IN-PROGRESS REVIEW DRAFT...Part of Asia Market Success, April 2016 IN-PROGRESS REVIEW DRAFT Pre-release copy of significant commercial value to industry Document contains incomplete

TARGET MARKET OPPORTUNITIES IN ASIA FOR ANIMAL PELLETS 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 Codes 230110

Product Flour or meal, pellet of meat or offal for animal feed; for use in home (pet), recreational (horse), and intensive agriculture/aquaculture; product is defined a processed mixture of ingredients

Out-of-scope Raw material/ingredient grains and meats, compressed hay, other single ingredient feeds

Origin Emerged in early 20th century with growth of domestic animals and intensive agriculture; spread to intensive aquaculture in 1950’s+

Example ingredients

Processed grain by-products, grain products, plaint protein products, animal protein products, roughage products, animal fat (preserved with BHA), calcium carbonate, natural chicken flavouring, ascorbic acid, vitamin A supplement, vitamin D supplement, vitamin E supplement, vitamin B12 supplement, riboflavin supplement, niacin supplement, d-Calcium pantothenate, pyridoxine hydrochloride, folic acid, menadione dimethylpyrimidinol bisulfite (source of vitamin K activity), thiamine mononitrate, biotin, choline chloride, salt, manganous oxide, manganese sulfate, ferrous sulfate, copper chloride, copper sulfacte, zinc oxide, zinc sulfate, potassium chloride, iron oxide, ethylenediamine dihydroiodide, sodium selenite, zinc, amino acid complex, manganese amino acid complex, iron amino acid complex, mineral oil, and propionic acid (a preservative).

Forms/usage -  Pellets

Drivers of consumer/market success

-  Growing demand for protein in Asia driving growing demand for land and water animals produced under intensive production systems

-  Growth of pet ownership in urban Asia

WHAT IS THE PRODUCT? Animal pellets emerged in Phase I as one of twenty “high growth, high potential” opportunities for Western Australia; animal pellets are pre-prepared, nutritionally complete food for animals (including aquaculture)

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

PRODUCT OVERVIEW Example; 2016

DOCUMENT STRUCTURE

What is the global situation?

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

Asia has growing animal protein production; this growth has driven an increased demand for imported feedstuffs, including animal pellets targeting intensive production systems

7 Source: UN FAO AgStat database; Coriolis analysis

NUMBER OF PRODUCING ANIMALS IN ASIA: SELECT TYPES Number of animals; m; 1961-2013

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 20

01

200

5 20

09

2013

LAYING HENS

-

20

40

60

80

100

120

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

200

1

200

5

200

9

2013

COWS IN MILK

-

100

200

300

400

500

600

700

800

900

1,000

1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 20

01

200

5 20

09

2013

PIGS (KILL)

-

10

20

30

40

50

60

70

80

90

100

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

200

1

200

5

200

9

2013

CATTLE (KILL)

Asia has growing aquaculture production; this expansion has driven an increased demand for animal feedstuffs, including animal pellets targeting aquaculture (e.g. prawns)

8 Source: UN Fishstat database; Coriolis analysis

AQUACULTURE PRODUCTION VOLUME IN ASIA Tonnes; 000; 1950-2013

1993

India

Japan

200

1

1992

200

8

2011

200

7

1999

200

3

2010

1997

1998

Taiwan 200

4

1996

1994

200

6

200

2

200

9

200

5

1995

200

0

1991

1964

1965

1966

Bangladesh

1962

1963

Thailand

1970

1971

1972

1967

1968

1969

1952

1951

1956

1954

1953

1955

1950

1959

1960

1961

1957

China

1958

1973

1984

Other 1985

1982

1983

Myanmar

1986

1989

1990

S Korea

1987

1988

Philippines

Indonesia

1976

1977

1978

2013

1974

1975

2012

Viet Nam

1981

1979

1980

833

824

741

1,228

1,141

1,164

610

509

40

9

310

23,671

21,678 18,398

26,924

24,923

24,14

8

15,510

10,14

6

9,623

8,527

13,109

11,477

10,80

2

28,423

52,502

49,559

47,0

25

62,578 58,976 54,830

44

,244

34,174

32,361

30,30

0

41,80

1

39,205

36,908

1,706

1,628

1,542

2,066

1,976

1,799

1,504

1,053

1,04

6

1,202

1,411

1,264

1,211

2,185

4,685

4,20

5

3,919

7,234

6,231

5,285

3,553

2,722

2,557

2,328

3,251

3,091

3,039

DOCUMENT STRUCTURE






9

Western Australia has the potential to grow animal pellet exports to Asia

10

-  Asian and Middle Eastern animal pellets import value is growing, driven by a combination of increasing volumes and rising prices

-  Asian/Middle East animal pellet import supply is currently dominated by Australia, the USA and Europe

-  Regional animal pellet imports have been growing rapidly over the past decade and Australia, the USA and the Netherlands have been capturing much of the value growth

-  While Australia stands out for absolute growth over the past five years, a range of other countries are achieving strong rates of growth

-  Average FOB price to target Asian markets varies by supplier, with Australia and the Anglo-sphere getting more than the Europeans

-  Animal pellets go primarily to SE Asia, particularly Indonesia, Vietnam and Thailand, followed by East Asia, particularly China and Taiwan

-  Over the past ten years, Vietnam, Indonesia, Thailand and China have driven import value growth

-  Vietnam, Thailand, China and Taiwan have been driving growth over the past five years

-  Average animal pellet import prices vary across a relatively narrow range across most large markets; Taiwan, Malaysia and Indonesia stand out as larger markets paying premium prices

-  Imported animal pellets consumption and aggregate animal pellet imports appear almost inversely correlated with income per capita in SE Asia; unlinked elsewhere

-  Market share varies by country; Australia is strong in Indonesia, Malaysia, Taiwan, China and much of SE Asia; extensive opportunities elsewhere

-  Australia has a strong position across a range of markets, on which to build

-  Data supports new high value, premium animal pellets opportunities being initially launched in Indonesia

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

-

200

400

600

800

1,000

1,200

1,400

1,600

200

4

200

5

200

6

200

7

200

8

200

9

2010

2011

2012

2013

2014

$-

$100

$200

$300

$400

$500

$600

$700

$800

200

4

200

5

200

6

200

7

200

8

200

9

2010

2011

2012

2013

2014

Asian and Middle Eastern animal pellets import value is growing, driven by a combination of increasing volumes and rising prices

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

VOLUME T; 000; 2004-2014

$-

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

200

4

200

5

200

6

200

7

200

8

200

9

2010

2011

2012

2013

2014

AVERAGE PRICE PER KILOGRAM US$; 2004-2014

VALUE US$m; 2004-2014

CAGR* 6%

CAGR 11%

CAGR 17%

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

Asian/Middle East animal pellet import supply is currently dominated by Australia, the USA and Europe

12 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

India

Other

Americas Australasia Europe

$184

Poland $20

$251

$13

United Kingdom $38

Canada $33

$23

USA $99

$249

Netherlands $70

Italy $15

Other Europe $4

Australia $195

Denmark $8

New Zealand $56 Spain

$12

France $13

Germany $53 Other

$13

India $23

Other Americas $15

Brazil $20

Belgium $16

Uruguay $17

TOTAL = US$720m

Regional animal pellet imports have been growing rapidly over the past decade and Australia, the USA and the Netherlands have been capturing much of the value growth

13 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

Spain

Italy

Uruguay

Denmark

USA

Other

France

Australia

New Zealand

Germany

10y ABS

Canada

Other Americas

Other Europe

India

2010 2008 2011 2013

United Kingdom

Belgium

Netherlands

2009 2014 2005 2012 2004

Poland

2007

Brazil

2006

$1

$14

$16

$195

$125

$4

$15

$190

$1 $1

$158

$98

$9

$18

$75

$2

$99

$9

$49

$10

$15

$23

$56

$6

$43

$1

$11

$5

$10

$49

$20

$29

$8

$86 $34

$35

$30

$20

$40

$20

$108

$10

$34

$11

+$20

+$38

+$44

+$16

+$12 +$12 +$14

+$32

+$83

+$21

+$19

+$70

+$4 +$9

+$7

$471

$407 $406

$482

$720

$758

$626

+$23

+$12 +$2

$151

$269

$192

$144

+$130

$125

$3

$16

$13

$94

$13

$77

$5

$136

$2

$54

$3

$109

$5

$0

$65

$0

$18

$7

$23

$52

$22

$0

$67

$0

$54

$0

$55

$0

$46

$22

$9

$16

$69

$15

$0

$18

$2

$9

$5

$6

$70

$14

$16 $19

$20

$6

$30

$6

$0

$9

$18

$7

$0

$20

$0

$43

$4

$6

$2

$35

$6 $0

$36

$53

$19

$0

$1

$0

$13

$51

$45

$58 $40

$62

$33

$67

$28

$39

$2

$25

$11 $1

$1

$38

$0

$11

$7

$3

$3

$15

$1

$0

$9

$1

$9

$8

$10

$2

$1

$2

$10

$18

$5

$3

$2

$4

$1

$3

$11

$2

$11

$1

$59

$2

$0

$4

$56

$1 $1

$1

$8

$0

$1

$3

$56

$3 $0 $0

$0

$15

$5

$4

$17

$1

$18

$13

$7

$14

$13

$1

$4 $2

$3

$18

$2

$13

$6

$18

$4

$7 $15

$22

$16

$17

$1

$15

$15

$12

CAGR 17%

While Australia stands out for absolute growth over the past five years, a range of other countries are achieving strong rates of growth


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

$20 $-10 $70

60%

100%

$50 $40 $30 $60

80%

$-20 $10 -20%

0%

20%

$0

40%

$90 $80

$20m

Poland

USA

Netherlands

Belgium

Germany

New Zealand

Australia

Uruguay

United Kingdom

Canada

Other Americas

Brazil

India

Other Other Europe

France

Italy

Denmark

Spain

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 Australia and the Anglo-sphere getting more than the Europeans


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

Uruguay

India

Germany Netherlands Canada USA Australia New Zealand

Italy

Other Europe

Poland

Spain

Belgium

Denm

ark

Other A

mericas

UK

Other

France

Brazil

$0.63

$0.46

$0.4

9

$0.50

$0.82

$0.24

$0.40

$0.31

$0.69 $0.65

$0.61

$0.53

$0.67

$0.51

$0.4

7

$0.4

3

$0.37

$2.11

$0.50

Average FOB

value

Volume imported by defined target market

Likely high meat waste blends

Animal pellets go primarily to SE Asia, particularly Indonesia, Vietnam and Thailand, followed by East Asia, particularly China and Taiwan


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

Indian Sub

SE Asia East Asia

NA

/ME/C

A

Other $10

Singapore $3

$15 $137

Israel $13

Egypt $0

$12 $556

India $2

South Korea $2

Philippines $42

Taiwan $53

Indonesia $200

Vietnam $151

Kuwait $0

Japan $5

Malaysia $30

Saudi $1

Other $1

China $77

UAE $0

Hong Kong SAR $0

Thailand $131

TOTAL = US$720m

Predominantly for aquaculture

Over the past ten years, Vietnam, Indonesia, Thailand and China have driven import value growth


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

2008

India

2009

Philippines

Bahrain

2004

Japan

2005 2007 2006

Taiwan

2013 2014

United Arab Emirates

Malaysia

2011 2010 2012

Kuwait

Hong Kong SAR

Thailand

Israel

Indonesia

South Korea

10y ABS

China

Other Ind. Sub

Vietnam

Egypt

Singapore

Saudi Arabia

Other ME

$1

$0

$0

$1

$0

$0 $0

$1

$5

$3

$0 $0

$10

$0

$1

+$8 +$2

-$2 +$2

+$38

+$127

+$17

+$125

+$0 +$0

$63 $77

-$21 +$12

+$0 +$1

+$143

$407

$471

$269

$406

$758

$720

$482

$626

+$41

+$0

+$4 +$2

$144

$192

+$70

$151

$37

$45 $34 $35

$0 $0

$53

$0 $12 $13

$2

$2

$24 $23 $18 $21

$0 $22 $26 $11 $24

$47 $38 $31 $64

$0 $0

$0 $2

$0

$6

$1

$1

$2

$9

$1

$1

$12

$14

$17

$17 $23

$0 $0

$0

$0

$0

$1

$1

$0

$0

$13

$3 $3

$0

$0

$4

$7

$7

$4

$8

$12

$21

$21 $21

$22

$1

$1

$4

$2

$0

$0

$0

$0

$0

$0

$0

$0

$0

$1 $1 $0

$0

$0

$0

$1

$0

$0

$0

$0

$0

$1

$2

$3

$1

$0

$1

$0

$0

$0

$1

$0

$0

$1

$0

$2

$3 $3

$54

$68

$42

$73

$122

$129 $169

$163

$138 $7

$20

$4

$7

$27

$47

$47

$33 $24

$208

$151 $151

$65 $108

$1

$0 $0

$0 $1

$8 $15

$240 $200

$17

$77

$72

$18

$49

$3

$1

$3

$1

$3

$4

$11

$9

$3

$12

$11

$10

$9

$11

$0

$1

$0

$0

$0

$8

$66 $70

$29

$41

$84

$150

$131

$97

$144

$20 $6

$16 $13

$12

$6 $11

$14

$30

CAGR 17%


Vietnam, Thailand, China and Taiwan have been driving 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

20%

80,000 100,000

15%

20,000 -20,000 0 60,000 40,000

25%

-10%

0%

-5%

10%

5%

South Korea

Lebanon

Oman

Taiwan Malaysia

China

Hong Kong SAR

$200m

Sri Lanka

Japan

Jordan

Indonesia

Philippines

Pakistan

Saudi Arabia

Kuwait

UAE

Israel

Egypt

Thailand

Vietnam

Singapore India

5y absolute change in volume

5y CAGR value

Average animal pellet import prices vary across a relatively narrow range across most large markets; Taiwan, Malaysia and Indonesia stand out as larger markets paying premium prices


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

Malaysia

Saudi Arabia

Japan

Thailand Vietnam Indonesia

Hong K

ong SAR

Jordan

South Korea

Om

an

Israel

China

Singapore Pakistan U

AE

India

Taiw

an

Philippines

Kuw

ait Lebanon

Sri Lanka Egypt

$0.88

$0.63

$1.33 $0

.88 $2.0

1

$0.60

$0.96

$0.23

$0.4

3

$0.63

$0.64

$0.64

$0.50

$0.52

$0.96 $0

.90

$0.64

$0.72

$1.03

$0.4

6

$1.07

$1.08

Volume imported

Average import

value

Imported animal pellets consumption and aggregate animal pellet imports appear almost inversely correlated with income per capita in SE Asia; unlinked elsewhere

20 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

0.0 $40,000 $20,000 $60,000 $30,000

4.5

4.0

$50,000

3.0

2.0

$0

2.5

1.5

3.5

0.5

$10,000

1.0

Egypt

Israel

100,000

Kuwait South Korea

Lebanon

Taiwan

Malaysia

Hong Kong SAR China

Sri Lanka

Jordan Japan

Indonesia Singapore

India

UAE

Thailand

Vietnam

Saudi

Pakistan

Oman

Philippines

GDP per capita

Imports per capita

Bubble scale: tonnes; 2014 A bubble this size=

Market share varies by country; Australia is strong in Indonesia, Malaysia, Taiwan, China and much of SE Asia; extensive opportunities elsewhere


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

China Taiwan Thailand Indonesia Vietnam

Other

Sri Lanka

Philippines

Japan

Israel

Malaysia

India $2

Other Europe

$6

Other Europe $2

$10

India $12 India

$8

Netherlands $4

Australia $1

Australia $8

Australia $24

India $1

Other Europe $10

New Zealand $34

$131

Germany $2

Netherlands $2

$77 $151

Netherlands $23

Netherlands $28

Netherlands $9

$200

Germany $32

$30

$13

$9

Germany $4

Netherlands

$4

Germany $15

$53

$5

$42

Australia $81

Canada $0

USA $2

New Zealand $6

Other Americas $1

Australia $15

Canada $32

USA $1

USA $6

USA $5

New Zealand $1

USA $34

USA $1 USA

$50

Other $1

Other $5

Other $1

Other $4

Australia $1

Australia $40

New Zealand $10

Other Americas $20

Australia $12

Australia $13

Other $1

New Zealand $4

Other Europe $46

Other Americas $31

Other Europe $62

TOTAL = US$720m

Australia has a strong position across a range of markets on which to build


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

Japan

Jordan O

man

India Saudi

Singapore

UA

E

Philippines

South Korea

Hong K

ong SAR

Lebanon

Indonesia

Kuw

ait

Thailand

Pakistan

Malaysia

Egypt

China

Israel

Taiw

an

Vietnam

Sri Lanka

2%

17%

0%

0% 0%

0%

76%

79%

0%

0

%

40

%

3% 0%

19%

30%

9%

10%

96%

3% 0%

12%

Total value of imports

Australian market share


Data supports new high value, premium animal pellet opportunities being initially launched in Indonesia


WHERE TO FOCUS FOR NEW HIGH VALUE, PREMIUM PRODUCTS: AU SHARE VS. AVERAGE VALUE VS. MARKET SIZE % of value; US$; US$m; 2014

70.0% 0.0%

$0.30

80.0% 40.0%

$0.40

$0.80

$0.60

50.0% 60.0%

$0.90

$0.00 20.0%

$0.20

$0.10

$1.00

$0.70

$0.50

90.0% 10.0% 100.0% 30.0%

Vietnam

South Korea

Lebanon

Indonesia

Taiwan

Egypt

Japan

$200m

Hong Kong SAR

Jordan

Pakistan

Kuwait

UAE

Singapore

China

Philippines

Israel

Sri Lanka

India

Saudi

Oman

Malaysia

Thailand

AU share of total import value [NOTE: LOGARITHMIC]

Value average

FOB $/kg

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

24

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

1 Export launch in Indonesia

2 Expansion to other SE Asian markets

3 Expansion into China

0 Product development and testing

DOCUMENT STRUCTURE






25

Western Australia is well-positioned to grow animal feed exports to Asia

26

IS THE MARKET DEVELOPED & COMPETITIVE?

-  The flow of animal pellets, from production to the farmer in Asia, is relatively straight-forward; complexity comes from needing to distribute the product to a large number of small producers across a large area

WHAT IS WA CAPABLE OF DELIVERING?

-  Western Australian animal pellet producers need to continue to move forward and improve through improved product development and presentation

-  Western Australian animal feeds are a premium product for which a wide rage of potential positions or claims exist to develop a more differentiated offer for Asia

-  As a “Straw Man” for discussion, we identify an opportunity to further develop Western Australian animal feed by developing and marketing select characteristics

HOW IS THE MARKET STRUCTURED? The flow of animal pellets, from production to the farmer in Asia, is relatively straight-forward; complexity comes from needing to distribute the product to a large number of small producers across a large area

27 Source: Coriolis

SIMPLIFIED MODEL OF SUPPLY CHAIN: ANIMAL PELLETS Model; 2016

Farm Operator

Regional Wholesaler(s)

Regional Distributor(s)

Agent/Broker/ Distributor

WA Mill/Processor

Other Australian Mill/Processor

WA Farmer

US Mill/Processor

These stages branch and add multiple

layers in large markets

Seafreight Logistics

New Zealand Mill/Processor

Domestic Mill/Processor

In-Market Farmer

Aquaculture Operator

European Mill/Processor

Other Mill/Processor

These stages can be captive inside a larger organisation (e.g. supply to

contract growers)

WHAT IS WA CAPABLE OF DELIVERING? STRATEGIC DIRECTION Western Australian animal pellet producers need to continue to move forward and improve through improved product development and presentation

28

SUGGESTED STRATEGIC DIRECTION: WESTERN AUSTRALIAN ANIMAL PELLETS Model; 2016

Bulk animal pellets

Production system optimised

pellets

Australian branded

Superior Growth

performance

Controlled supply chain

Farmer direct

WA suppliers are here in Asia

High growth, high potential opportunities

are here

Track-&-Trace

PRELIMINARY FOR DISCUSSION

WHAT IS WA CAPABLE OF DELIVERING? CLAIMS Western Australian animal feeds are a premium product for which a wide rage of potential positions or claims exist to develop a more differentiated offer for Asia

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

IDENTIFIED POTENTIAL PREMIUM POSITIONS Model; 2016

Identified source region Nutritionally complete High in protein

Track & trace

HEALTH PROVENANCE INDULGENCE CONVENIENCE

Faster animal growth

“Farm”-ready Quality assured

Added nutrients

Antibiotic free

No added hormones

Improved quality

Sustainable


Human grade food safety In-market technical staff

Strong biosecurity

Disease free environment

Added antibiotics

Plain animal pellets

WHAT IS A POTENTIAL WA OFFER? As a “Straw Man” for discussion, we identify an opportunity to further develop Western Australian animal feed by developing and marketing select characteristics

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

HYPOTHETICAL EXAMPLE OF POTENTIAL PREMIUM PRODUCT FROM WA Model; 2016

High in protein Safety & quality

assured

From Western Australia

Sustainable Track-&-Trace

code

Nutritionally complete

HEALTH

PROVENANCE

INDULGENCE

CONVENIENCE

Ensured quality


Strong biosecurity

DOCUMENT STRUCTURE






31

FOCUS MARKET – INDONESIA Five potential in-market partners are identified for Western Australian animal pellet firms in Indonesia

Firm PT Charoen Pokphand Indonesia Tbk

PT Japfa Comfeed Indonesia TBK PT Suri Tani Pemuka

CheilJedang Indonesia PT. Cheil Jedang Superfeed PT. Cheil Jedang Indonesia PT. Super Unggas Jaya

PT Malindo Feedmill PT Sierad Produce Tbk

Ownership Public; listed; Indonesia Partial owner/parent is private; Thailand

Public; listed Indonesia

Private; Korea (Lee family) South Korea



Website www.cpfworldwide.com www.cpgroupglobal.com

www.japfacomfeed.co.id english.cj.net www.cj.net

www.malindofeedmill.com/ www.sieradproduce.com

Annual sales Indo: US$3.1b (14) Global: US$46.5 (13)

US$2.53b (14) Global: US$10.4b (13) US$480m (14) US$235m (14)

# of employees 4,860 (Indonesia) 300,000 (Global)

19,120 (14) 2,500-5,000 (Indonesia) 5,991 (Korea)

3,730 (Indonesia) 1,810 (Indonesia)

% of Indonesian animal feed capacity

31% 22% 6% 4% 3%

Products Animal feeds (76% of sales) Day-old-chickens Chicken processing

Animal feed production Chicken production Aquaculture Value added processing

Animal feed Day-old-chickens Chicken processing

Animal feed production Animal feed production

Notes - - Parent historically invested in sugar in the Ord

- -

32 Source: Coriolis from a wide range of sources

POTENTIAL IN-MARKET PARTNERS – INDONESIA 2015 or as available

DOCUMENT STRUCTURE






33

IDENTIFIED WA COMPANIES

GILMAC MACKIE HAY KETTRIDGES MILNE AGRIGROUP

ADDRESS: Level 3, 3 Ord St , West Perth WA 6005 ADDRESS: Cnr Harris Road & Golding Cresent, Picton WA

ADDRESS: 2 Alumina Road,East Rockingham, WA 6168

PHONE: 08 9429 4900 PHONE: 08 9724 6800 PHONE: 08 9351 0750

WEBSITE: www.gilmac.com.au WEBSITE: www.kettridges.com.au WEBSITE: www.milne.com.au

34 Sources: Coriolis from a wide range of sources

THOMPSON AND REDWOOD /PREMIUM GRAIN HANDLERS

UNIGRAIN

WELLARD GROUP

ADDRESS: 220 Almeria Parade, Upper Swan WA 6069

ADDRESS: 28 Howson Way, Bibra Lake, WA 6163 ADDRESS: 1A Pakenham Street, Fremantle, WA 6160

PHONE: 08 9296 4767 PHONE: 08 9418 6126 PHONE: 08 9432 2800

WEBSITE: www.thompsonandredwood.com.au WEBSITE: www.unigrain.com.au WEBSITE: www.wellard.com.au

WESTON MILLING ANIMAL NUTRITION

ADDRESS: 31 Sevenoaks St, Bentley, WA 6102

PHONE: 08 9350 7000

WEBSITE: www.westonanimalnutrition.com.au

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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