Darren Burton - Innovative use of information systems in our industry

Innovative Use of Information Systems in our IndustryPrepared by: Darren Burton, Burton Consulting

16th October 2015

2014 AMS 40th Anniversary Industry Conference proudly presented by

o 6-7 years ago major shift if the way information is collected, reported and used.

o With leadership, trust and collaboration, we have developed a number of world class information systems and programs.

o Programs that now allowed all industry participants to benefit from the wealth of knowledge that we had accumulated.

o Today the Australian macadamia industry has range of data information systems unparalleled by any other horticulture industry in Australia

Innovative use of Information with the Australian Mac Industry


o Today I would like to talk briefly about 2 projects.

1. AMHA data collection Program2. The role of research in market development.

o Each of these project have been highly innovative in both way information has been collected and utilised.

o Information that has been generated from this work has provided the industry with improved knowledge on which better decisions are being made.

o improved profitability and stability.

o Each of these projects could not of occurred without significant industry collaboration.

Innovative use of Information with the Australian Mac Industry

2. AMHA Market Data Collection


AMHA Market Data Collection

o After a large NIS price drop in 2007 it was very evident that the Australian processing sector needed much more accurate market information.

o At that time the processors had no accurate information about:

Level of Carry over kernel held by all processors Volume of shipments of kernel into keys market Volume of forward contracts Volume of uncommitted stock

o We also has no information to provide objective crop forecast as the season progressed.

o In 2008 the AMHA was formed with the primary goal of developing an industry wide market data collection system .

o The vision was that all major sellers would contribute sales information about their business on a monthly which would be consolidated and available to all contributors .



This year will mark the 7th year of the AMHA.

All 10 major Australian processors are contributing members which represent 90% of the total Australia crop.

AMHA is an autonomous organisation, funded by annual subscriptions paid by each on the current members.

AMHA works closely with the AMS with Lynne and Jolyon attending most meeting.

Member contribute data on a monthly basis to a central database which is managed by an external consultant.

The Consultant is responsibility for chasing, checking and consolidates all supplied information.

The consolidated monthly information is available electronically to each member on the 20th of each month.


Key data that is now available to the processors included:

o Expected total Crop production for the yearo Year to date Crop intakeo Carryover stock from previous seasono Year to date average kernel recoverieso Volumes of kernel shipments by marketo Volumes of forward contracts of kernel by market.o Volume of uncommitted whole and half kernel

This year the following has been added:

o Volumes of NIS shipmentso Volume of forward contracts of NISo Current levels of uncommitted NIS



As a result the processors now have access to accurate and timely market information which has been a game changer for the industry.

One of the critical number is the carryover stock from one year to the next.

Historically the levels of carryover stock has had the greatest influence on future kernel prices movements.

Low levels of carryover results in stable or firming new season prices

High levels of carry over results in lower new season price.

The processing sector and the AMS can now monitor the build up of stock levels across the industry on a monthly basis.

If stock levels starting to build to levels then processors working with the AMS marketing committee can take action to implement programs to increase demand.

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Some other benefits of the data collection program are that:

o Processors can deliver a reliable and consistent message to our customers.

o Consistent messages from all processors build trust and credibility in the market place.

o AMS can make regular crop forecasts during the season. Again this build trust and credibility.

o Having access to such reliable and accurate information on a consistent basis has strengthened our position as the premier producer of macadamia across the globe.

o Lynne and Marketing Committee can more effectively monitor the performance of the industries marketing programs


AMS MEDIA RELEASE FROM 8TH SEPTEMBER 2014

Australian macadamia crop on track for 41,000 tonnes in-shell

The Australian Macadamia Society (AMS) has released the third crop forecast for the 2014 season and is confident the Australian crop is on track to hit 41,000 tonnes in-shell.

“Favourable conditions throughout the growing season and during harvest combined with improved yields on-farm have resulted in an increase in the forecast from 40,000 tonnes to 41,000 tonnes at 10% moisture,” said AMS CEO Jolyon Burnett. “Recent wet weather in SE Queensland and the Northern Rivers may delay some final harvest rounds but is not expected to adversely affect kernel quality.”

It is estimated that there will be a slight increase in nut in-shell shipments to China, up from 10,000 to 11,000 tonnes. This is a significant increase from the estimated 5,000 tonnes in 2013.

Consequently, the available kernel is expected to remain around 8,650 tonnes in 2014. The 2013 Australian macadamia crop totaled 35,200 tonnes in-shell (with available kernel of 8,400 tonnes).


International Data Collection

Production converted to

10% MC

% total production

Change over prior year

NIS Sales as reported

NIS Sales converted to

10% MC

% sold as NIS as reported

Kernel production

Uncommitted kernel (as of

June 14)

South Africa 45,989 33% 16% 17,200 18,396 40% 7,224 NR

Australia 41,000 29% 16% 11,000 11,000 14% 8,650 1,844

Kenya 26,460 19% 19% NR 2% 4,700 275

USA 17,010 12% -10% NR 0% 6,510 NR

Guatamala 8,675 6% 11% 800 800 3% 1,684 239

China 7,500 5% 50% 6,000 6,000 80% 1,679 NR

Malawi 7,333 5% 25% - NR 0% 1,987 47

Brazil 5,540 4% 15% 400 400 0% 1,250 NR

Columbia 1,000 1% 0% NR NA 250 NR

New Zealand 600 0% 0% NR NA 150 NR

Others* 4,000 3% 0% NR NA 1,000 NR

165,107 35,400 36,596 35,084 2,405

o As a result of the success of the AMHA Data Collection, an International data collection project has been developed. This project is still in its infancy but most major producing nations are now contributing data on a regular basis.

DATA NOT FOR PUBLICATION

3. The Role of Market Research in MarketDevelopment


The Role of Market Research in Market Development

o What I would like to provide you with today is a much greater appreciation of how Lynne and the marketing committee are benefiting from the use of market research in the market development.

o About 6 years ago the marketing committee of the time undertook a comprehensive process to determine which countries presented the greatest opportunities for growth of over the next 5 to 10 years.

o At the time we had 4 major core markets that consumed over 80% of our total production.



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World Macadamia Consumption - 2007

South Africa, Kenya, Hawaii

Australia



o While these 4 core markets would remain our major markets in the short to medium term they were unlikely to absorb the additional production.

o Developing emerging markets was essential.

o To determine which emerging markets we going to provide the best opportunity for us we analysed lots of information.

o We looked current incomes levels, future income growth, current mac consumption, markets location, import duty and whether there were established trade links.

o Whether the markets were currently or would be supported by the processors and we looked at whether there were clear distribution channels.

o We examined current almond consumption and compared it to the current level of macadamia consumption.



Country Population

(million)

Income

Per

Capita

USD

Current

Total Mac

Consump

Consump

Per head

Gm/yr

Import

Duty

%

Aust

Market

Share of

total

Almond

kernel

Consump

Almond

to Mac

Ratio

Australia 22 37500 4000 182 0 99% 15000 4:1

USA 301 45800 12000 40 0 12% 193000 16:1

Japan 127 33600 1900 15 5 60% 21300 11:1

Germany 82 34200 2000 24 0 70% 48000 24:1

China 1330 5300 1000 8 24.5 ??? 22000 22:1

Sth Korea 49 24800 100 2 30 90% 6000 60:1

Taiwan 23 30100 150 6 7.5 90% 2500 17:1

Singapore 5 49700 100 20 0 60-70% 1000 10:1

Malaysia 25 13300 100 4 5 60-70% 2000 20:1

Thailand 65 7900 150 2 3 80% 900 6:1

India 1150 2700 10 0.01 30 80% 33000 3300:1



Core Markets

1. Australiao Largest market for Aust kernel.o Strong preference for local product o Little imported product available.o Despite high consumption, room for

growth particularly in manufacturing sector.

o In 2008 the marketing Committee determine that we had really 3 core markets and we 3 emerging markets which would be the key to our future over the next 5-10 years:



Core Markets (cont)

2. Japano Stable, consistent high value marketo Strong preference for Aust kernel 60% MSo Strong established trade linkso Strong ability to accept high priceso Room to increase market size and share.

3. Germanyo Aust remains main supplier with 70% ms.o Well established supply links with major retailers. o Market was dominated by snack business but

growth opportunities will come from the manufacturing sector.

o The challenge was competing with increasing competition from SA.



Emerging Markets

1. South Koreao consumption was only 100Mt. o Duty 30% - not the main impediment to growth. o Incomes are rising steadily, o Strong preference for Australian kernel,o Well established trade linkso Almond to Mac ratio is very high at 54:1.

2. Taiwano Consumption has grown to 150mt in 3 years. o Strong preference for high quality Australia kernel -

100%MS. o No major food companies using of macs yet.o Well serviced with good distribution



Emerging Markets (cont)

3. China o Wage growth of 20-25% per year the

levels of disposable increase was increasing exponentially.

o NIS market was just started to develop. o Duty high at 24.5% but much of the

product entering the market through the grey trade.

o This market had huge potential.



o The next stage of the process was to examine our promotional strategy.

o More sophisticated and more targeted.

o Move away from the traditional trade promotions

o Move to consumer promotions.

o Outside Australian we had undertaken very little consumer research

o Had a very limited understanding of who our customers were and what they thought about our product.



o Before we embarking on this new direction we first had to first gain a detailed understanding of our consumers in our overseas markets.

o Because of the high level of consumer awareness of macs in Japan, we decided to undertake our first international consumer research in Japan.

o A Quantitative and qualitative research was undertaken in Japan by Marketing Directions in Tokyo, that examined consumer attitudes and usage of mac and nuts generally.

o The research results were highly insightful and it provided us with a level of understanding of our Japanese consumer that we had never had before.

o From the research there were a couple of keys themes that came out of the research that I would like to discuss briefly.


1. Sourcing of information

o Most of our demographic obtained their information from the internet and via their smart phones. We also found out that influential bloggers were a large source of information and opinion in Japan.



2. The importance of Beauty and Skin care.

o We knew the Japanese consumers were very concerned about their health but w identified that they were even more concerned about the effects that consuming mac could have on anti aging and their skin.



o Using this type of insight, we were then able to work with a promotional agency to develop a targeted promotional campaign.

o This new information meant all the individual sellers of Australian macs in Japan had the opportunity to have a new conversation with our customers.

o Suddenly as sellers of macs we were often better informed about the Japan macadamia consumer than they were.

o This consumer research gave the Japanese market a reason to get excited about the potential of macadamia again.

o Our first consumer campaign in Japan was built around a digital campaign using influential bloggers and social media. The focus was about taste, health and Beauty.

o The campaign was very successful and since 2008 the Japanese market has seen solid growth particularly in value terms.



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2008 2013

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Japan Mac Sales by Volume

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2008 2013

AUD inMillions

Japan Mac Sales by Value (AUD)

Sales volume increased 35% while sales value increased 79%.



o Because of the insight the initial Japanese market research gave us, it was determined that this type of consumer market research should become a precursor to any new market development program.

o Since that time the marketing committee has undertaken consumer market research in Taiwan, Korea and more recently China.

o Since we identified these three emerging markets in 2008 as expected each market have experienced very strong growth for Australian macs.

o Taiwan has doubled in size from 150Mt to 300Mt

o Korea has more than doubled in size from 100Mt to 220Mt

o China, as a market for NIS, has increased 5 fold from 2,000mt to 10,000Mt

o With strong leadership, trust and collaboration, today the Australian Industry have a range of information systems across growing, processing and marketing that is unparalleled by any other horticulture industry in Australia.

o The result of this is that all industry participants, now have the opportunity to benefit from the increasing wealth of knowledge that currently exists in our industry.

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Darren Burton - Innovative use of information systems in our industry