in Hong Kong, Indonesia, Malaysia and Singapore

IMPORT VALUE MARKET SHARE BY MARKET BY KEY SUPPLIER % of value in US$m; FOB; 2014

100% China

90% Hong Kong SAR

80% Thailand

Other E/SE Asia 70% Other

60% Chile

50% Brazil

Other Europe 40% Denmark

30% Canada

20% USA

Australia 10%

0% Kuwait Saudi Arabia Qatar Egypt Hong Kong UAE China Bahrain Singapore Japan Thailand South Korea Vietnam Taiwan Oman Lebanon Philippines India Indonesia Jordan 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 processed ham export growth in select Asian markets; Taiwan and Singapore are highlighted as high potential market for Western Australia

AUSTRALIAN IMPORT VALUE MARKET VS. MARKET VALUE

US$m; FOB; 2014 9%

4% Australian market share 1% 1% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% China Lebanon India Vietnam Thailand Malaysia Hong Kong SAR Philippines South Korea Singapore Indonesia Taiwan Japan Bahrain Israel Sri Lanka Saudi Pakistan Egypt UAE Oman Kuwait Qatar Jordan

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 processed ham opportunities being initially launched in (1) Singapore, (2) Hong Kong and (3) South Korea

WHERE TO FOCUS FOR NEW HIGH VALUE, PREMIUM PRODUCTS: AU SHARE VS. AVERAGE VALUE VS. MARKET SIZE % of value; US$; US$m; 2014 $6.00 India Oman Jordan Qatar Egypt

Bahrain $5.00 Lebanon Hong Kong SAR 2 Thailand South Korea 3 Taiwan UAE Singapore Pakistan $4.00 1 Japan Indonesia Kuwait Philippines VALUE Israel Average $3.00 Malaysia FOB $/kg 2014 Saudi

$2.00 China

Vietnam

$1.00

Size of bubble = value A bubble this size= $50 $0.00 0% 1% 2% 3% 4% 5% 6% 7% 8% 9%

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 PROCESSED HAM OPPORTUNITY Model; 2016

0 1 2 3 Product Export market launch Export market launch Export market launch development and in Singapore in Hong Kong in South Korea testing

- High income, sophisticated market and consumers - Manageable sized test bed - AU already has some market position

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 processed ham exports to Asia

IS THE MARKET DEVELOPED & COMPETITIVE? - The flow of processed ham from the farm through to the consumer is relatively straight forward and simple - Processed ham prices are attractive in Asia, with a premium for imported products - Asian markets have a much less developed processed ham range and offer than Western countries - “Leading indicator” Western markets strongly suggest depth of processed ham range in Asian markets will increase going forward - Processed ham appears to support a market structure of ~4-5 brands and private label; no clear regional or global leaders exist

WHAT IS WA CAPABLE OF DELIVERING? - A wide range of premium, value-adding product attributes emerged from our cross-country retailer survey - Western Australian processed ham producers need to continue to move forward and improve through new products - Multiple potential positions exist to develop a premium processed ham offer for Asia - Products from other processors in other markets demonstrate what is possible in terms of developing a premium Western Australian processed ham offer - There are a wide range of potential product positions or claims available for a premium processed ham product from Western Australia targeting Asia - As a “Straw Man” for discussion, we identify an opportunity for a high value, premium processed ham product with select characteristics for export market launch

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

SIMPLIFIED MODEL OF SUPPLY CHAIN: PROCESSED HAM 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, New Zealand Trucking) Processor

Regional Processor

Chinese Processor

Other Processor

Source: Coriolis 24 WHO IS THE COMPETITION? PRICING Processed ham prices are attractive in Asia, with a premium for imported products

SHELF PRICE PER KG ACROSS SELECT SE ASIAN MARKETS AND AUSTRALIA: SELECT PROCESSED HAM PRODUCTS US$/kg; Feb 2016 Thailand Singapore Hong Kong $66.08

$45.92 $42.72 $41.33 $37.46 $35.96

$25.47 $20.64 $21.67 $17.19 $15.68 $13.75 $13.75 $12.24 Coles Honey Sliced Don Hardwood Smoked Ferrarini Cooked Ham Honey Ham 100g (SG) Lean&Trim Smoked CP 4x4 Ham 200g BMP First Class Toast S&P Premo Cooked Primo Fine Carved Leg Primo Honey Leg Ham Primo Honey Leg Ham Dietz&Watson Smoked Maid Ham Slice Hormel Honey Ham Sliced Ham 200g (AU) Maple Ham 198g (US) Cold Storage Shaved Ham 100g (AU) Ham 160g (TH) Ham 150g (US) 200g (HK) Slices 100g (AU) Slices 100g (AU) Ham 200g (TH) Sliced 120g (IT) Ham 215g (AU) 225g (US) (TH)

AU 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 processed ham range and offer than Western countries

EXAMPLE: ACTUAL RETAIL PACKED PROCESSED HAM RANGE ON SHELF Presence; actual; Feb 2016

California: GDP/Capita US$59,562 Hong Kong: GDP/Capita US$40,169

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 processed ham range in Asian markets will increase going forward

NUMBER OF LINES ON SHELF: SELECT RETAILERS FROM ACROSS MULTIPLE MARKETS SKU; actual; Feb 2016

90

73 Average 48.0 sku/store

52 4x

44

29 28 Average 10.2 sku/store 20 19 19

9 8 6 0

Sainsbury Tesco Waitrose Safeway Coles Woolworths Wegmans Cold Storage Wellcome Tesco Park'N Shop Fairprice Tesco (UK) (UK) (UK) (CA) (AU) (AU) (NY) (SG) (HK) (TH) (HK) (SG) (MY)

Anglo-American SE Asia

Source: Coriolis from store checks 27 IS THE MARKET DEVELOPED & COMPETITIVE? SEGMENTATION Processed ham appears to support a market structure of ~4-5 brands and private label; emerging regional leaders exist

MARKET SHARE BY BRAND: SELECT RETAILERS FROM ACROSS MULTIPLE MARKETS % of SKU; actual; Feb 2016

Safeway (CA) Sainsbury (UK) Coles (AU) Danepak (UK) Montorsi 2% Negroni (IT) 1% Hans O Living (AU) Other BB Products 10% 27% Oscar Mayer (AU) Don (AU) (US7% 10% 31%

Private label Hormel (US) Private label 21% 18% Private label 5% 97% Signature Primo (AU) Farms (US) 28% 7% Hillside Farm Land O'Frost (US) (US) 7% 9%

Tesco Lotus (TH) Wellcome (HK) Cold Storage (SG) Oscar Mayer (US) Lean & Trim Diverxu (HK) 5% CP (TH) 11% Other (US) Other 11% 5% 5% 5% Dietz & Ferrarini (IT) Watson (US) BMP (TH) Bangkok Ham 21% 5% Private label 11% (TH) Private label 32% 34% 10% Wicks Manor TGM (TH) (UK) 11% Hormel (US) Maid (HK) 11% 16% 21% S&P Premo Ferrarini (IT) Primo (AU) (TH) Private label 11% 22% Primo (AU) 26% 11% 16%

Source: Coriolis from store checks 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=397; Feb 2016

- This provide very clear instruction on what product attributes are succeeding the best across Region specified 34% markets

Honey 22% - Western Australian processed ham manufacturers looking to grow value and share should focus in these areas Smoked 13% - Specifying region stands out, with ~1/3 observed product SKU having origin in name of the product Low fat/lean 3%

- Survey universe is all products in all listed Champagne 2% retailers (across multiple countries)

Salt reduced 2%

Organic/free range 1%

Maple 1%

Premium 1%

Natural 1%

Source: Coriolis from store checks 29 WHAT IS WA CAPABLE OF DELIVERING? STRATEGIC DIRECTION Western Australian processed ham producers need to continue to move forward and improve through new products

SUGGESTED STRATEGIC DIRECTION: WESTERN AUSTRALIAN PROCESSED HAM Model; 2016

Private label retail Branded retail Resealable/single Premium named Bulk deli counter Free range Region specified packs packs serve ingredients

Local suppliers AU 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 processed ham offer for Asia

IDENTIFIED POTENTIAL PREMIUM POSITIONS Model; 2016

HEALTH PROVENANCE INDULGENCE CONVENIENCE

Source of protein Organic Premium ingredients Lunchbox packs

Reduced sodium Identified source region Regional specialities Resealable packaging

Low fat Specialty variety Unique WA flavours Mixed meat packs

Source of iron Track & trace Thick cut Variety of slicing

Vitamins and minerals Free range Traditional methods

Nitrate free 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 processed ham offer

EXAMPLES OF PREMIUM PRODUCTS FROM OTHER MARKETS Select; 2016

97% fat free Cooks’ Ingredients British Ham ‘n’ cheese crackers

Juice, tender pork Smoked ham batons Honey roast No artificial colours

Heart tick Fragrant with beechwood Wiltshire cured ham No artificial flavours

No artificial flavours Fold into an omelette or pasta Taste tested by customers Easy lunchbox option

No added fillers Delicious with coleslaw & cheese “Taste the Difference” Excellent source of protein

No artificial colours British/British Flag British pork symbol

Resealable container Serving suggestion

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 processed ham product from Western Australia targeting Asia

HYPOTHETICAL EXAMPLE OF POTENTIAL PREMIUM PRODUCT FROM WA Model; 2016

Reduced sodium High in protein Low fat

HEALTH

From Australian Free range West Australia Flag

PROVENANCE

Sliced ham Traditional methods Premium Jarrah honey

INDULGENCE

Resealable packaging

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 processed ham product with select characteristics for export market launch

PRELIMINARY “STRAW MAN” DEVELOPMENT & ROLLOUT PLAN FOR PROCESSED HAM OPPORTUNITY Model; 2016

CURRENT AU IDENTIFIED HIGH GROWTH, POTENTIAL FUTURE POSITIONING IN ASIA HIGH VALUE OPPORTUNITY FOR WA PRODUCT LINE EXTENSION

From From Retail pack Free range Free range Premium ingredients Australia West Australia

Australian Jarrah honey Traditional methods WA flavours Flag

Reduced sodium High in protein

Resealable container

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

TURNOVER & PURCHASES ESTIMATED WHOLESALE FOOD & FMCG PURCHASES US$b; 2014 US$b; 2014

$46.3 $19.4 100% 90% $19.4 Foodservice 80% $64.6 70% 60% Supermarket 50% $17.5 40% 324,000 restaurants, bars $46.3 Retail 30% & clubs, 47,573 hotels/ $66.1 motels/etc., vending 20% machines, institutions 10% (schools, hospitals, airline 0% caterers, prisons, etc.) Turnover Purchases

TURNOVER GROWTH RATE Foodservice Hypermarket $19.4 % Y-O-Y; KRW; 2013v2014 $13.0

Retail 1.7% Convenience $3.8 On-Line $2.6 Department stores $1.7

Foodservice 3.0% Other $7.7

Retail Foodservice

Source: Coriolis from a wide range of sources 40 FOCUS MARKET – 3 – SOUTH KOREA Six potential in-market partners are identified for Western Australian firms in South Korea

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

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

Ownership Shinsegae Private Equity (MBK Lotte Group (Korea) GS Holdings (Korea; listed) E Land Group (Korea; BGF (Korea; listed) Partners, Canadian Pension listed) Fund, Temasek (SG)

Website www.shinsegae.com www.homeplus.co.kr www.lottemart.com www.gsretail.com www.newcore.co.kr www.bgfretail.com emart.ssg.com www.lottesuper.co.kr www.gsholdings.com www.eland.com www.7-eleven.co.kr

Annual sales US$15.2b US$10.6b US$18.2b US$5.1b US$2.3b US$2.6b (retail)

Store formats Hypermarket Hypermarket Hypermarket Supermarket Hypermarket 19 Convenience 7,939 Supermarkets Supermarket Supermarket Convenience Department stores Department stores Department stores Petrol stations Clothing stores Convenience stores Restaurants

# of stores E Mart 148 Home Plus 139 Lotte Mart 108 GS Supermarket 254 New Core 19 CU 8,000+ E Mart Everyday 132 Home Plus Express 286 Lotte Super Market 496 GS25 7,774 Kim's Club Shinsegae 7-Eleven 7,213 GS Caltex NewCore Outlet, 2001 Outlet DongA Department Store

Store fascia (select)

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

DEL BASSO SMALLGOODS D’ORSOGNA MONDO DORO

ADDRESS: 4 Frobisher St, Osborne Park, WA 6017 ADDRESS: Leach Hwy & Stock Rd, Palmyra, WA 6157 ADDRESS: 3 Sainsbury Rd, O'Connor, WA 6163 PHONE: 08 9444 0811 PHONE: 08 6313 6990 PHONE: 08 9314 5445 WEBSITE: www.delbasso.com.au WEBSITE: www.dorsogna.com.au WEBSITE: www.mondodoro.com.au

PRINCI’S SMALLGOODS TRADITION SMALLGOODS

ADDRESS: 7 Irvine Drive, Malaga, WA 6090 ADDRESS: 23 Knock Pl, Jandakot, WA 6164 PHONE: 08 9249 7359 PHONE: 08 9417 1477 WEBSITE: www.princismallgoods.com.au WEBSITE: www.traditionsmallgoods.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.