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FIRM

TARGET MARKET OPPORTUNITIES IN FOR ASSORTED 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 (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. 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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 Pakistan Sri Lanka Japan South Korea Taiwan Indonesia Malaysia Philippines Singapore Thailand 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 ; 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, , 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 (30%) (, cocoa butter, cocoa mass, skim milk powder, ingredients anhydrous milkfat, emulsifier: (soy), flavouring: vanillin), (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 , the USA, and China - A wide range of countries are achieving solid growth in assorted chocolate in Asia - Poland, China, USA and 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 $55 New Zealand Other Europe $1 $55 Other Australasia USA Europe E/SE Asia

NA/ME/CA = North /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 +$92 $57 $2 $266 $155 Netherlands +$116 $159 $142 $1,199 $135 +$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 $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 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) 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; ; 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.