IN-PROGRESS REVIEW DRAFT - Agriculture and Food...Food Western Australia (DAFWA), with funding...

TARGET MARKET OPPORTUNITIES IN ASIA FOR FRESH APPLES Part of Asia Market Success, April 2016

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

IINNHHEERREENNTT LLIIMMIITTAATTIIOONNSS This work was commissioned by the Department of Agriculture and Food Western Australia (DAFWA), with funding through the State Government’s Royalties for Regions program and prepared by Coriolis. This work is based on secondary market research, analysis of information available or provided to Coriolis by our client, and a range of interviews with industry participants and industry experts. Coriolis have not independently verified this information and make no representation or warranty, express or implied, that such information is accurate or complete. Projected market information, analyses and conclusions contained herein are based (unless sourced otherwise) on the information described above and on Coriolis’ judgement, and should not be construed as definitive forecasts or guarantees of future performance or results. Neither Coriolis nor its officers, directors, shareholders, employees or agents accept any responsibility or liability to readers or recipients of this report other than DAFWA or people other than DAFWA who rely upon it (described below as Recipients) with respect to this document. Coriolis wishes to draw Recipients’ attention to the following limitations of the Coriolis document “Target Market Opportunities in Asia for the Western Australian Premium Products” (the Coriolis Document) including any accompanying presentation, appendices and commentary (the Coriolis Commentary): a. Coriolis has not been asked to independently verify or audit the information or material provided to it by or on behalf of the Client or any of the parties involved in the project; b. the information contained in the Coriolis Document or any Coriolis Commentary has been compiled from information and material supplied by third party sources and publicly available information which may (in part) be inaccurate or incomplete; c. Coriolis makes no representation, warranty or guarantee to Recipients, whether express or implied, as to the quality, accuracy, reliability, currency or completeness of the information provided in the Coriolis Document and any Coriolis Commentary or that reasonable care has been taken in compiling or preparing them; d. the analysis contained in the Coriolis Document and any Coriolis Commentary are subject to the key assumptions, further

qualifications and limitations included in the Coriolis Document and Coriolis Commentary, and are subject to significant uncertainties and contingencies, some of which, if not all, are outside the control of Coriolis; and e. any Coriolis Commentary accompanying the Coriolis document is an integral part of interpreting the Coriolis document. Consideration of the Coriolis document will be incomplete if it is reviewed in the absence of the Coriolis Commentary and Coriolis conclusions may be misinterpreted if the Coriolis document is reviewed in absence of the Coriolis Commentary. Coriolis is not responsible or liable in any way for any loss or damage incurred by any person or entity other than DAFWA relying on the information in, and the Recipient unconditionally and irrevocably releases Coriolis from liability for loss or damage of any kind whatsoever arising from, the Coriolis document or Coriolis Commentary including without limitation judgements, opinions, hypothesis, views, forecasts or any other outputs therein and any interpretation, opinion or conclusion that the Recipient may form as a result of examining the Coriolis document or Coriolis Commentary. The Coriolis document and any Coriolis Commentary may not be relied upon by the Recipient, and any use of, or reliance on that 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. AACCCCEESSSSIIBBIILLIITTYY Coriolis seeks to support the widest possible audience for this research. This document has been designed to be as accessible to as many users as possible. Any person – with or without any form of disability – should feel free to call the authors if any of the material cannot be understood or accessed. We welcome the opportunities to discuss our research with our readers and users. All photos used in this discussion document were either (1) purchased by Coriolis from a range of stock photography providers as documented, (2) received written permission to use Southern

Forest Food Council photo or (3) are low resolution, complete product/brand for illustrative purposes used under fair dealing/fair use for both “research and study” and “review and criticism”. Our usage of them complies with Australian law or their various license agreements (© Dollar Photo Club). CCOOPPYYRRIIGGHHTT Copyright © Western Australian Agriculture Authority, 2016 IIMMPPOORRTTAANNTT DDAAFFWWAA DDIISSCCLLAAIIMMEERR The Chief Executive Officer of the Department of Agriculture and Food and the State of Western Australia and their employees and agents (collectively and individually referred to below as DAFWA) accept no liability whatsoever, by reason of negligence or otherwise, arising from any use or release of information in this report or any error, inaccuracy or omission in the information. DAFWA does not make any representations or warranties about its quality, accuracy, reliability, currency, completeness or suitability for any particular purpose. Before using the information, you should carefully evaluate these things. The information is general in nature, is not tailored to the circumstances of individuals or businesses, and does not constitute financial, taxation, legal, business or management advice. We recommend before making any significant financial or business decisions, you obtain such advice from appropriate professionals who have taken into account your individual circumstances and objectives. The information in this report should not be presumed to reflect or indicate any present or future policies or decisions by the Government of Western Australia.

2

FFIINNAALL vv110000;; AApprriill 22001166

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

3

STRUCTURE OF MULTI-STAGE SCREENING PROCESS USED IN THIS PROJECT Model; 2016

INDIVIDUAL FIRM ROLE & RESPONSIBILITY STAGE I STAGE II STAGE III STAGE IV

PLATFORM PRODUCT POSITIONING TARGET MARKET

FIT WITH WA

WA INDUSTRY-GOOD RESEARCH

9 PLATFORMS

679 TRADE CODES

47 QUAL/QUANT

SCREENS

Project does not attempt to address firm-level operational or executional activities: -  R&D

-  Product development

-  Sourcing & supply chain

-  Production & operations

-  Marketing & branding

-  Sales & sales structure

-  Capital structure

-  Negotiation

-  Distributor appointment

20 OPPORTUNITIES

YOU ARE

HERE

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

Note: Complete list for analysis purposes, some countries excluded from list if no/limited trade data available (e.g. Iran)

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

MIDDLE EAST

Bahrain Egypt Israel

Jordan Kuwait

Lebanon Oman Qatar

Saudi Arabia UAE

24 defined target markets for this project

4

SOUTH ASIA

India Pakistan Sri Lanka

Western Australia

SE ASIA

China Hong Kong

Japan South Korea

Taiwan Indonesia Malaysia

Philippines Singapore Thailand Vietnam

PRODUCT PROFILE

HS Code 080810

Product Apples, fresh

Out-of-scope Frozen, cooked, pureed, preserved apples, juices, baby foods, supplements, etc. as all are covered under other screened trade codes

Origin Central Asia, cultivated in Asia and Europe for thousands of years

Example ingredients

Apples

Forms/usage -  Snack -  Ingredient in cooking, baking, desserts -  Preserves, jams and sauces -  Juiced -  Baby food -  Gift giving

Drivers of consumer/market success

-  Healthy snack

-  Eaten across the world

-  Versatile

-  Convenient

WHAT IS THE PRODUCT? Fresh apples emerged in Phase I as one of twenty “high growth, high potential” opportunities for Western Australia; apples are tree fruit that are consumed fresh and used as an ingredient

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

PRODUCT OVERVIEW Example; 2016

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 increase apple exports to Asia by focusing on select high value markets

7

-  Asian apple imports are rising, with import value growth being driven by expanding tonnage and increasing average FOB (free-on-board) prices

-  Asian & Middle Eastern apple imports come from three broad regions: Southern Hemisphere (Chile, NZ and South Africa), Western/Northern Hemisphere (USA, Italy, France, and other Europe) and China/other Asia

-  China, the USA and Italy stand out for driving apple import value growth in Asia & the Middle East

-  China and the USA lead in absolute volume growth, while Italy and “other Europe” lead in rate of growth

-  Average FOB price to target Asian markets vary by supplier, with Japan and Australia standing out for achieving good premiums

-  Apples go to a wide number of the target markets, with no single country predominating; China is a relatively small importer

-  Growth in apple imports is broad based and coming from across multiple markets

-  India, Egypt and Taiwan stand out for growth; a range of markets have declining volumes, but growing value, indicating a move to quality

-  Average apple import prices vary by region, with East Asia paying more than SE Asia and the Middle East; Taiwan stands out as a large market that pays well

-  Imported apple consumption and aggregate apple imports appear partially driven by income per capita; a number of markets appear to have long-run penetration upside

-  Market share varies by country; European countries stronger in Middle East than E/SE Asia; China really only achieving penetration in poorer countries (e.g. Philippines, Indonesia, Pakistan, India)

-  Opportunities for apple export growth in select Asian markets, as Australia has less than 1% share in the target markets

-  Data supports new high value, premium apple opportunities being initially launched in (1) Singapore, (2) Hong Kong and (3) China

-  As a “Straw Man” for discussion, we identify a export market roll-out plan

Asian apple imports are rising, with import value growth being driven by expanding tonnage and increasing average FOB (free-on-board) prices

0

200

400

600

800

1000

1200

1400

1600

1800

2000

200

4

200

5

200

6

200

7

200

8

200

9

2010

2011

2012

2013

2014

8 * Compound Annual Growth Rate; Source: UN Comtrade database; Coriolis analysis and classifications

VOLUME T; 000; 2004-2014

$-

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

200

4

200

5

200

6

200

7

200

8

200

9

2010

2011

2012

2013

2014

AVERAGE PRICE PER KILOGRAM US$; 2004-2014

$-

$500

$1,000

$1,500

$2,000

$2,500

200

4

200

5

200

6

200

7

200

8

200

9

2010

2011

2012

2013

2014

VALUE US$m; 2004-2014

CAGR* 5%

CAGR 8% CAGR

14%

TOTAL IMPORTS TO ASIA/MIDDLE EAST TARGET REGION (24 COUNTRIES)

Asian & Middle Eastern apple imports come from three broad regions: Southern Hemisphere (Chile, NZ and South Africa), Western/Northern Hemisphere (USA, Italy, France, and other Europe) and China/other Asia

9 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

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

Europe USA E/SE Asia

Other

Australasia Other Key SH

$483

Chile $189

$387

Italy $188

USA $483

Australia $1

$842

New Zealand $173

China $686

Other $21

France $123

Japan $81

Other Europe $75

South Africa $81

$21 $270 $174

Other Asia $75

TOTAL = US$2,176m

China, the USA and Italy stand out for driving apple import value growth in Asia & the Middle East

10 Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Coriolis analysis and classifications

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

2007 2011

Italy

2008 2010 2009 2014 2013

Other

Australia

Other Asia

New Zealand

Japan

USA

10y ABS

2012

France

2005

Chile

South Africa

China

Other Europe

2004 2006

$85

$686

+$67

+$55

$2,176

$81

$1,976

+$56

$83

$1,913

$86

$593 +$521

$29

+$101

+$330

$185

$704

+$182

$165 $226

$58 $66

$652

$42

+$42 $73

$48

$1,283

$450

$295

$81

+$137

$729

+$113

$67

$73

$49

-$2

$1,191

$70

$1,819

$580

$824

$424

$65 $75

-$5

$1,565

$27

$532

$41

$965

$21

$25

$189

$179

$36

$31

$25

$106

$132

$112

$176

$177

$166

$50

$109 $59

$22

$82

$83

$88

$67

$63

$55

$81

$107 $80

$4

$4

$5

$37

$1

$2

$3

$8

$6

$4

$3

$3

$38

$173

$168 $131

$100

$80

$76

$63

$49

$35

$104

$73

$74 $91

$95

$48

$26

$188

$69 $111

$11

$7

$123

$24

$18

$14

$152

$437 $470 $453

$29 $33

$483

$216

$198 $207

$347

$303

$240

$8

$5

$4

$22

$14

$9

$28 $28 $29

$7

$7

$21

$39

$69

$51

$52

$89 $98 $106

$22

$75

$55

$45

$34 $31

CAGR 14%

China and the USA lead in absolute volume growth, while Italy and “other Europe” lead in rate of growth


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

$0 $50

0%

$-50

20%

$-100

10%

$250 -30%

-20%

-10%

$100 $150 $200

60%

30%

50%

40%

New Zealand

$100m

Australia

Chile

Other Asia

Japan

Italy

USA China

Other

South Africa

France

Other Europe

5y absolute change in value

5y CAGR

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

Average FOB price to target Asian markets vary by supplier, with Japan and Australia standing out for achieving good premiums


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

China

Australia

Other A

sia

New

Zealand

USA

South Africa

Other Europe

Other France Chile Italy

Japan

$0.90 $1.00

$0.70

$0.34

$1.02

$1.43

$3.38 $2.22

$1.53

$1.16

$1.38 $1.22

Volume imported by defined target market

Average FOB

value received

+82%

Apples go to a wide number of the target markets, with no single country predominating; China is a relatively small importer


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

NA/ME/CA East Asia Indian Sub SE Asia

China $62

$251 $853 $476

Other $41

Other $29

$596

Israel $31

Egypt $148

Singapore $75

India $222

Saudi Arabia $145

Bahrain $5

United Arab Emirates $200

Kuwait $14

Qatar $12

South Korea $0

Japan $5

Hong Kong SAR $127

Taiwan $282

Vietnam $187

Thailand $178

Malaysia $117

Indonesia $194

Philippines $101

TOTAL = US$2,176m

Growth in apple imports is broad based and coming from across multiple markets


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

2012

Hong Kong SAR

2014 2013

South Korea

2011

Vietnam

2004 2005

Japan

Taiwan

Philippines

China

2009

Indonesia

2010

Thailand

2006 2007 2008

Qatar

Singapore

Other ME Israel

Egypt

Other Ind. Sub

Kuwait

Saudi Arabia

Malaysia

United Arab Emirates

India

Bahrain

$19

$172

$149

$14

$162

$13

$187

$17

$179

$17

$8

$10

$282

$39 $44

$12

$43

$11

$232

$14

$206

$15

$238

$15

$204

$145

$0

$0 $0

$154

$0

$155

$13

$59

$5

$75

$5

$24

$5

$77

$0

$86

$0

$98

$0

$111

$73

$81

$0

$140

$0

$153

$0

$124

$0

$113

$729

$4

$580

$824

$206

$965

$200

$4

$97

$4

$96

$4

$62

$4

$77

$1,191

$85

$1,976

$109

$2,176

$43

$52

$65

$1,913

$159

$1,283

$173

$1,565

$126

$1,819

$140

$10

$134

$8

$121

$2

$104

$7

$97

$10

$56

$12

$65

$7

$79

$7

$127

$6

$41

$5

$56

$4

$81

$7

$33 $27

$0

$4

$31

$5

$26

$5

$178

$9

$183

$9

$29

$26

$6

$13

$125

$19

$100

$17

$157

$12

$150

$222

$74 $87

$62

$56 $119

$55

$86

$118

$49

$205

$42

$217

$65

$194

$61

$49

$75

$53

$91

$44

$98

$43

$79

$75

$67

$57

$64

$60

$65

$66

$107

$30

$48

$29

$64

$27

$88

$33

$40

$32

$128

$34

$117

$30

$28

$29 $93

$11

$76

$5

$187 $3

$144

$11

$57

$17

$22

$18

$66

$13

$64

$3

$0

$70

$1

$92

$0

$86

$0

$100

$1

$0

$2

$148

$0

$82

$0

$31

$100

$29

$123

$37

$130

$25

$82

$28

$101

$34

$16

$41

$68

$68

$198

$25

$3

$19

$28

$22

$24

$31

$194

$30

$229

$37

$223

$21

$154 $23

CAGR 14%

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

India, Egypt and Taiwan stand out for growth; a range of markets have 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

0 20,000 120,000 -20,000 80,000 60,000 100,000 -40,000 40,000

10%

35%

5%

15%

30%

25%

20%

0%

-5%

South Korea

$200m

Jordan

Kuwait

Malaysia

Taiwan

Lebanon

Hong Kong SAR

Sri Lanka

China

Indonesia

Bahrain

Japan

Israel

UAE

Egypt

Thailand

Singapore

India

Vietnam

Pakistan

Philippines

Oman

Qatar

Saudi Arabia

5y absolute change in volume

5y CAGR

Shift to quality Growing volume & value

Average apple import prices vary by region, with East Asia paying more than SE Asia and the Middle East; Taiwan stands out as a large market that pays well


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

Saudi Arabia

Qatar

Vietnam

China

Bahrain

Malaysia

Singapore

Om

an

Indonesia

Jordan Pakistan

Taiw

an

Lebanon

Sri Lanka

UA

E

India

Hong K

ong SAR

South Korea

Thailand

Japan

Egypt

Israel

Philippines

Kuw

ait

$1.54

$1.56

$0.68

$1.38 $1.27

$0.88

$1.11

$1.12

$1.08

$1.65

$0.87

$1.03

$1.38

$1.42

$1.44

$0.92

$1.14

$1.20

$1.34

$1.43

$1.05

$1.15

$1.33

This is driven predominantly by biosecurity & variety mix

Volume imported

Average import

value

Imported apple consumption and aggregate apple imports appear partially driven by income per capita; a number of markets appear to have long-run penetration upside

17 Note: data is as reported by sender (FOB), not receiver; Source: UN Comtrade database; Wikipedia (GDP/capita); Coriolis analysis and classifications

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

$50,000

20.0

$20,000

15.0

5.0

$40,000 $30,000 $60,000

10.0

0.0 $0 $10,000

Vietnam Egypt 100,000 Thailand

United Arab Emirates

Singapore

Jordan

Japan

Israel

Kuwait

South Korea China

Sri Lanka

Bahrain

Indonesia

Hong Kong SAR

Lebanon

Qatar

Philippines

India

Saudi Arabia

Pakistan

Taiwan

Malaysia Oman

GDP per capita

Imports per capita

Bubble scale: tonnes; 2014 A bubble this size=

Market share vary by country; European countries stronger in Middle East than E/SE Asia; China really only achieving penetration in poorer countries (e.g. Philippines, Indonesia, Pakistan, India)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Japan

Om

an

Malaysia

Bahrain

China

Taiw

an

Singapore

India

Saudi Arabia

UA

E

Kuw

ait

Hong K

ong SAR

Pakistan

Thailand

Sri Lanka

Qatar

Vietnam

Indonesia

Philippines

Egypt

Jordan

Israel

South Korea

Lebanon

China

Japan

Other Asia

USA

Italy

France

Other Europe

Other

South Africa

Chile

New Zealand

Australia


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

Opportunities for apple export growth in select Asian markets as Australia has less than 1% share in the target markets


AUSTRALIAN IMPORT VALUE MARKET VS. MARKET VALUE US$; FOB; 2014

Singapore

Pakistan O

man

Hong K

ong SAR

Bahrain

Jordan

Malaysia

Taiw

an

Indonesia

Egypt

South Korea

Saudi Arabia

Thailand

UA

E

Japan

Kuw

ait

Philippines

China

India

Lebanon

Vietnam

Israel

Sri Lanka

Qatar

$0

$0 $0

$63,699

$8,282 $0

$0

$0

$0

$0

$0

$32,052

$195,671

$0

$0

$0

$106,882

$0

$645

$15,693

$0

$219,086

$218,013

Total value of imports

Australian total value

Size of bubble = value A bubble this size=

Data supports new high value, premium apple 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

0.25% 0.05% 0.00% 0.10% 0.20% 0.15%

$1.20

$1.00

$0.80

$1.80

$1.60

$1.40

$0.00 0.30%

$0.20

$0.60

$0.40

Thailand Indonesia

Saudi Arabia Bahrain

Vietnam

Qatar

Oman

Singapore

Malaysia UAE

Kuwait

Israel

Egypt

Taiwan

South Korea

Hong Kong SAR

$100

Philippines

Japan

India

China

Sri Lanka

Pakistan

Lebanon

Jordan

AU share of total import value

VALUE Average

FOB $/kg 2014

1

2 3

4?

As a “Straw Man” for discussion, we identify a export market roll-out plan

21

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

1 Export market launch in Singapore

2 Export launch in Hong Kong

3 Export launch in China

0 Product development and testing

Potential in-market partners identified later in this document

-  High income, sophisticated market and consumers

-  Manageable sized test bed -  WA already has a market

position

DOCUMENT STRUCTURE





22

Western Australia has an opportunity to make a strong apple offer to Asia, however innovation will be required

23

IS THE MARKET DEVELOPED & COMPETITIVE?

-  The flow of apples from the farm through to the consumer is relatively straight forward and simple

-  In Asia, apple prices are related to variety, and generally higher than in Australia

-  Asian markets generally have a much less developed apple range and offer than western countries

-  “Leading indicator” Western markets strongly suggest depth of range in Asian apple markets will increase going forward

-  While retailers pursue different ranging strategies, most appear to target 5-8 loose apples, with range increases beyond this coming from prepack options; more prepack in “leading indicator” markets

-  “Leading indicator” Western markets also strongly suggest Asian apple markets will carry more varieties in the future

WHAT IS WA CAPABLE OF DELIVERING?

-  A wide range of premium, value-adding product attributes emerged from our cross-country retailer survey

-  Western Australian apple producers need to continue to move forward and improve through new products

-  Multiple potential positions exist to develop a premium apple offer for Asia

-  Products from other processors in other markets demonstrate what is possible in terms of developing a premium Western Australian apple offer

-  There are a wide range of potential product positions or claims available for a premium apple product from Western Australia targeting Asia

-  As a “Straw Man” for discussion, we identify an opportunity for a high value, premium apple product with select characteristics for export market launch

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

24 Source: Coriolis

SIMPLIFIED MODEL OF SUPPLY CHAIN: APPLES Model; 2016

Retailers

Foodservice & Institutional

Exports

Wholesalers

Distributor(s) (multi-layered in large markets)

Domestic Packer/Processor

Agent/Broker/ Distributor

Packer/Processor Sales/Marketing

In-Market Farmer

Logistics Providers

(Airfreight, Seafreight, Trucking)

WA Apple Packer/Processor

Other Australian Packer/Processor

WA Farmer

New Zealand Packer/Processor

Chile/Argentinean Packer/Processor

USA Packer/Processor

Chinese Packer/Processor

Other Packer/Processor

European Packer/Processor

South African Packer/Processor

This stage branches and adds multiple layers in large markets

WHO IS THE COMPETITION? PRICING In Asia, apple prices are related to variety, and generally higher than in Australia

$0.96 $0.96 $0.96 $0.96

$1.43

$0.49

$0.63 $0.63 $0.69

$0.83 $0.87

$1.01

$1.70

$0.36 $0.36

$0.54 $0.54 $0.60

Fuji, large, loose

Granny Sm

ith, large, loose

Gala, large, loose

Red, large, loose

Envy, large, loose

Diva (N

Z)

Granny Sm

ith, 8 bag (U

SA)

Royal Gala, 8 bag

(USA

)

Granny Sm

ith

Diva, 5 pack tube

(NZ

)

Royal Gala (N

Z)

Fuji (CN

)

Envy (NZ

)

Pink Lady

Granny Sm

ith

Red Delicious

Sundowner

Royal Gala

25 Source: Coriolis from store checks

SHELF PRICE PER APPLE ACROSS SELECT SE ASIAN MARKETS AND AUSTRALIA: APPLES US$/item; Feb 2016

SELECT SE ASIAN RETAILERS AUSTRALIA

AU AU AU AU

Thailand Singapore

WHAT IS ON THE SHELF? RANGE IN MARKET Asian markets generally have a much less developed apple range and offer than western countries

26 Source: Coriolis from store checks; photo credit (fair use/fair dealing; low resolution; complete product/brand for illustrative purposes); Coriolis analysis

EXAMPLE: ACTUAL PREPACK APPLE RANGE ON SHELF Feb 2016

New York: GDP/Capita US$53,067 Singapore: GDP/Capita $83,100

IS THE MARKET DEVELOPED & COMPETITIVE? RANGE “Leading indicator” Western markets strongly suggest depth of range in Asian apple markets will increase going forward

51

38

33

29

21

12 9

14

8 8 7 6 3

Wegmans (NY)

Waitrose (UK)

Tesco (UK)

Sainsbury (UK)

Safeway (CA)

Woolworths (AU)

Coles (AU)

Tesco (TH)

Park'N Shop (HK)

Cold Storage (Sing)

Tesco (MY)

Wellcome (HK)

Fairprice (Sing)


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

SE Asia Anglo-American

Average 7.7 sku/store

Average 27.6 sku/store

3.5x

IS THE MARKET DEVELOPED & COMPETITIVE? SEGMENTATION While retailers pursue different ranging strategies, most appear to target 5-8 loose apples, with range increases beyond this coming from prepack options; more prepack in “leading indicator” markets

26

4 8 8

16

5 4 5 6 5 1

5

25

34 25 21 5

7 5

9 2 3

6 3

Wegmans (NY)

Waitrose (UK)

Tesco (UK)

Sainsbury (UK)

Safeway (CA)

Woolworths (AU)

Coles (AU)

Tesco (TH) Park'N Shop (HK)

Cold Storage (Sing)

Tesco (MY)

Wellcome (HK)

Fairprice (Sing)

Prepack

Loose


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

SE Asia Anglo-American

Average 5 loose

/store

Average 8 loose

/store

IS THE MARKET DEVELOPED & COMPETITIVE? SEGMENTATION “Leading indicator” Western markets also strongly suggest Asian apple markets will carry more varieties in the future

19 18

14

10 9

5 4

8

6 5 5

3 3

Waitrose (UK)

Wegmans (NY)

Tesco (UK)

Safeway (CA)

Sainsbury (UK)

Woolworths (AU)

Coles (AU)

Tesco (TH)

Park'N Shop (HK)

Cold Storage (SG)

Wellcome (HK)

Tesco (MY)

Fairprice (SG)


NUMBER OF DIFFERENT VARIETIES OF APPLE ON SHELF: SELECT RETAILERS FROM ACROSS MULTIPLE MARKETS # of varieties; actual; Feb 2016

Average 5 varieties/store

Average 11 varieties/store 2.2x

SE ASIA ANGLO-AMERICAN

IS THE MARKET DEVELOPED & COMPETITIVE? PRODUCT ATTRIBUTES A wide range of premium, value-adding product attributes emerged from our cross-country retailer survey

85%

39%

22%

15%

12%

2%

2%

Named variety

Taste description

1 of 5

Named origin

Organic

Kids pack

Size


PERCENT OF OBSERVED PRODUCTS ON SHELF MAKING THE CLAIM ON PACK % of SKU; N=239; Feb 2016

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

-  Western Australian apple producers looking to grow value and share should focus in these areas

-  Specifying the variety stands out, with 85% observed product SKU naming the apple variety

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

TAKEAWAYS

WHAT IS WA CAPABLE OF DELIVERING? STRATEGIC DIRECTION Western Australian apple producers need to continue to move forward and improve through new products

31

SUGGESTED STRATEGIC DIRECTION: WESTERN AUSTRALIAN APPLES Model; 2016

Loose, bulk, non-varietal apples

Loose, variety specific apples

Organic apples

Named gourmet varieties

Apple slices in bag

Chinese & WA suppliers

are here in Asia

High growth, high potential opportunities

are here

USA & UK suppliers are here

Everyday prepack apples

Prepacked gourmet varieties

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

32 Source: Coriolis; photo credit (Dollar Photo and Southern Forests Food Council Inc.)

IDENTIFIED POTENTIAL PREMIUM POSITIONS Model; 2016

Organic Lunchbox packs Heart healthy

Identified source region

Gourmet varieties

Kid sized apples High in antioxidants

Specialty variety

Gift packs

Sliced in bag Aids production of saliva

Track & trace

Kid friendly characters

Brain health

High in flavonoids

Promotes dental health

Reduces risk of cancer

High in fibre

Digestive health

Prewashed

HEALTH PROVENANCE INDULGENCE CONVENIENCE

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 apple offer

33 Source: photo credit (fair use/fair dealing; low resolution; complete product/brand for illustrative purposes); Coriolis analysis

EXAMPLES OF PREMIUM PRODUCTS FROM OTHER MARKETS Select; 2016

Product of Japan Cleaned & cut IP protected variety Organic

Distinctive packaging Snack Pack Product of NZ Pink Lady

Contrasting colours Nutrition panel “Sweet desire” Fizzy & Sweet

Named varieties Convenient Striking packaging

Healthy Convenient packaging

“Bite & believe ”

Love Life

Backed by marketing campaign

1 of 5 a day

Donation to charity from sales 1 of 5 a day

Deep red colour

WHAT IS A POTENTIAL WA OFFER? There are a wide range of potential product positions or claims available for a premium apple product from Western Australia targeting Asia

34 Source: Coriolis; photo credit (Dollar Photo and Southern Forests Food Council Inc.)

HYPOTHETICAL EXAMPLE OF POTENTIAL PREMIUM PRODUCT FROM WA Model; 2016

High in antioxidants High in fibre

From Western Australia

Organic Australian

Flag

Unique variety

Sliced snack pack

Good for digestive health

Attractive packaging

HEALTH

PROVENANCE

INDULGENCE

CONVENIENCE

WHAT IS THE IDENTIFIED OPPORTUNITY? As a “Straw Man” for discussion, we identify an opportunity for a high value, premium apple product with select characteristics for export market launch

35

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

CURRENT WA POSITIONING IN ASIA

IDENTIFIED HIGH GROWTH, HIGH VALUE OPPORTUNITY FOR WA

High in antioxidants

High in fibre

From Western Australia

Organic

Australian Flag

Unique variety

1 of 5 a day

Attractive packaging From

Australia Prepack

POTENTIAL FUTURE PRODUCT LINE EXTENSION

Deep red colour

Gift pack

DOCUMENT STRUCTURE





36

FOCUS MARKET – 1 – SINGAPORE Singapore has a robust and well-developed food retailing and foodservice sector

$5.6

$3.9

$6.3

$1.9

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Turnover Purchases

37 Source: Coriolis from a wide range of sources

TURNOVER & PURCHASES US$b; 2014

ESTIMATED WHOLESALE FOOD & FMCG PURCHASES US$b; 2014

Foodservice Retail

$1.9 $3.9

Online $0.1

Traditional grocery $0.3

Supermarket $2.2

Convenience $0.4

Wet markets, etc. $0.7

Foodservice $1.9

Department stores $0.3

Petrol stations $0.1

Foodservice

Retail 6,500 restaurants,

hawker stalls, hotels, vending machines,

institutions (schools, hospitals, airline caterers,

prisons, etc.)

3.0%

5.0%

Retail

Foodservice

TURNOVER GROWTH RATE % Y-O-Y; S$; 2013v2014

FOCUS MARKET – 1 – SINGAPORE Four potential in-market partners are identified for Western Australian firms in Singapore

Firm NTUC Fairprice Cold Storage Sheng Siong Prime Supermarkets

Ownership National Trade Union Council (Singapore)

Dairy Farm International (Hong Kong)

Listed; Singapore Private; Singapore

Website www.fairprice.com.sg www.ntuc.org.sg

www.coldstorage.com.sg www.dairyfarmgroup.com

www.shengsiong.com.sg www.allforyou.sg

www.primesupermarket.com

Annual sales US$1.83b US$1.55b US$0.55b US$0.2b

Store formats Supermarket Hypermarket Convenience (Cheers; 139) Online

Supermarket (Cold Storage, Marketplace) Hypermarket Convenience (7-Eleven; 502) Online

Supermarkets Online

Supermarkets

# of stores 285 848 38 19

Store fascia


POTENTIAL IN-MARKET PARTNERS – SINGAPORE 2015 or as available

FOCUS MARKET – 2 – HONG KONG Hong Kong has a robust and well-developed food retailing and foodservice sector

$11.5

$8.0

$12.8

$3.9

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Turnover Purchases




Retail Foodservice

$3.9 $8.0

Foodservice $3.9

CRA $0.3 CRE

$0.2

Wellcome $1.2

AEON $0.6

Drug stores $0.6

Wet markets, etc. $3.0

ParknShop $1.5

Other retail $0.6

Foodservice

Retail 14,000+ restaurants 1,000+ bars & clubs

1,050+ hotels Vending machines

Institutions (1,088 schools, 42 hospitals, 3 main airline

caterers, prisons, etc.)

6.7%

3.5%

Retail

Foodservice

TURNOVER GROWTH RATE % Y-O-Y; HK$; 2013v2014

FOCUS MARKET – 2 – HONG KONG Seven potential in-market partners are identified for Western Australian firms in Hong Kong

Firm Wellcome Park’N Shop CR Vanguard Dah Chong Hong 759 Stores AEON Stores Convenience Retail Asia

Ownership Dairy Farm International/Jardine Matheson

A.S. Watson/ Hutchison Whampoa

CRE/China Resources (SOE; China)

Dah Chong Hong/ CITIC Pacific/CITIC (SOE; China)

Private; Hong Kong (Lam Wai Chun)

AEON (Japan) Fung Group

Website www.wellcome.com.hk www.parknshop.com www.crvanguard.com.hk www.crc.com.cn

www.dch.com.hk

www.759store.com www.aeonstores.com.hk www.aeon.info

www.circlek.hk/en www.cr-asia.com

Annual sales (in HK)

$2.2b+ $2.8b ~$0.8b (food/FMCG) N/A N/A $0.8b $0.4b

Food store formats

Supermarkets 318 Convenience 921 Health & Beauty 369 Restaurants 676

Supermarkets 260+ Convenience

Supermarkets Convenience

Supermarkets Grocery 247+ Dept. stores (w/food) 8 Supermarkets 5

Convenience 600+ Bakery

# of stores Wellcome 280+ Marketplace 31 7-Eleven 900+ Olivers the Delicatessen ThreeSixty

ParknShop 175 PnS Superstore 50+ PnS Taste 10 PnS Fusion 14

CR Vanguard 100+ VanGo 79

DCH Food Mart 80+ DCH Food Mart Deluxe

759 Stores 247+ AEON 13 Circle K Saint Honore Cake

Store fascia


POTENTIAL IN-MARKET PARTNERS – HONG KONG 2015 or as available

FOCUS MARKET – 3 – CHINA China has a robust and well-developed food retailing and foodservice sector

$601

$421

$450

$135

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Turnover Purchases




Foodservice Retail

Supermarkets $126

$135

Traditional $71

Online $8

Foodservice $135

Wet markets $143

$421

Hypermarkets $63

Convenience $8

Foodservice

Retail 7m+ restaurants plus bars & clubs,

hotels/motels/etc., vending machines,

institutions (schools, hospitals, airline

caterers, prisons, etc.)

6.0%

7.0%

Retail

Foodservice

TURNOVER GROWTH RATE % Y-O-Y; CNY; 2013v2014

PRELIMINARY

PRELIMINARY

PRELIMINARY

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 (SOE; China)

Listed; HK; Auchan and Ruentex group

Listed; USA Listed; HK; Bailian Group Co.

Listed; France Listed; Shanghai; Dairy Farm 20%; JD.com 10%;

China

Website www.crvanguard.com.hk www.crc.com.cn

www.sunartretail.com www.rt-mart.com.tw

www.wal-martchina.com www.samsclub.cn

lianhua.todayir.com

www.carrefour.cn www.carrefour.com.cn www.carrefour.com

www.yonghui.com.cn www.ngs1685.com

Annual sales Total/Food

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

Food store formats

Hypermarket Supermarket Convenience

Hypermarket Online

Hypermarket Warehouse Club Compact HM Supermarket

Hypermarkets Supermarket 4,600 Convenience 1,905

Hypermarket 236 Convenience 3 Online

Supermarket Supermarkets 2,644 Convenience 1,700

# of stores 4,637 264 423 6,900+ 239 351 2,644

Store fascia

-  Alldays -  Kedi

FOCUS MARKET – 3 – CHINA … continued



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.metrogroup.de

www.lotte.co.kr


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)

Food store formats

Hypermarkets Supermarkets Convenience

Hypermarkets Convenience

Hypermarkets Department stores Online

Hypermarket Supermarket Department store Convenience

Hypermarket Supermarket

Cash & Carry Hypermarkets Supermarkets

# of stores 482 547 445 601 116 75 110

Store fascia

Le Wan Jia Supermarket Jiangsu Chaoyue Supermarket Hunan Joindoor Supermarket

FOCUS MARKET – 3 – CHINA … continued



Firm Sinopec Group PetroChina Co. Dongguan Sugar & Liquor Group

Seven & I Holdings

Ownership Chinese government (SOE)

Chinese government (SOE)

Japan; listed

Website english.sinopec.com www.meiyijia.com.cn www.7-11.cn www.7andi.com www.sej.co.jp www.itoyokado.co.jp


US$455b (14) US$49.1b US$17.5b

Food store formats

Easy Joy uSmile Meiyijia Seven&I 301 Area licensees 1,763 - DairyFarm 740 - Others ~1,063

# of stores 23,300 14,000 5,580 2,064

Store fascia

DOCUMENT STRUCTURE





45

IDENTIFIED WA COMPANIES

FARAWAY HILL ORCHARD

High Vale Orchard

KARINTHA ORCHARDS

ADDRESS: Bremer Lane, Donnybrook, WA 6239 ADDRESS: 35 Merrivale Rd, Pickering Brook, WA 6076 ADDRESS: Mitchell Rd, Donnybrook, WA 6239

PHONE: 08 9731 2452 PHONE: 08 9293 8217 PHONE: 08 9731 0106

WEBSITE: www.westernaustralianapples.com.au WEBSITE: www.highvale.com WEBSITE: www.karinthaorchards.com

46 Sources: Coriolis from a wide range of sources

KARRAGULLEN COOL STORAGE

LYSTER ORCHARDS

Newton Brothers Orchards

ADDRESS: 42 Rokewood Way, Karagullen, WA 6111 ADDRESS: South Western Hwy, Manjimup, WA 6258 ADDRESS: 62-66 Franklin Street, Manjimup, WA 6258

PHONE: 08 9397 5905 PHONE: 0417 438 806 PHONE: 08 9771 1135

WEBSITE: www.karragullencoolstorage.com.au WEBSITE: www.lysterorchards.com.au WEBSITE: www.newtonorchards.com.au

Prime Organics/ Twin Apple Pack House

RAEBURN ORCHARDS

ADDRESS: 206 Goldfields Rd, Upper Capel, WA 6239 ADDRESS: 4 Raeburn Rd, Roleystone, WA 6111

PHONE: 08 9731 1363 PHONE: 08 9397 5325

WEBSITE: www.primeorganics.com.au WEBSITE: www.raeburnorchards.com

AUSTRALIA Coriolis Australia Pty Ltd

PO Box 5831 St Georges Terrace

Perth, WA 6831 Australia

+61 8 9468 4691

NEW ZEALAND Coriolis (New Zealand) Limited

PO Box 90-509 Victoria Street West

Auckland, 1142 New Zealand

+64 9 623 1848

www.coriolisresearch.com

Coriolis is the leading Australasian management consulting firm specialising in the wider food value chain. We work on projects in agriculture, food and beverages, consumer packaged goods, retailing & foodservice. In other words, things you put in your mouth and places that sell them. WHERE WE WORK We focus on the Asia Pacific region, but look at problems with a global point-of-view. We have strong understanding of, and experience in, markets and systems in Australia, China, Japan, Malaysia, New Zealand, Singapore, South Korea, Thailand, the United Kingdom and the U.S. We regularly conduct international market evaluations and benchmarking. WHAT WE DO We help our clients assemble the facts needed to guide their big decisions. We develop practical, fact-based insights grounded in the real world that guide our clients decisions and actions. We make practical recommendations. We work with clients to make change happen. We assume leadership positions to implement change as necessary. HOW WE DO IT 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 recommendations are grounded in the real world. Our style is practical and down-to-earth. We try to put ourselves in our clients’ shoes and focus on actions. We listen hard, but we are suspicious of the consensus. We provide an external, objective perspective. We are happy to link our fees to results. WHO WE WORK WITH 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.

Coriolis advises clients on growth strategy, mergers and acquisitions, operational improvement and organisational change. Typical assignments for clients include… FIRM STRATEGY & OPERATIONS We help clients develop their own strategy for growing sales and profits. We have a strong bias towards growth driven by new products, new channels and new markets. MARKET ENTRY We help clients identify which countries are the most attractive – from a consumer, a competition and a channel point-of-view. Following this we assist in developing a plan for market entry and growth. VALUE CREATION We help clients create value through revenue growth and cost reduction. TARGET IDENTIFICATION We help clients identify high potential acquisition targets by profiling industries, screening companies and devising a plan to approach targets. DUE DILIGENCE We help organisations make better decisions by performing consumer and market-focused due diligence and assessing performance improvement opportunities. EXPERT WITNESS We provide expert witness support to clients in legal cases and insurance claims. We assist with applications under competition/fair trade laws and regulations.

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