TARGET MARKET OPPORTUNITIES IN ASIA FOR FLUID MILK Part of Asia Market Success, April 2016 INHERENT LIMITATIONS

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2 SCREENING OVERVIEW In Phase One of the Target Market Opportunities in Asia for WA Premium Products Report (TMO Report), extensive import/export trade data was fed through a multi-stage screening process to “hone-in” on potential opportunities for Western Australia; stakeholder interviews also fed into this process STRUCTURE OF MULTI-STAGE SCREENING PROCESS USED IN THIS PROJECT Model; 2016 WA INDUSTRY-GOOD RESEARCH INDIVIDUAL FIRM STAGE I STAGE II STAGE III STAGE IV ROLE & RESPONSIBILITY

PLATFORM PRODUCT FIT WITH WA POSITIONING Project does not attempt to TARGET MARKET address firm-level operational or executional activities:

- R&D

- Product development

- Sourcing & supply chain

- Production & operations

- Marketing & branding 679 47 9 20 TRADE QUAL/QUANT PLATFORMS OPPORTUNITIES - Sales & sales structure CODES SCREENS - Capital structure

- Negotiation

- Distributor appointment

YOU ARE HERE

3 This project is focused on “market demand” from the following twenty-four Asian/Middle Eastern markets4

24 COUNTRIES DEFINED AS HIGH POTENTIAL TARGET MARKETS FOR WESTERN AUSTRALIA Target markets; 2015

SOUTH ASIA SE ASIA

India China Pakistan Hong Kong Sri Lanka Japan South Korea Taiwan Indonesia Malaysia Philippines 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? Fluid milk emerged in Phase I as one of twenty “high growth, high potential” opportunities for Western Australia; fluid milk can be fresh/chilled or long life, but excludes sweetened and concentrated

PRODUCT OVERVIEW Example; 2015

PRODUCT PROFILE HS Trade Codes 040120/040110 Product Milk, not concentrated nor sweetened, low fat and regular Out-of-scope Cream, milk powder, infant formula, dairy nutritionals, flavoured or sweetened milk, buttermilk, yoghurt, fermented products, whey products, butter, cheese Origin Neolithic period in Southwest Asia and the Americas Example Milk ingredients

Forms/usage - Beverage (by-itself) - Added to beverages (e.g. tea, coffee) - Ingredient in many dishes across many cuisines Drivers of - Perception of dairy as healthy product, especially for children; endorsed by consumer/ medical profession market success - Increasing middle class wanting better nutrition and Westernised diet

Source: photo credit (Dollar Photo); Coriolis analysis 5 DOCUMENT STRUCTURE

What is the strategic situation in the market?

In this environment, what is the opportunity for Western Australia?

Who are the potential in-market partners?

Who are the key firms in Western Australia capable of delivering?

6 Western Australia is well-positioned to grow fluid milk exports to Asia

- Asian fluid milk imports are rising, with import value growth being driven by increasing volume (particularly the 2011+ surge); average FOB (free-on-board) prices expanding above inflation - Asian & Middle Eastern fluid milk imports primarily come from a handful of countries and regions: Australasia (Australia & New Zealand), Germany and “other Europe”, and inter-Asian trade - Australia and Germany stand out for driving fluid milk trade value growth in Asia & the Middle East - Germany and other Europe (in aggregate) are driving growth over the past five years - Average achieved FOB price to target Asian markets vary by supplier, with Australia sitting in the middle of the curve - Fluid milk goes – in any quantity – to a handful of the target markets; China stands out as the largest, followed by Hong Kong, the Philippines and Singapore - Growth in fluid milk imports is a “Greater China” story - China has been the engine of import growth over the past five years - Average fluid milk import prices are relatively similar, other than a handful of very small, high value markets - Imported fluid milk consumption appears unrelated to per capita income - Market share varies by country; European countries stronger in Middle East than E/SE Asia; New Zealand, Australia and South America strong in East and SE Asia - Western Australia has opportunities for fluid milk export growth in key SE and East Asian markets - Data supports new high value, premium fluid milk opportunities being initially launched in (1) Singapore, (2) Hong Kong and (3) China - As a “Straw Man” for discussion, we identify an export market roll-out plan

7 Asian fluid milk imports are rising, with import value growth being driven by increasing volume (particularly the 2011+ surge); average FOB (free-on-board) prices expanding above inflation

TOTAL IMPORTS TO ASIA/MIDDLE EAST TARGET REGION (24 COUNTRIES) VOLUME AVERAGE PRICE PER KILOGRAM VALUE T; 000; 2004-2014 US$; 2004-2014 US$m; 2004-2014

600 $1.20

$500 CAGR 4% 500 $1.00

$400

400 CAGR* $0.80 12% CAGR 16% $300 300 $0.60

$200 200 $0.40

$100 100 $0.20

0 $- $- 2010 2011 2010 2011 2010 2011 2004 2004 2004 2014 2014 2014 2008 2008 2008 2006 2006 2006 2009 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 fluid milk imports primarily come from a handful of countries and regions: Australasia (Australia & New Zealand), Germany and “other Europe”, and inter-Asian trade

EXPORT VALUE BY SUPPLIER TO TARGET REGION TOTAL = US$516m US$m; FOB; 2014

$199 $16 $22 $193 $11 $75

Other E/SE Asia $26

Australia Germany $118 $120

Uruguay Thailand $13 $10

USA Other $22 $11 Indonesia $14

France $22

United Kingdom New Zealand $12 $81 Belgium China $9 $25

Other C/S America Other Europe $3 $29 Other Australasia C/S AmericaUSA 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 Australia and Germany stand out for driving fluid milk trade value growth in Asia & the Middle East

EXPORT VALUE BY SUPPLIER TO TARGET REGION 10y ABS US$m; FOB; 2004-2014 $516

$118 Australia +$85

$389

CAGR 16% $81 New Zealand +$52 $80

$300 $13 Uruguay +$12 $3 Other C/S America +$2 $22 USA +$21 $78 $74 $235 $6 $2 $120 Germany +$120 $202 $12 $192 $69 $70 $164 $39 $160 $54 $78 $2$3 $138 $40 $6 $22 France +$21 $128 $43 $62 $50 $12 United Kingdom +$12 $113 $37 $58 $45 $18 $9 Belgium +$9 $2 $38 $34 $3 $1 $3 $12 $29 Other Europe +$29 $34 $0$2$1 $39 $4 $10 $9 $26 $0$2$1 $16 $4$3$1 $20 $5$1 $5 $9 $11 Other +$11 $26 $0$1 $17 $2$1 $5 $4 $0$1 $2$3 $0$5$1 $2$1 $0 $40 $29 $1 $7 $26 $0$1 $5 $26 Other E/SE Asia +$12 $0$6$1 $21 $14 $28 $0$1 $28 $28 $19 $0$1 $17 $9 $10 Thailand -$4 $14 $29 $20 $11 $9 $22 $11 $14 Indonesia +$14 $15 $17 $14 $16 $16 $19 $11 $14 $25 $25 China +$6 $19 $20 $22 $24 $13 $15 $18 $22 $23 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 Germany and other Europe (in aggregate) are driving growth over the past five years

FIVE YEAR EXPORT GROWTH MATRIX: CHANGE IN VALUE VS. RATE OF GROWTH VS. ABSOLUTE VALUE US$m; 2009 vs. 2014 125% Belgium Other Europe

Germany 100%

Uruguay

United Kingdom USA

France 5y CAGR 50%

Other E/SE Asia Australia China New Zealand Other C/S America 0% Other Indonesia Thailand

Bubble scale: US$m; 2014 $20m A bubble this size=

-50% $-20 $0 $20 $40 $60 $80 $100 $120

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 achieved FOB price to target Asian markets vary by supplier, with Australia sitting in the middle of the curve

AVERAGE EXPORT VALUE COST CURVE BY SUPPLIER US$/kg; t; FOB; 2014 $1.77 $1.23 $1.16 $1.04 $1.01 $0.86

$0.98 $0.97 $0.85 $0.95 $0.94 $0.80 Average $0.88 $0.79 FOB $0.71 value Other /SE Asia United Kingdom Thailand Other China Other Europe Indonesia Belgium USA Other C/S America Uruguay New Zealand France Australia Germany

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 Fluid milk goes – in any quantity – to a handful of the target markets; China stands out as the largest, followed by Hong Kong, the Philippines and Singapore

IMPORT VALUE BY MARKET BY REGION TOTAL = US$516m US$m; FOB; 2014 $0 $12$0 $138 $366 South Korea Japan $2 $2 Taiwan $23 UAE $2 India Hong Kong SAR Bahrain $0 $0 Singapore $66 $52 Qatar Kuwait $0 $0

Malaysia Saudi $12 $5 Thailand $0

Egypt $0 China Israel Other $274 $0 $0 Philippines $58

Other $4 Indonesia $1 Vietnam $15 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 fluid milk imports is a “Greater China” story

IMPORT VALUE BY MARKET BY REGION US$m; FOB; 2004-2014

Saudi Arabia Egypt $516 Israel Other ME $0$2 $0$5 India $0$4 Other Ind. Sub

$52 Singapore

$12 Malaysia $0 Thailand

$58 Philippines $389 $0$2$3$1 Indonesia $0$3$1 $1 Vietnam $15 Japan $2 South Korea CAGR $23 Taiwan 16% $69

$300 $10 $66 Hong Kong SAR $2 $0 $0$2$1

$54 $62

$235 $1 $11 $0$2$1 $0$2$1 $9 $4$2 $0 $14 $202 $192 $0$3$1 $59 $46 $0$5 $0$3$1 $1 $10 $63 $164 $0 $2 $160 $8 $10 $4$1 $60 $0 $2$3 $0$3$1 $43 $0$5 $7$1 $0$4$1 $11 $138 $0 $0$4$1 $128 $0$2 $47 $274 China $0$2 $0$4 $0$1 $33 $0$6 $113 $0$4 $39 $24 $2 $63 $0$1 $22 $0$4 $37 $10 $0$3 $0$4 $40 $0$1 $22 $0$2 $12 $25 $28 $0$2 $27 $2 $30 $28 $14 $148 $28 $12 $19 $10 $0$1 $2 $3 $11 $12 $3 $4 $0$2 $57 $9 $2 $19 $12 $4$1 $6 $6$1 $9 $0 $0$3 $4$0 $0$3 $6 $85 $43 $40 $48 $41 $38 $39 $38 $35 $13 $10 $1 $1 $2 $3 $9 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 has been the engine of import growth over the past five years

FIVE YEAR IMPORT GROWTH MATRIX: CHANGE IN VOLUME VS. RATE OF GROWTH VS. ABSOLUTE VALUE US$m; t; 2009 vs. 2014 100%

Sri Lanka China 80%

60% Shift to quality Growing volume & value

40% 5y CAGR Vietnam South Korea Taiwan Thailand Malaysia 20% Philippines Jordan Hong Kong SAR

Saudi Arabia Singapore 0% Kuwait Oman Bahrain Japan UAE QatarLebanon -20% Israel Bubble scale: US$m; 2014 $50m Pakistan A bubble this size= Egypt Indonesia India -40% -50,000 0 50,000 100,000 150,000 200,000 250,000 300,000

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 fluid milk import prices are relatively similar, other than a handful of very small, high value markets

AVERAGE IMPORT VALUE COST CURVE BY MARKET/REGION US$/kg; t; FOB; 2014 $3.91 $2.27

Average import value $1.46 $1.41 $1.37 $1.23 $1.22 $1.19 $1.18 $1.15 $1.09 $0.86 $0.84 $0.80

$1.07 $0.79 $0.94 $0.93 $0.85 $0.84 Japan Saudi Arabia India Malaysia Lebanon Jordan South Korea Egypt Israel United Arab Emirates Vietnam Hong Kong SAR Philippines China Taiwan Singapore Pakistan Qatar

Volume imported Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 16 Imported fluid milk consumption appears unrelated to per capita income

MARKET SIZE DRIVERS: GDP PER CAPITA VS. IMPORTS PER CAPITA VS. MARKET SIZE US$; l; l/000; 2014

12.0

Singapore

10.0

Hong Kong SAR 8.0

Imports per capita (l)

6.0

4.0

2.0 Philippines Size of bubble = total litres (000) 100,000 Taiwan China A bubble this size= Vietnam South Korea India Jordan Malaysia Saudi Arabia United Arab Emirates Pakistan Oman Bahrain Japan Israel 0.0 Thailand Kuwait Qatar $0 $10,000 Lebanon $20,000 $30,000 $40,000 $50,000 $60,000 Egypt 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 stronger in Middle East than E/SE Asia; New Zealand, Australia and South America strong in East and SE Asia

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

100% China

Indonesia 90% Thailand This is predominantly 80% very small amounts of Other E/SE Asia inter-Middle East Trade Other 70% Other Europe

60% Belgium United Kingdom 50% France

Germany 40% USA

30% Other C/S America Uruguay 20% New Zealand

10% Australia

0% Egypt Japan Thailand South Korea China Hong Kong SAR Singapore Saudi Arabia Bahrain Kuwait Qatar Vietnam Taiwan Oman Lebanon Philippines India Indonesia Jordan Pakistan Israel Malaysia Sri Lanka United Arab Emirates

Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 18 Western Australia has opportunities for fluid milk export growth in key SE and East Asian markets

AUSTRALIAN IMPORT VALUE MARKET VS. MARKET VALUE US$m; FOB; 2014 100%

Australian 51% market share 35% 34% 27% 21% 20% 18% 13% 8% 3% 2% 0% 0% 0% Lebanon UAE China Malaysia Hong Kong SAR Taiwan Vietnam Singapore India Philippines Indonesia Israel Oman Thailand Kuwait Saudi Arabia Qatar South Korea Jordan Sri Lanka Japan Bahrain Pakistan

Total value of imports Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 19 Data supports new high value, premium fluid milk opportunities being initially launched in (1) Singapore, (2) Hong Kong 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 $4.00 Japan

$3.50

$3.00

$2.50

Bahrain VALUE Average $2.00 FOB $/kg 2014 Thailand Sri Lanka $1.50 Qatar Indonesia Saudi Arabia Malaysia Oman KuwaitUAE Philippines India Pakistan Hong Kong Vietnam SAR $1.00 Lebanon China 2 Jordan 3 Taiwan Singapore 1 Israel South Korea

$0.50

Size of bubble = value $20 A bubble this size= $0.00 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

AU share of total import value Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications 20 As a “Straw Man” for discussion, we identify an export market roll-out plan

PRELIMINARY “STRAW MAN” DEVELOPMENT & ROLLOUT PLAN FOR FLUID MILK OPPORTUNITY Model; 2016

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

- High income, sophisticated market and consumers - Manageable sized test bed - WA already has a very strong market position - WA/AU is market leader and should, therefore, lead

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 fluid milk exports to Asia

IS THE MARKET DEVELOPED & COMPETITIVE? - The flow of fluid milk from the farm through to the consumer is straight forward and simple - Milk prices are attractive in Asia, with a premium for organic, fortified and some imported fresh milk - Asian markets match western countries in term of range and offer for fluid milk - “Leading indicator” Western markets suggest depth of fluid milk range in Asian is well-developed and competitive; this suggests limited range upside going forward - While Western retailers focus on fresh milk, Asian markets have a mix skewed towards long life milk

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

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

SIMPLIFIED MODEL OF SUPPLY CHAIN: FLUID MILK Model; 2016

This stage branches and adds multiple layers in large markets

In-Market Domestic Wholesalers Retailers Dairy Farmer Dairy Processor

Distributor(s) WA Dairy WA Dairy Agent/Broker/ Foodservice (multi-layered in Farmer Processor Distributor & Institutional large markets)

Other Australian Dairy Processor

NZ Exports Dairy Processor Logistics Providers (Airfreight, Seafreight, USA Trucking) Packer/Processor

European Dairy Processor

Other Packer/Processor

Source: Coriolis 24 WHO IS THE COMPETITION? PRICING Milk prices are attractive in Asia, with a premium for organic, fortified and some imported fresh milk

SHELF PRICE PER KG ACROSS SELECT SE ASIAN MARKETS AND AUSTRALIA: SELECT FLUID MILK ITEMS US$/kg; Feb 2016

Thailand Singapore Hong Kong $4.59

$3.44 $3.30

$2.80 $2.57 $2.55 $2.47 $2.42 $2.29 $2.16 $2.16 $1.84 $1.88 $1.74 $1.51 $1.53 $1.21 $1.26 $1.09 $0.86 $0.62 Foremost UHT Living Planet UHT HiCal LoFat (AU) Harvey Fresh UHT Coles UHT Coles Fresh Devondale UHT Bannister Downs Coles Organic UHT HiCal LoFat (SG) Elle & Vire UHT Living Planet UHT Dutch Lady UHT Dutch Lady UHT Farmhouse Fresh Foremost Fresh A2 UHT (AU) Harvey Fresh Emmi Swiss UHT Devondale UHT Devondale UHT Magnolia UHT Pauls UHT Phy Premium (CH) Organic (AU) Organic(AU) (TH) (TH) (AU) (AU) (MY) (MY) (FR) Fresh (AU) (AU) (AU)

AU AU

SELECT SE ASIAN RETAILERS AUSTRALIA

Source: Coriolis from store checks 25 WHAT IS ON THE SHELF? RANGE IN MARKET Asian markets match western countries in term of range and offer for fluid milk

EXAMPLE: ACTUAL UHT MILK RANGE ON SHELF Feb 2016

Singapore: GDP/Capita US$83,100 Australia: GDP/Capita US$61,887

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 suggest depth of fluid milk range in Asia is well-developed and competitive; this suggests limited range upside going forward

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

84 83 Average 68.1 sku/store Average 65.8 sku/store 74 69 69 69 69 65 62 62 59 57 50

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

Anglo-American SE Asia

Source: Coriolis from store checks 27 IS THE MARKET DEVELOPED & COMPETITIVE? SEGMENTATION While Western retailers focus on fresh milk, (generally)Asian markets have a mix skewed towards long life milk

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

2 UHT Fresh 2

24 25 17 37 26 21 18 65

82 42 30

30 67

48 44 45 41 41 43 37 27 18 20 20

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

Anglo-American SE Asia 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=872; Feb 2016

- This provide very clear instruction on what product attributes are succeeding the most across markets Organic 15%

- Western Australian milk producers looking to grow value and share should focus in these areas Fortified - Calcium 9%

- Organic and fortified stand out, with almost 1/3 observed product SKU being either organic or Country in title 6% fortified, with calcium being the most common

- Survey universe is all products in all listed Lacto free 5% retailers (across multiple countries)

Fortified - Other 3%

Fortified - Omega 3 2%

A2 Protein milk 1%

Kids milk 1%

Source: Coriolis from store checks 29 WHAT IS WA CAPABLE OF DELIVERING? STRATEGIC DIRECTION Western Australian milk processors need to continue to move forward and improve through new products, either down a “natural” or a “science” path

SUGGESTED STRATEGIC DIRECTION: WESTERN AUSTRALIAN FLUID MILK Model; 2016

“Natural” Named source No pesticides or Named Non- Organic Direction or region or local growth hormone Breed homogenised Positioning

Reconstituted UHT milk Key competitors USA/UK are powder are here are here

Added supplements (e.g. “Science” High in calcium or Added Added Added Omega 3, Local suppliers WA suppliers Ginko, barley Direction or added calcium vitamins prebiotics DHA & ARA are here are here in Asia malt, collagen, Positioning green tea)

Multinationals are here

30 WHAT IS WA CAPABLE OF DELIVERING? CLAIMS Multiple potential positions exist to develop a premium fluid milk offer for Asia

IDENTIFIED POTENTIAL PREMIUM POSITIONS Model; 2016

HEALTH PROVENANCE INDULGENCE CONVENIENCE

Excellent source of calcium Organic Fresh Single serve

A2 proteins Identified source region Full cream Easy pour containers

Vitamin & mineral enriched Track & trace Region specific Extended shelf life

Lactose free Animal welfare Co-branded Bulk packed/bagged

Low fat Hormone/antibiotic free Kid friendly characters Multi-Pack

Promotes bone health Not fed GMO Grass fed cows

Added omega 3,DHA & ARA No growth hormones Non-Homogenised

Added plant sterols No antibiotics Breed specific

Essential for healthy growth No toxic pesticides Non-Bovine

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 fluid milk offer

EXAMPLES OF PREMIUM PRODUCTS FROM OTHER MARKETS Select; 2016

Enriched fresh whole milk Skimmed milk Certified organic/USDA Lactose free

Iron for cognitive development UHT DHA Omega 3 Semi-skimmed

Vitamin D for bone development Convenient 6 pack Supports brain health 5 x 20ml portions

Vitamin A enriched “super healthy, low fat just milk” Reduced fat milk Long life

Rich in calcium Heat treated to last longer 38% less fat than whole milk On the go portion pack

Children aged 1 to 5 Handle for ease of pouring Vitamins A & D added Made in Denmark

Mumsnet tried & tested Ultra-Pasteurised

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 milk product from Western Australia targeting Asia

HYPOTHETICAL EXAMPLE OF POTENTIAL PREMIUM PRODUCT FROM WA Model; 2016

Added Omega 3 & Essential for healthy Vitamin fortified DHA growth

HEALTH

From Australian Organic Western Australia Flag

PROVENANCE

Fresh Region specific Grass fed cows

Fluid Milk INDULGENCE

Easy to pour

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 two different potential opportunities for a high value, premium fluid milk product with select characteristics for export market launch

PRELIMINARY “STRAW MAN” DEVELOPMENT & ROLLOUT PLAN FOR FLUID MILK OPPORTUNITY Model; 2016

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

“Natural” Direction or Positioning

Organic Not fed GMO Non-Homogenised Breed specific

Australian Flag No growth hormones Non-Bovine

No toxic pesticides No antibiotics

“Science” Direction or Positioning

Enriched with essential UHT High in calcium nutrients for growth Added DHA/ARA Added Iodine “Designed to support brain From Added Vitamins Low fat development” Added Zinc Western Australia Added Choline Added Prebiotics

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 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 Prime

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 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 – 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 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

BANNISTER DOWNS DAIRY BROWNES DAIRY HARVEY FRESH

ADDRESS: Muirillup Road, Northcliffe WA 6262 ADDRESS: 22 Geddes Street, Balcatta, WA 6021 ADDRESS: Lot 4, Third Street, Harvey, WA 6220 PHONE: 08 9776 4555 PHONE: 08 9441 7777 PHONE: 08 9729 0600 WEBSITE: www.bannisterdowns.com.au WEBSITE: www.brownesdairy.com.au WEBSITE: www.harveyfresh.com.au

LION DAIRY & DRINKS MARGARET RIVER DAIRY CO. MARGARET RIVER ORGANIC CREAMERIES

ADDRESS: 86 Radium St, Bentley, WA 6102 ADDRESS: 8063 Bussell Hwy, Metricup, WA 6280 ADDRESS: Jindong Treeton Rd, Treeton, WA 6284 PHONE: 08 9333 2888 PHONE: 08 9755 7588 PHONE: 08 9751 3117 WEBSITE: www.lionco.com WEBSITE: www.margaretriverdairy.com.au WEBSITE: www.margaretriverorganiccreameries.com

MUNDELLA FOODS

ADDRESS: 46 Randell Road, Mundijong, WA 6123 PHONE: 08 9525 5754 WEBSITE: www.mundellafoods.com.au

1. article; 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.