IN-PROGRESS REVIEW DRAFT Pre-release copy of significant commercial value to industry Document contains incomplete & in-progress research for comment For named reviewer/firm only; do not duplicate or distribute
RECIPIENT
FIRM
TARGET MARKET OPPORTUNITIES IN ASIA FOR ASSORTED CHOCOLATE 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. Coriolis e. any Coriolis Commentary accompanying the Coriolis document is have not independently verified this information and make no an integral part of interpreting the Coriolis document. 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. Neither Coriolis nor its officers, directors, shareholders, information in, and the Recipient unconditionally and irrevocably Food and the State of Western Australia and their employees and employees or agents accept any responsibility or liability to readers or releases Coriolis from liability for loss or damage of any kind agents (collectively and individually referred to below as DAFWA) recipients of this report other than DAFWA or people other than whatsoever arising from, the Coriolis document or Coriolis accept no liability whatsoever, by reason of negligence or otherwise, DAFWA who rely upon it (described below as Recipients) with Commentary including without limitation judgements, opinions, arising from any use or release of information in this report or any respect to this document. hypothesis, views, forecasts or any other outputs therein and any error, inaccuracy or omission in the information. interpretation, opinion or conclusion that the Recipient may form as a Coriolis wishes to draw Recipients’ attention to the following result of examining the Coriolis document or Coriolis Commentary. 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? Assorted chocolate emerged in Phase I as one of twenty “high growth, high potential” opportunities for Western Australia; assorted chocolate are boxes of different, individual chocolates; wrapped or unwrapped
PRODUCT OVERVIEW Example; 2015
PRODUCT PROFILE HS Code 180690 Product Chocolate and other food preparations containing cocoa; other Out-of-scope Cocoa beans, cocoa shells, cocoa paste, cocoa butter, fat or oil, cocoa powder, chocolate or other food preparations containing cocoa if weigh above 2 kg, chocolate bars whether filled or unfilled, etc. as all are covered under other screened trade codes Origin Mesoamerica, with the Mokaya and pre-Olmec people Example Milk chocolate (30%) (sugar, cocoa butter, cocoa mass, skim milk powder, ingredients anhydrous milkfat, emulsifier: lecithins (soy), flavouring: vanillin),Hazelnuts (28.5%), Sugar, Vegetable oil, Wheat flour, Whey powder, Fat-reduced cocoa powder, Emulsifier (lecithins): soy, Raising agent (sodium carbonate), Salt, Flavouring (vanillin).
Forms/usage - Gift giving - Indulgent versatile treat - Dessert accompaniment or substitute Drivers of - Extremely versatile luxury gift; every occasion for everyone consumer/ - Indulgence trend market success - Associated with popular holidays (Valentine’s Day, Easter, Christmas, Chinese New Year)
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 assorted chocolate exports to Asia
- Asian assorted chocolate imports are growing, with import value growth being driven by both growing tonnage and increasing average FOB (free-on-board) prices - Asian & Middle Eastern assorted chocolate imports come primarily from Europe, the USA, and China - A wide range of countries are achieving solid growth in assorted chocolate in Asia - Poland, China, USA and Italy stand out for driving growth - Average FOB prices of assorted chocolate to target Asian markets vary by supplier, with European countries generally receiving a solid premium - Assorted chocolate go to a wide number of the target markets, with no single country predominating - Growth in assorted chocolate imports is broad based and coming from across effectively all markets - China, Hong Kong, UAE & Saudi Arabia stand out for growth; Japan has declining volumes but growing value, indicating a move to quality - Average assorted chocolate import prices vary by country, with Greater China, Singapore and Malaysia paying more than elsewhere; Hong Kong and Singapore stand out as larger markets that pay well - Imported assorted chocolate consumption and aggregate imports appear partially driven by income per capita; a number of markets appear to have long-run penetration upside - Market share varies by country; Europeans very strong across richer Middle East; Singapore and China stronger across SE and E Asia; Australia currently strong in markets where Europe is weak - Western Australia can build on existing Australian strength and market position to grow opportunities for assorted chocolate exports in select East & South-East Asian markets - Data supports new high value, premium assorted chocolate opportunities being initially launched in (1) Hong Kong, (2) Singapore and (3) China - As a “Straw Man” for discussion, we identify a export market roll-out plan 7 Asian assorted chocolate imports are growing, with import value growth being driven by both growing 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
400 $8.00 $2,500
350 $7.00
$2,000
300 $6.00 CAGR CAGR* 7% 9% 250 $5.00 $1,500 CAGR 16%
200 $4.00
$1,000 150 $3.00
100 $2.00
$500
50 $1.00
0 $- $- 2010 2011 2010 2011 2010 2011 2004 2004 2004 2014 2014 2014 2008 2008 2008 2006 2009 2006 2006 2009 2009 2007 2007 2007 2005 2005 2005 2012 2012 2012 2013 2013 2013
* Compound Annual Growth Rate; Source: UN Comtrade database; Coriolis analysis and classifications 8 Asian & Middle Eastern assorted chocolate imports come primarily from Europe, the USA, and China
EXPORT VALUE BY SUPPLIER TO TARGET REGION US$m; FOB; 2014 TOTAL = US$2,279m $28 $282 $1,292 $133 $544
Other E/SE Asia $61
Italy $353
Singapore $137
Poland $171
Netherlands Australia Hong Kong SAR USA $155 Other $28 $125 $282 $133
Belgium $138
Germany $135
Turkey $101 China $221 France $71 Switzerland $57 United Kingdom $55 New Zealand Other Europe $1 $55 Other Australasia USA Europe E/SE Asia
NA/ME/CA = North Africa/Middle East/Central Asia; Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 9 A wide range of countries are achieving solid growth in assorted chocolate in Asia
10y ABS EXPORT VALUE BY SUPPLIER TO TARGET REGION US$m; FOB; 2004-2014
$2,279 Australia -$32 $28 $1 New Zealand -$1
$282 USA +$218
$1,941 $29 $0
$1,764 $240 $353 Italy +$311 $33 $2 CAGR $192 16% $1,492 $297 $138 Belgium +$92 $57 $2 $266 $155 Netherlands +$116 $159 $142 $1,199 $135 Germany +$119 $135 $53 $2 $241 $136 $71 France +$44 $135 $148 $101 Turkey +$81 $976 $102 $925 $121 $72 $48 $4 $82 $171 Poland +$167 $55 $196 $811 $7 $110 $108 $72 $81 $97 $57 Switzerland +$38 $54 $76 $107 $7 $88 $75 $55 United Kingdom +$39 $160 $75 $88 $155 $72 $80 $51 $55 Other Europe +$43 $620 $46 $43 $59 $544 $40 $128 $77 $60 $58 $46 $133 Other +$103 $513 $7 $81 $58 $44 $43 $70 $58 $45 $54 $70 $52 $32 $16 $44 $119 $61 Other E/SE Asia +$29 $59 $17 $77 $26 $46 $35 $38 $97 $2 $68 $47 $44 $26 $37 $57 $64 $22 $39 $30 $59 $137 Singapore +$83 $37 $56 $38 $34 $29$14 $69 $43 $43 $31$7 $26 $89 $47 $51 $18 $33$7 $30 $25 $49 $128 $39 $15$31 $31 $25$22 $25 $50 $154 $125 Hong Kong SAR +$115 $17 $27 $25 $16 $76 $27 $21 $23$6 $76 $142 $102 $19$4 $21$5 $14$17 $67 $40 $19$17 $12$15 $43 $40 $42 $167 $87 $29$12 $44 $35 $130 $55 $33 $32 $109 $221 China +$201 $77 $98 $29 $139 $173 $54 $64 $12 $16 $28 $112 $20$10 $20$12 $30$8 $35 $39 $35 $61 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 10 Poland, China, USA and Italy stand out for driving growth
FIVE YEAR EXPORT GROWTH MATRIX: CHANGE IN VALUE VS. RATE OF GROWTH VS. ABSOLUTE VALUE US$m; 2009 vs. 2014 75%
Poland 60%
Hong Kong SAR China 40%
Turkey Germany
Other Europe United Kingdom 5y CAGR Netherlands 20% USA Switzerland Italy Other E/SE Asia Belgium
0% Singapore France Other
Australia
-20%
Bubble scale: US$m; 2014 $50m New Zealand A bubble this size=
-40% $-50 $0 $50 $100 $150 $200
5y absolute change in value
Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 11 Average FOB prices of assorted chocolate to target Asian markets vary by supplier, with European countries generally receiving a solid premium
AVERAGE EXPORT VALUE COST CURVE BY SUPPLIER US$/kg; t; FOB; 2014 $12.61 $12.42 $10.70 $10.64 $10.20 $10.11 $9.25 $9.12
2.3x $7.82 $7.35 $7.14
Average $6.32 FOB $5.53 $5.38 value $5.20 $4.96 $3.59 $2.86 Belgium France Switzerland Hong Kong SAR Netherlands Germany Poland Italy Other United Kingdom New Zealand Other Europe USA China Other E/SE Asia Australia Singapore Turkey
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 Assorted chocolate go to a wide number of the target markets, with no single country predominating
IMPORT VALUE BY MARKET BY REGION TOTAL = US$2,279m US$m; FOB; 2014 $688 $50 $441 $1,100
Japan $253 Singapore United Arab Emirates $137 $229
South Korea Bahrain $155 $12 Qatar India $29 $36 Malaysia Taiwan Kuwait $91 $40 $95
Saudi Arabia $153 Thailand Hong Kong SAR $52 $281
Egypt $40 Philippines $87 Israel $98 China Other $321 $13 Indonesia $51 Other $86 Vietnam $20 NA/ME/CA Indian Sub SE Asia East Asia
Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 13 Growth in assorted chocolate imports is broad based and coming from across effectively all markets
IMPORT VALUE BY MARKET BY REGION US$m; FOB; 2004-2014
$2,279
$229 United Arab Emirates
Bahrain $12 $29 Qatar $1,941 $40 Kuwait
$153 Saudi Arabia $191 $1,764 $40 Egypt $27$10 $98 Israel $157 $38 CAGR $86 Other ME $10 $134 $25 $36 India 16% $33 $13 Other Ind. Sub $1,492 $28 $118 $85 $137 Singapore $126 $32 $82 $18$7 $71 $95 Malaysia $23 $32 $10 $83 $73 $52 Thailand $1,199 $31 $111 $19 $10 $87 Philippines $74 $95 $104 $94 $51 Indonesia $58 $13$5 $20 Vietnam $20 $29 $86 $55 $69 $9 $976 $83 $70 $15 $52 $253 Japan $925 $54 $45 $78 $68 $63 $17 $6 $58 $74 $19$11 $36 $34 $811 $6 $20$7 $12 $23$10 $54 $50 $13 $69 $25 $237 $63 $52 $54 $8 $155 South Korea $10$5 $9 $61 $19 $49 $56 $262 $46 $27 $620 $8 $51 $11$6 $40 $15 $262 $91 Taiwan $41 $7 $59 $21$5 $43 $40 $49 $123 $544 $4 $45 $513 $13$6 $13$8 $36 $23 $30 $32 $43 $24 $118 $6$4 $6 $38 $76 $30 $12 $35 $28 $42 $16$5 $249 $13$4 $25$5 $34 $15 $19 $26 $29 $4$5 $32 $5 $107 $281 Hong Kong SAR $32$3 $28 $28 $14$4 $80 $9$3 $22 $22$4$3 $20 $15 $208 $21 $10$15 $28 $76 $16$8 $32 $15$3 $213 $81 $254 $24 $22 $208 $20$3 $3 $207 $63 $174 $60 $186 $153 $164 $62 $60 $49 $43 $131 $321 China $44 $38 $95 $39 $41 $24 $87 $188 $220 $32 $24 $73 $144 $45 $48 $63 $71 $95 $12 $14 $21 $41 $49 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 14 China, Hong Kong, UAE & Saudi Arabia stand out for growth; Japan has declining volumes but growing value, indicating a move to quality
FIVE YEAR IMPORT GROWTH MATRIX: CHANGE IN VOLUME VS. RATE OF GROWTH VS. ABSOLUTE VALUE US$m; t; 2009 vs. 2014 40%
35% China
Vietnam Growing volume & value 30%
Sri Lanka India Hong Kong SAR Indonesia Egypt 25% United Arab Emirates South Korea 5y CAGR Qatar Singapore 20% Saudi Arabia Thailand Philippines Bahrain Kuwait Malaysia 15% Lebanon Israel Taiwan 10% Oman Shift to quality Pakistan
5% Jordan Bubble scale: US$m; 2014 Japan A bubble this size= $200m
0% -20,000 -15,000 -10,000 -5,000 0 5,000 10,000 15,000 20,000 25,000 30,000
5y absolute change in volume
Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 15 Average assorted chocolate import prices vary by country, with Greater China, Singapore and Malaysia paying more than elsewhere; Hong Kong and Singapore stand out as larger markets that pay well
AVERAGE IMPORT VALUE COST CURVE BY MARKET/REGION US$/kg; t; FOB; 2014 $11.02 $9.64 $9.09 $8.94 $8.92 $8.76 $8.65 $8.25 $8.01 $7.34 $7.08 $6.92 $6.80 $6.77 $6.17 $6.04 $5.91 $5.69 $5.63 $5.16 Average $5.00 import $4.73 value $3.46 Oman Hong Kong SAR Vietnam Singapore China Sri Lanka Taiwan Malaysia Qatar Kuwait Bahrain UAE South Korea Thailand Pakistan Indonesia Israel India Saudi Arabia Lebanon Jordan Philippines Japan Egypt
Volume imported Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 16 Imported assorted chocolate consumption and aggregate imports appear partially driven by income per capita; a number of markets appear to have long-run penetration upside
MARKET SIZE DRIVERS: GDP PER CAPITA VS. IMPORTS PER CAPITA VS. MARKET SIZE Kg; US$; t; 2014
4.0 Hong Kong SAR
UAE 3.5
3.0
Singapore
2.5 Imports per capita
2.0 Israel
Kuwait Qatar Lebanon 1.5
Bahrain
1.0 Saudi Arabia Jordan Bubble scale: tonnes; 2014 50,000 0.5 Oman Japan A bubble this size= Taiwan South Korea Philippines Malaysia Egypt Thailand IndiaVietnam
0.0 China $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 Pakistan Indonesia Sri Lanka GDP per capita Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Wikipedia (GDP/capita); Coriolis analysis and classifications 17 Market share varies by country; European countries very strong across richer Middle East; Singapore and China stronger across SE and E Asia; Australia currently strong in markets where Europe is weak
IMPORT VALUE MARKET SHARE BY MARKET BY KEY SUPPLIER % of value in US$m; FOB; 2014
100% China
90% Hong Kong SAR Singapore
80% Other E/SE Asia
Other 70% Turkey
Other Europe 60% United Kingdom
50% Switzerland
France 40% Germany
Belgium 30% Netherlands
20% Poland Italy
10% USA
New Zealand 0% Kuwait UAE Qatar Singapore Thailand Egypt Japan Hong Kong SAR South Korea Bahrain China Vietnam Oman Taiwan Lebanon India Philippines Indonesia Jordan Saudi Pakistan Israel Malaysia Sri Lanka Australia
Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 18 Western Australia can build on existing Australian strength and market position to grow opportunities for assorted chocolate exports in select East & South-East Asian markets
AUSTRALIAN IMPORT VALUE MARKET VS. MARKET VALUE US$m; FOB; 2014 6% 5% 5%
Australian market
4% share 2% 2% 2% 1% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Sri Lanka Israel Jordan Oman Qatar India Vietnam South Korea Bahrain Saudi Kuwait UAE China Taiwan Singapore Japan Hong Kong SAR Philippines Thailand Malaysia Indonesia Lebanon Pakistan Egypt
Total value of imports Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 19 Data supports new high value, premium assorted chocolate opportunities being initially launched in (1) Hong Kong, (2) Singapore and (3) China
WHERE TO FOCUS FOR NEW HIGH VALUE, PREMIUM PRODUCTS: AU SHARE VS. AVERAGE VALUE VS. MARKET SIZE % of value; US$; US$m; 2014 $12.00
Oman
$10.00 Vietnam Hong Kong 1 China Sri Lanka 3 Singapore Malaysia $8.00 Qatar Taiwan 2 Kuwait Bahrain UAE South Korea Thailand Value Pakistan average $6.00 Israel Indonesia FOB $/kg Saudi India Lebanon Philippines Jordan Japan
$4.00 Egypt
$2.00
Size of bubble = value $200 A bubble this size=
$0.00 0% 1% 2% 3% 4% 5% 6% 7%
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 a export market roll-out plan
PRELIMINARY “STRAW MAN” DEVELOPMENT & ROLLOUT PLAN FOR ASSORTED CHOCOLATE OPPORTUNITY Model; 2016
0 1 2 3 Product Export market launch Export market launch Export market launch development and in Hong Kong in Singapore in China testing
- High income, sophisticated market and consumers - Pay high prices - Manageable sized test bed - AU already has a 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 can develop a strong assorted chocolate offer for Asia
IS THE MARKET DEVELOPED & COMPETITIVE? - The flow of assorted chocolate from the manufacturer through to the consumer is straight forward - Assorted chocolate prices are competitive in Asia, typically cheaper than Australia; Belgium stands out as receiving a premium - Asian markets (generally) have a much less developed assorted chocolate range and offer than western countries - “Leading indicator” Western markets strongly suggest depth of range in assorted chocolate in Asian markets will increase going forward; Park ‘N Shop stands out as the exception - Assorted chocolate appears to support a market structure of ~6-8 brands; global leaders are European (e.g. Ferrero Rocher, Lindt) and are in Asia
WHAT IS WA CAPABLE OF DELIVERING? - A wide range of premium, value-adding product attributes emerged from our cross-country retailer survey - Western Australian chocolate producers need to continue to move forward and improve through new products - Multiple potential positions exist to develop a premium assorted chocolate offer for Asia - Products from other manufacturers in other markets demonstrate what is possible in terms of developing a premium Western Australian assorted chocolate offer - There are a wide range of potential product positions or claims available for a premium assorted chocolate product from Western Australia targeting Asia - As a “Straw Man” for discussion, we identify an opportunity for a high value, premium assorted chocolate product with select characteristics for export market launch
23 HOW IS THE MARKET STRUCTURED? The flow of assorted chocolate from the manufacturer through to the consumer is straight forward
SIMPLIFIED MODEL OF SUPPLY CHAIN: ASSORTED CHOCOLATE Model; 2016 This stage branches and adds multiple layers in large markets
In-Market Wholesalers Retailers Processor
Distributor(s) Sugar WA Chocolate Agent/Broker/ Foodservice (multi-layered in Mill Processor Distributor & Institutional large markets)
Dairy Other Australian Processor Processor
Cocoa USA Packer/Processor Exports Processor Processor Sales/Marketing
Logistics Providers Nut Italian (Airfreight, Grower Processor Seafreight, Trucking)
Fruit Belgian Processor Processor
Other flavour Other European suppliers Processor
Other Processor
Source: Coriolis 24 WHO IS THE COMPETITION? PRICING Assorted chocolate prices are competitive in Asia, typically cheaper than Australia; Belgium stands out as receiving a premium
SHELF PRICE PER KG ACROSS SELECT SE ASIAN MARKETS AND AUSTRALIA: ASSORTED CHOCOLATE US$/kg; Feb 2016
Malaysia Singapore Hong Kong
$69.46
$54.19 $55.04
$43.12 $42.34 $43.00 $35.37 $36.39 $32.99 $33.25 $34.59 $29.76 $30.91 $30.70
$17.20 Meiji Choc. Almonds Guylian Seashells 125g Duc d'O Hazelnut Milk Cadbury Glow 240g Cadbury Glow 240g Lindt Assorted 200g Lindt Assorted 200g Guylian Seashells 65g Ferrero Rocher 16pk Ferrero Rocher 16pk Ferrero Rocher 16pk Ferrero Rocher 16pk Lindt Assorted 150g GBS Seashells Almonds 240g (CH) 50g Box (BE) Nestle Scorched Truffles 8pk (BE) Gift 250g (JP) (CH) (UK) (UK) (CH) (CH) (IT) (IT) (IT) (IT) (BE) (BE)
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 assorted chocolate range and offer than western countries
EXAMPLE: ACTUAL ASSORTED UNWRAPPED CHOCOLATE RANGE ON SHELF Feb 2016
London: GDP/Capita US$75,200 Bangkok: GDP/Capita US$15,192
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 assorted chocolate in Asian markets will increase going forward; Park ‘N Shop stands out as the exception
NUMBER OF LINES ON SHELF: SELECT RETAILERS FROM ACROSS MULTIPLE MARKETS SKU; actual; Feb 2016
108
Average 64.8 sku/store 81
72 69
53 49 Average 37.2 sku/store 45
35 34
21
13 12
Waitrose Wegmans Sainsbury Tesco Coles Woolworths Park'N Shop Fairprice Tesco Tesco Cold Storage Wellcome (UK) (NY) (UK) (UK) (AU) (AU) (HK) (SG) (MY) (TH) (SG) (HK)
Anglo-American SE Asia
Source: Coriolis from store checks 27 IS THE MARKET DEVELOPED & COMPETITIVE? SHARE DISTRIBUTION Assorted chocolate appears to support a market structure of ~6-8 brands; global leaders are European (e.g. Ferrero Rocher, Lindt) and are in Asia
MARKET SHARE BY BRAND: SELECT RETAILERS FROM ACROSS MULTIPLE MARKETS SKU; actual; 2016
Wegman’s (NY) Sainsbury (UK) Coles (AU) Guylian (BE) Darrell Lea 3% (AU) 4% Other Other Lindt (CH) Other 14% Green & Guylian (BE) 8% 3% Blacks (UK) 19% Russell Lindt (CH) 6% 4% Ferrero (IT) Stover (US) 23% 4% 33% Cadbury Cadbury (UK) (UK) Dove (US) Lindt (CH) 6% 14% 5% Private label 51% Whitman's 22% Elizabeth (US) Ferrero (IT) Shaw (UK) 17% Godiva (TR) Thorntons 17% 21% 7% (UK) Ferrero (IT) 10% 9%
Tesco (MY) Park ‘N Shop (HK) Fairprice (SG) Fazer (FI) Almond Almond 6% Roca (US) Roca (US) Duc d'O (BE) 3% 6% Other 6% 9% Other Merci (DE) Merci (DE) Ferrero (IT) 28% Ferrero (IT) 6% Private label 22% 9% 20% Guylian (BE) 29% Van Houten 6% Lindt (CH) Cadbury Merci (DE) Lindt (CH) (NL) 16% 17% (UK) Vochelle 3% 11% Cadbury 12% Ferrero (MY) Private Label Auston (UK) 4% (MY) (IT) 17% Meiji (JP) 17% 15% Governor's 11% 11% (BE) Herseys Almond 4% (US) Roca (US) 4% 8% 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=554; Feb 2016
- This provide very clear instruction on what product attributes are succeeding the most across Nut 21% markets
- Western Australian chocolate manufacturers Truffles 17% looking to grow value and share should focus in these areas
Belgian 5% - Chocolate containing nuts stand out, with ~1/4 observed product SKU being nut covered chocolate Fruit 5%
- Survey universe is all products in all listed retailers (across multiple countries) Mint 4%
Mini bars 3%
Swiss 2%
Organic 2%
Liqueur 1%
Source: Coriolis from store checks 29 WHAT IS WA CAPABLE OF DELIVERING? STRATEGIC DIRECTION Western Australian chocolate producers need to continue to move forward and improve through new products
SUGGESTED STRATEGIC DIRECTION: WESTERN AUSTRALIAN CHOCOLATE Model; 2016
Loose, bulk Everyday Gift Premium Traditional Special occasion Unique chocolate bars packs ingredients methods packs flavours
Chinese suppliers WA suppliers USA & EU 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 assorted chocolate offer for Asia
IDENTIFIED POTENTIAL PREMIUM POSITIONS Model; 2016
HEALTH PROVENANCE INDULGENCE CONVENIENCE
Lowers blood pressure Organic Premium cocoa Variety of sizes
High in flavonoids Identified source region Single source beans Individually wrapped
High in antioxidants Specialty variety Gift packaging Gift wrapped box
High satiety Track & trace Premium ingredients
Reduced stress Ethical production Handmade
Boosts blood flow to the brain Traditional methods Keepsake container
Cough relief Unique WA flavours
Source: Coriolis; photo credit (Dollar Photo and Southern Forests Food Council Inc.) 31 WHAT IS WA CAPABLE OF DELIVERING? GLOBAL PEERS Products from other manufacturers in other markets demonstrate what is possible in terms of developing a premium Western Australian assorted chocolate offer
EXAMPLES OF PREMIUM PRODUCTS FROM OTHER MARKETS Select; 2016
Organic Gift wrapped Individually wrapped truffles Italian
Tasting collection Petit indulgence Crystals inlaid in lid Heart shaped box
Contains map of the world Assorted flavours Keepsake tin Perfect for gifting
Contains tasting notes Amazing taste Red colour Classic delicacy
Fairtrade beans Delicious ingredients Romantic gift for Valentine’s Roasted whole hazelnut
Tasting journey around the world Mouth watering recipes Delight that special someone The golden elegance
Intense and refined flavours
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 assorted chocolate product from Western Australia targeting Asia
HYPOTHETICAL EXAMPLE OF POTENTIAL PREMIUM PRODUCT FROM WA Model; 2016
Improves cognitive High in antioxidants Good for heart health abilities
HEALTH
From Specialty varieties of Traditional methods West Australia cocoa
PROVENANCE
Gift packaging Premium ingredients
INDULGENCE
Variety of pack sizes
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 assorted chocolate product with select characteristics for launch in Hong Kong
PRELIMINARY “STRAW MAN” DEVELOPMENT & ROLLOUT PLAN FOR ASSORTED CHOCOLATE OPPORTUNITY Model; 2016
CURRENT WA IDENTIFIED HIGH GROWTH, POTENTIAL FUTURE POSITIONING IN ASIA HIGH VALUE OPPORTUNITY FOR WA PRODUCT LINE EXTENSION
From From Traditional methods Unique WA flavours Specialty variety Australia West Australia
Premium ingredients High in antioxidants Organic
Gift packaging
Variety of pack sizes
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 $0.4b (in HK)
Food store Supermarkets 318 Supermarkets 260+ Supermarkets Supermarkets Grocery 247+ Dept. stores (w/food) 8 Convenience 600+ formats Convenience 921 Convenience Convenience Supermarkets 5 Bakery Health & Beauty 369 Restaurants 676
# of stores Wellcome 280+ ParknShop 175 CR Vanguard 100+ DCH Food Mart 80+ 759 Stores 247+ AEON 13 Circle K Marketplace 31 PnS Superstore 50+ VanGo 79 DCH Food Mart Deluxe Saint Honore Cake 7-Eleven 900+ PnS Taste 10 Olivers the Delicatessen PnS Fusion 14 ThreeSixty
Store fascia
Source: Coriolis from a wide range of sources 37 FOCUS MARKET – 2 – SINGAPORE Singapore has a robust and well-developed food retailing and foodservice sector
TURNOVER & PURCHASES ESTIMATED WHOLESALE FOOD & FMCG PURCHASES US$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 38 FOCUS MARKET – 2 – 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$0.2b
Store formats Supermarket Supermarket (Cold Storage, Supermarkets Supermarkets Hypermarket Marketplace) Online Convenience (Cheers; 139) Hypermarket Online Convenience (7-Eleven; 502) Online
# of stores 285 848 38 19
Store fascia
Source: Coriolis from a wide range of sources 39 FOCUS MARKET – 3 – CHINA China has a robust and well-developed food retailing and foodservice sector
TURNOVER & PURCHASES ESTIMATED WHOLESALE FOOD & FMCG PURCHASES PRELIMINARY US$b; 2014 US$b; 2014 PRELIMINARY $421 $135 100%
90% $135 Foodservice Hypermarkets 80% $450 $63 70% 60% 50% 7m+ restaurants 40% $421 Retail plus bars & clubs, 30% $601 Supermarkets hotels/motels/etc., 20% $126 vending machines, institutions (schools, 10% hospitals, airline 0% caterers, prisons, etc.) Turnover Purchases Convenience $8 TURNOVER GROWTH RATE Foodservice % Y-O-Y; CNY; 2013v2014 $135 PRELIMINARY Traditional $71
Online $8 Retail 6.0%
Wet markets $143 Foodservice 7.0%
Retail Foodservice
Source: Coriolis from a wide range of sources 40 FOCUS MARKET – 3 – CHINA Eighteen potential in-market partners are identified for Western Australian firms in China…
POTENTIAL IN-MARKET PARTNERS – CHINA 2015 or as available
Firm CR Vanguard Sun Art Retail Group Wal-Mart China Lianhua Carrefour China Yonghui Superstores Nonggongshang
Ownership China Resources Listed; HK; Auchan and Listed; USA Listed; HK; Bailian Listed; France Listed; Shanghai; Dairy China (SOE; China) Ruentex group Group Co. Farm 20%; JD.com 10%;
Website www.crvanguard.com.hk www.sunartretail.com www.wal-martchina.com lianhua.todayir.com www.carrefour.cn www.yonghui.com.cn www.ngs1685.com www.crc.com.cn www.rt-mart.com.tw www.samsclub.cn www.carrefour.com.cn www.carrefour.com
Annual sales US$15.2b (13) US$14.0b (14) US$11.0b (13) US$10.5b (13) US$7.1b (13) US$5.3b US$4.6b Total/Food
Food store Hypermarket Hypermarket Hypermarket Hypermarkets Hypermarket 236 Supermarket Supermarkets 2,644 formats Supermarket Online Warehouse Club Supermarket 4,600 Convenience 3 Convenience 1,700 Convenience Compact HM Convenience 1,905 Online Supermarket
# of stores 4,637 264 423 6,900+ 239 351 2,644
Store fascia
- Alldays - Kedi
Source: Coriolis from a wide range of sources 41 FOCUS MARKET – 3 – CHINA … continued
POTENTIAL IN-MARKET PARTNERS – CHINA 2015 or as available
Firm HNA Group Wumart Stores Better-Life Jiajiayue Group A. Best Supermarket Metro Cash & Carry Lotte Mart
Ownership Private; China Public; China Public; China Public; China Public; China Listed; Germany Listed; Korea
Website www.hnagroup.com/ www.wumart.com www.bbg.com.cn www.jiajiayue.com.cn www.abest-xyj.com www.metro.com.cn www.lotte.co.kr www.metrogroup.de
Annual sales US$4.0b (13) US$3.3b (13) US$3.2b (13) US$2.9b US$2.7b US$2.7b (13) US$2.4b (13) Total/Food
Food store Hypermarkets Hypermarkets Hypermarkets Hypermarket Hypermarket Cash & Carry Hypermarkets formats Supermarkets Convenience Department stores Supermarket Supermarket Supermarkets Convenience Online Department store Convenience
# of stores 482 547 445 601 116 75 110
Store fascia Le Wan Jia Supermarket
Jiangsu Chaoyue Supermarket
Hunan Joindoor Supermarket
Source: Coriolis from a wide range of sources 42 FOCUS MARKET – 3 – CHINA … continued
POTENTIAL IN-MARKET PARTNERS – CHINA 2015 or as available
Firm Sinopec Group PetroChina Co. Dongguan Sugar & Seven & I Holdings Liquor Group
Ownership Chinese government Chinese government Japan; listed (SOE) (SOE)
Website english.sinopec.com www.meiyijia.com.cn www.7-11.cn www.7andi.com www.sej.co.jp www.itoyokado.co.jp
Annual sales US$455b (14) US$49.1b Total/Food US$17.5b
Food store Easy Joy uSmile Meiyijia Seven&I 301 formats Area licensees 1,763 - DairyFarm 740 - Others ~1,063
# of stores 23,300 14,000 5,580 2,064
Store fascia
Source: Coriolis from a wide range of sources 43 DOCUMENT STRUCTURE
What is the strategic situation in the market?
In this environment, what is the opportunity for Western Australia?
Who are the potential in-market partners?
Who are the key firms in Western Australia capable of delivering?
44 IDENTIFIED WA COMPANIES
BAHEN & CO FRESH FOOD INDUSTRIES GABRIEL CHOCOLATE
ADDRESS: 135 Puzey Rd, Yallingup, WA 6282 ADDRESS: 19 - 23 Knock Place, Jandakot, WA 6164 ADDRESS: Caves & Quininup Rd, Yallingup WA 6282 PHONE: 08 9757 1034 PHONE: 08 9417 4088 PHONE: 08 9756 6689
WEBSITE: www.bahenchocolate.com WEBSITE: www.ffiholdings.com.au WEBSITE: www.gabrielchocolate.com.au
JOHN WALKER CHOCOLATIER MARGARET RIVER CHOCOLATE CO.
ADDRESS: Unit 5, 20-22 Boag Pl, Morley, WA 6062 ADDRESS: 415 Harman’s Mill Rd, Metricup, WA 6280 PHONE: 08 9276 3599 PHONE: 08 9755 6555 WEBSITE: www.johnwalkerchocolatieros.com.au WEBSITE: www.chocolatefactory.com.au
Sources: Coriolis from a wide range of sources 45 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.