IN-PROGRESS REVIEW DRAFT

TARGET MARKET OPPORTUNITIES IN ASIA FOR ASSORTED CHOCOLATE 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.

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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 180690

Product Chocolate and other food preparations containing cocoa; other

Out-of-scope Cocoa beans, cocoa shells, cocoa paste, cocoa butter, fat or oil, cocoa powder, chocolate or other food preparations containing cocoa if weigh above 2 kg, chocolate bars whether filled or unfilled, etc. as all are covered under other screened trade codes

Origin Mesoamerica, with the Mokaya and pre-Olmec people

Example ingredients

Milk chocolate (30%) (sugar, cocoa butter, cocoa mass, skim milk powder, anhydrous milkfat, emulsifier: lecithins (soy), flavouring: vanillin),Hazelnuts (28.5%), Sugar, Vegetable oil, Wheat flour, Whey powder, Fat-reduced cocoa powder, Emulsifier (lecithins): soy, Raising agent (sodium carbonate), Salt, Flavouring (vanillin).

Forms/usage -  Gift giving

-  Indulgent versatile treat

-  Dessert accompaniment or substitute

Drivers of consumer/market success

-  Extremely versatile luxury gift; every occasion for everyone

-  Indulgence trend

-  Associated with popular holidays (Valentine’s Day, Easter, Christmas, Chinese New Year)

WHAT IS THE PRODUCT? Assorted chocolate emerged in Phase I as one of twenty “high growth, high potential” opportunities for Western Australia; assorted chocolate are boxes of different, individual chocolates; wrapped or unwrapped

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

PRODUCT OVERVIEW Example; 2015

DOCUMENT STRUCTURE

What is the strategic situation in the market?

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

Who are the potential in-market partners?

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

6

Western Australia can grow assorted chocolate exports to Asia

7

-  Asian assorted chocolate imports are growing, with import value growth being driven by both growing tonnage and increasing average FOB (free-on-board) prices

-  Asian & Middle Eastern assorted chocolate imports come primarily from Europe, the USA, and China

-  A wide range of countries are achieving solid growth in assorted chocolate in Asia

-  Poland, China, USA and Italy stand out for driving growth

-  Average FOB prices of assorted chocolate to target Asian markets vary by supplier, with European countries generally receiving a solid premium

-  Assorted chocolate go to a wide number of the target markets, with no single country predominating

-  Growth in assorted chocolate imports is broad based and coming from across effectively all markets

-  China, Hong Kong, UAE & Saudi Arabia stand out for growth; Japan has declining volumes but growing value, indicating a move to quality

-  Average assorted chocolate import prices vary by country, with Greater China, Singapore and Malaysia paying more than elsewhere; Hong Kong and Singapore stand out as larger markets that pay well

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

-  Market share varies by country; Europeans very strong across richer Middle East; Singapore and China stronger across SE and E Asia; Australia currently strong in markets where Europe is weak

-  Western Australia can build on existing Australian strength and market position to grow opportunities for assorted chocolate exports in select East & South-East Asian markets

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

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

Asian assorted chocolate imports are growing, with import value growth being driven by both growing tonnage and increasing average FOB (free-on-board) prices

0

50

100

150

200

250

300

350

400

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

$-

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

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* 9%

CAGR 7%

CAGR 16%

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

Asian & Middle Eastern assorted chocolate imports come primarily from Europe, the USA, and China

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

Other

Australasia E/SE Asia Europe USA

$544 $1,292 $133 $28

China $221

$282

Italy $353

Germany $135

Poland $171

USA $282

New Zealand $1

Australia $28

Netherlands $155

Belgium $138

Switzerland $57

Other E/SE Asia $61

Other $133

Hong Kong SAR $125

Singapore $137

France $71

United Kingdom $55

Other Europe $55

Turkey $101

TOTAL = US$2,279m

A wide range of countries are achieving solid growth in assorted chocolate in Asia

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

2008

Turkey

2007

Poland

2004

France

China

2006

Other E/SE Asia

2005

Hong Kong SAR

Singapore

2012

USA

2014

Other

2013 2011 2009

Netherlands

New Zealand

2010

Other Europe

Belgium

Germany

Switzerland

10y ABS

Australia

Italy

United Kingdom

$54

$1,764

$7

+$167

$173 $221

$57

$7

$59 $61

$139 $98

$1,199

$17

$109

$7

$64 $130

$1,492

+$38

$77

+$311

+$92

$40

$2

+$218

$35

+$119

+$44

$32

$2

+$116

$42

$4

$49 $59

+$81

$1,941

-$32

$40

-$1

$2

$2,279

$50

$112

$544

$28 $29 $55

$53

+$83

+$29

$12

$620

$57

$16 $30

+$115 $125

+$201

$20

$55

$20

$87

$513

$48

$54

$102

$33

+$43

$61

$925

$28

$128 $154

$2

$167

$976

+$39

$142

$137

$39 $12

$40

$8 $35

$29

$35

$54

+$103

$811

$10 $33

$29

$35

$31

$32

$46

$22 $26

$44

$19

$75

$82 $171

$43

$25

$21 $23

$51

$26

$155

$30 $26

$136

$59

$38

$58

$17 $15

$57

$18 $22 $17 $15

$17

$107 $97 $110

$88 $160

$159

$128

$155

$135

$353

$241

$266

$297

$196

$70

$64 $68

$192

$14

$135

$7 $7

$102

$75

$16 $44

$282

$4

$240

$77

$6

$43 $37

$5

$77

$37

$25

$30

$46

$55

$43 $81

$12 $14 $12

$135

$25

$88

$121

$16

$70

$69

$97

$47 $89

$133

$0

$1

$119

$56

$43 $29 $44

$76 $76 $67

$51

$101

$58 $58

$44 $46

$72

$72

$80

$52

$27 $27

$55

$148

$38

$72

$108

$31

$47

$45

$60

$39

$39

$81

$142

$138

$76

$43

$21

$71

$19

$33 $34

$25 $31

CAGR 16%

Poland, China, USA and Italy stand out for driving growth


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

$200 $150 -40%

$100

-20%

60%

$0 $-50

75%

$50

0%

40%

20%

$50m

China Hong Kong SAR

USA Italy Switzerland

Poland

New Zealand

Australia

Belgium

Germany

Netherlands

Other

Other Europe

Singapore

Other E/SE Asia

France

United Kingdom

Turkey

5y absolute change in value

5y CAGR

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

Average FOB prices of assorted chocolate to target Asian markets vary by supplier, with European countries generally receiving a solid premium


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

France Sw

itzerland

Australia

Hong K

ong SAR

Germ

any

Netherlands

Italy

China

USA

Other E/SE A

sia

Turkey

Singapore

New

Zealand

United K

ingdom

Other

Other Europe

Poland

Belgium

$5.53

$5.38

$9.25

$6.32

$2.86

$5.20

$3.59

$7.82

$10.20

$10.11

$10.64

$4.96

$12.61

$10.70

$7.35 $7.14

$12.42

$9.12 Volume imported by defined target market

Average FOB

value

2.3x

Assorted chocolate go to a wide number of the target markets, with no single country predominating


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

NA/ME/CA East Asia Indian Sub SE Asia

China $321

$50 $441 $1,100

Other $86

Other $13

$688

Israel $98

Egypt $40

Singapore $137

India $36

Saudi Arabia $153

Bahrain $12

United Arab Emirates $229

Kuwait $40

Qatar $29

South Korea $155

Japan $253

Hong Kong SAR $281

Taiwan $91

Vietnam $20

Thailand $52

Malaysia $95

Indonesia $51

Philippines $87

TOTAL = US$2,279m

Growth in assorted chocolate imports is broad based and coming from across effectively all markets


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

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

$23

$49

$24

$40

$24

$38

$43

$33

$38

$20

$13 $12

$91

$45 $63

$29

$48

$13

$76

$19

$63

$23

$76

$19

$80

$153

$41 $39 $44

$118

$60

$134

$3

$8

$262 $9

$237

$5

$253

$6

$62

$32

$123

$46

$155

$32

$26 $25

$118

$69

$60

$83

$81

$52

$107

$54

$544

$4

$513

$620

$191

$811

$229

$4

$188

$6

$144

$5

$321

$4

$220

$925

$63

$1,941

$74

$2,279

$30 $30

$43

$1,764

$126

$976

$157

$1,199

$78

$1,492

$95

$10

$186

$11

$207

$6

$254

$10

$131

$25

$73

$27

$87

$13

$95

$18

$281

$7

$49

$10

$71

$6

$95

$5

$41 $12

$4 $6

$14

$10

$21

$12

$52

$5

$55

$3

$32 $24 $3

$8

$27

$7

$23

$6

$52

$7

$36

$36

$50

$11 $40 $15

$70

$13

$63

$20

$32

$32

$28

$31

$38

$29

$42

$69

$45

$83

$61

$49

$68

$59

$36

$137

$15 $16 $22

$104

$28

$111

$86

$10

$15

$13

$15

$9

$24

$10

$10

$28

$94

$43

$95

$8 $21 $20

$12

$49 $8

$41

$20

$35

$17

$54

$5

$71

$4

$74

$5

$54

$5 $29

$208

$19

$213

$15

$262

$13

$249

$32

$164 $153

$32

$40

$208

$28

$174

$73

$14

$82

$19

$58

$16

$58

$15

$9

$87

$4

$4

$86

$22 $20

$21

$3

$22 $28

$3

$85

$3

$98

$51

$51

$25

$56

$34

$34

$45

$40

CAGR 16%

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

China, Hong Kong, UAE & Saudi Arabia stand out for growth; Japan has declining volumes but growing value, indicating a move to quality


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

30,000 25,000 -15,000 5,000 -5,000 0 15,000 20,000 10,000 -20,000

15%

40%

10%

20%

35%

30%

25%

0% -10,000

5% Jordan Japan

South Korea

Lebanon

Malaysia Kuwait

China

Bahrain

Sri Lanka

$200m

Israel

Hong Kong SAR

Indonesia

Vietnam

India

Singapore

United Arab Emirates

Thailand

Egypt

Pakistan

Oman

Taiwan

Qatar Saudi Arabia

Philippines

5y absolute change in volume

5y CAGR

Shift to quality

Growing volume & value

Average assorted chocolate import prices vary by country, with Greater China, Singapore and Malaysia paying more than elsewhere; Hong Kong and Singapore stand out as larger markets that pay well


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

Saudi Arabia

Qatar

Vietnam

China

Bahrain

Malaysia

Singapore

Om

an

Indonesia

Jordan

Pakistan

Taiw

an

Lebanon

Israel

Sri Lanka

India

Hong K

ong SAR

South Korea

Thailand

Japan

Egypt

UA

E

Philippines

Kuw

ait

$8.65

$6.17

$3.46

$5.00

$6.92

$5.16

$5.91

$8.76

$5.69

$4.73

$11.02

$7.08

$8.94

$9.09

$8.92

$7.34

$8.01

$6.80

$6.77

$9.64

$5.63

$8.25

$6.04

Volume imported

Average import

value

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

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

$40,000

3.0

$60,000 $50,000 $0 $10,000

4.0

3.5

$30,000 $20,000

2.5

0.5

1.0

2.0

1.5

0.0

South Korea

Jordan

Taiwan Malaysia

Kuwait Lebanon

China

Sri Lanka

50,000

Bahrain

Israel

Japan

Hong Kong SAR

Indonesia

India

UAE

Egypt

Singapore

Vietnam Thailand

Pakistan

Oman Philippines

Saudi Arabia

Qatar

GDP per capita

Imports per capita

Bubble scale: tonnes; 2014 A bubble this size=

Market share varies by country; European countries very strong across richer Middle East; Singapore and China stronger across SE and E Asia; Australia currently strong in markets where Europe is weak

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Malaysia

Indonesia

Thailand

Egypt

Taiw

an

Vietnam

Philippines

Japan

Jordan

Hong K

ong SAR

South Korea

Bahrain

Sri Lanka

China

Saudi

Lebanon

UA

E

Qatar

Israel

Singapore

India

Pakistan

Kuw

ait

Om

an

China

Hong Kong SAR

Singapore

Other E/SE Asia

Other

Turkey

Other Europe

United Kingdom

Switzerland

France

Germany

Belgium

Netherlands

Poland

Italy

USA

New Zealand

Australia


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

Western Australia can build on existing Australian strength and market position to grow opportunities for assorted chocolate exports in select East & South-East Asian markets


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

Qatar

Indonesia

Sri Lanka

Taiw

an

Vietnam

Philippines

Singapore

Israel

Malaysia

Saudi

Bahrain

Egypt

Om

an Pakistan

South Korea

India

Japan

Hong K

ong SAR

UA

E

China

Jordan

Kuw

ait

Lebanon

Thailand

2%

2%

4%

0%

0%

0%

0%

0%

0%

0%

1%

0%

5%

2%

0%

5%

6%

0%

0%

0%

0%

0%

0%

Total value of imports

Australian market share

Size of bubble = value A bubble this size=

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


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

4%

$4.00

$10.00

6% 5% 1% 0%

$12.00

3% 2%

$6.00

$0.00

$8.00

$2.00

7%

India

Lebanon

Saudi

$200

Sri Lanka

Malaysia Singapore

UAE South Korea Thailand

Indonesia

Vietnam

China

Kuwait

Oman

Bahrain

Qatar Taiwan

Egypt

Jordan

Pakistan

Japan

Hong Kong

Israel

Philippines

AU share of total import value

Value average

FOB $/kg

1

2 3

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

21

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

1 Export market launch in Hong Kong

2 Export market launch in Singapore

3 Export market launch in China

0 Product development and testing

-  High income, sophisticated market and consumers

-  Pay high prices -  Manageable sized test bed -  AU already has a market

position

DOCUMENT STRUCTURE





22

Western Australia can develop a strong assorted chocolate offer for Asia

23

IS THE MARKET DEVELOPED & COMPETITIVE?

-  The flow of assorted chocolate from the manufacturer through to the consumer is straight forward

-  Assorted chocolate prices are competitive in Asia, typically cheaper than Australia; Belgium stands out as receiving a premium

-  Asian markets (generally) have a much less developed assorted chocolate range and offer than western countries

-  “Leading indicator” Western markets strongly suggest depth of range in assorted chocolate in Asian markets will increase going forward; Park ‘N Shop stands out as the exception

-  Assorted chocolate appears to support a market structure of ~6-8 brands; global leaders are European (e.g. Ferrero Rocher, Lindt) and are in Asia

WHAT IS WA CAPABLE OF DELIVERING?

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

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

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

-  Products from other manufacturers in other markets demonstrate what is possible in terms of developing a premium Western Australian assorted chocolate offer

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

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

HOW IS THE MARKET STRUCTURED? The flow of assorted chocolate from the manufacturer through to the consumer is straight forward

24 Source: Coriolis

SIMPLIFIED MODEL OF SUPPLY CHAIN: ASSORTED CHOCOLATE Model; 2016

Retailers

Foodservice & Institutional

Exports

Wholesalers

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

In-Market Processor

Agent/Broker/ Distributor

Packer/Processor Sales/Marketing

Logistics Providers

(Airfreight, Seafreight, Trucking)

WA Chocolate Processor

Other Australian Processor

Sugar Mill

USA Processor

Italian Processor

Belgian Processor

Other European Processor

Other Processor

Dairy Processor

Cocoa Processor

Nut Grower

Fruit Processor

Other flavour suppliers

This stage branches and adds multiple layers in large markets

WHO IS THE COMPETITION? PRICING Assorted chocolate prices are competitive in Asia, typically cheaper than Australia; Belgium stands out as receiving a premium

$29.76

$35.37

$54.19

$30.91 $32.99

$43.12

$69.46

$30.70 $33.25 $34.59 $36.39

$17.20

$42.34 $43.00

$55.04

Ferrero Rocher 16pk (IT

)

Guylian Seashells 125g

(BE)

Duc d'O

Hazelnut M

ilk T

ruffles 8pk (BE)

Lindt Assorted 20

0g

(CH

)


)

Cadbury G

low 24

0g

(UK

)

GBS Seashells

50g Box (BE)


)

Meiji C

hoc. Alm

onds G

ift 250g (JP)

Cadbury G

low 24

0g

(UK

)

Lindt Assorted 20

0g

(CH

)

Nestle Scorched

Alm

onds 240

g (CH

)

Guylian Seashells 65g

(BE)


)

Lindt Assorted 150

g (C

H)

25 Source: Coriolis from store checks

SHELF PRICE PER KG ACROSS SELECT SE ASIAN MARKETS AND AUSTRALIA: ASSORTED CHOCOLATE US$/kg; Feb 2016

SELECT SE ASIAN RETAILERS AUSTRALIA

AU

Malaysia Singapore Hong Kong

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

26

EXAMPLE: ACTUAL ASSORTED UNWRAPPED CHOCOLATE RANGE ON SHELF Feb 2016

London: GDP/Capita US$75,200 Bangkok: GDP/Capita US$15,192

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

IS THE MARKET DEVELOPED & COMPETITIVE? RANGE “Leading indicator” Western markets strongly suggest depth of range in assorted chocolate in Asian markets will increase going forward; Park ‘N Shop stands out as the exception

81

72 69

53 49

45

108

35 34

21

13 12

Waitrose (UK)

Wegmans (NY)

Sainsbury (UK)

Tesco (UK)

Coles (AU)

Woolworths (AU)

Park'N Shop (HK)

Fairprice (SG)

Tesco (MY)

Tesco (TH)

Cold Storage (SG)

Wellcome (HK)


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

SE Asia Anglo-American

Average 37.2 sku/store

Average 64.8 sku/store

IS THE MARKET DEVELOPED & COMPETITIVE? SHARE DISTRIBUTION Assorted chocolate appears to support a market structure of ~6-8 brands; global leaders are European (e.g. Ferrero Rocher, Lindt) and are in Asia


MARKET SHARE BY BRAND: SELECT RETAILERS FROM ACROSS MULTIPLE MARKETS SKU; actual; 2016

Russell Stover (US)

33%

Godiva (TR) 21%

Whitman's (US) 17%

Dove (US) 5%

Ferrero (IT) 4%

Lindt (CH) 3%

Guylian (BE) 3%

Other 14%

Wegman’s (NY) Sainsbury (UK) Coles (AU)

Private label 29%

Vochelle (MY) 17%

Ferrero (IT) 15%

Cadbury (UK) 12%

Guylian (BE) 6%

Merci (DE) 6%

Duc d'O (BE) 6%

Fazer (FI) 6%

Almond Roca (US)

3%

Tesco (MY)

Ferrero (IT) 22%

Lindt (CH) 16%

Meiji (JP) 11%

Almond Roca (US)

8%

Herseys (US) 4%

Governor's (BE) 4%

Private Label 4%

Merci (DE) 3%

Other 28%

Park ‘N Shop (HK)

Ferrero (IT) 20%

Lindt (CH) 17%

Cadbury (UK) 17%

Auston (MY) 11%

Van Houten (NL) 11%

Merci (DE) 9%

Almond Roca (US)

6% Other 9%

Fairprice (SG)

Lindt (CH) 23%

Private label 22%

Thorntons (UK) 10% Ferrero (IT)

9%

Elizabeth Shaw (UK)

7%

Cadbury (UK) 6%

Green & Blacks (UK)

4%

Other 19%

Lindt (CH) 51%

Ferrero (IT) 17%

Cadbury (UK) 14%

Guylian (BE) 6%

Darrell Lea (AU) 4% Other

8%

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

21%

17%

5%

5%

4%

3%

2%

2%

1%

Nut

Truffles

Belgian

Fruit

Mint

Mini bars

Swiss

Organic

Liqueur


PERCENT OF OBSERVED PRODUCTS ON SHELF MAKING THE CLAIM ON PACK % of SKU; N=554; Feb 2016

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

-  Western Australian chocolate manufacturers looking to grow value and share should focus in these areas

-  Chocolate containing nuts stand out, with ~1/4 observed product SKU being nut covered chocolate

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

TAKEAWAYS

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

30

SUGGESTED STRATEGIC DIRECTION: WESTERN AUSTRALIAN CHOCOLATE Model; 2016

Loose, bulk chocolate

Everyday bars

Gift packs

Premium ingredients

Traditional methods

Special occasion packs

Unique flavours

Chinese suppliers are here

WA suppliers are here in Asia

High growth, high potential opportunities

are here

USA & EU suppliers are here

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

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

IDENTIFIED POTENTIAL PREMIUM POSITIONS Model; 2016

Organic Premium cocoa Variety of sizes Lowers blood pressure

Identified source region Single source beans Individually wrapped High in flavonoids

Specialty variety Gift packaging Gift wrapped box High in antioxidants

Track & trace Premium ingredients High satiety

Reduced stress

Boosts blood flow to the brain

Cough relief

HEALTH PROVENANCE INDULGENCE CONVENIENCE

Ethical production Handmade

Traditional methods Keepsake container

Unique WA flavours

WHAT IS WA CAPABLE OF DELIVERING? GLOBAL PEERS Products from other manufacturers in other markets demonstrate what is possible in terms of developing a premium Western Australian assorted chocolate offer

32 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

Organic Gift wrapped Individually wrapped truffles Italian

Tasting collection Petit indulgence Crystals inlaid in lid Heart shaped box

Contains map of the world Assorted flavours Keepsake tin Perfect for gifting

Contains tasting notes Amazing taste Red colour

Fairtrade beans Delicious ingredients Romantic gift for Valentine’s

Tasting journey around the world Delight that special someone

Intense and refined flavours

Classic delicacy

Roasted whole hazelnut

The golden elegance Mouth watering recipes

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

33 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 Good for heart health

From West Australia

Traditional methods Specialty varieties of

cocoa

Gift packaging

Variety of pack sizes

Improves cognitive abilities

Premium ingredients

HEALTH

PROVENANCE

INDULGENCE

CONVENIENCE

WHAT IS THE IDENTIFIED OPPORTUNITY? As a “Straw Man” for discussion, we identify an opportunity for a high value, premium assorted chocolate product with select characteristics for launch in Hong Kong

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

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

CURRENT WA POSITIONING IN ASIA

IDENTIFIED HIGH GROWTH, HIGH VALUE OPPORTUNITY FOR WA

High in antioxidants

From West Australia

Traditional methods Specialty variety

Variety of pack sizes

From Australia

POTENTIAL FUTURE PRODUCT LINE EXTENSION

Gift packaging

Premium ingredients

Unique WA flavours

Organic

DOCUMENT STRUCTURE





35

FOCUS MARKET – 1 – 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

36 Source: Coriolis from a wide range of sources

TURNOVER & PURCHASES US$b; 2014

ESTIMATED WHOLESALE FOOD & FMCG PURCHASES US$b; 2014

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 – 1 – 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 – 2 – 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




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 – 2 – 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 – 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





44

IDENTIFIED WA COMPANIES

BAHEN & CO

FRESH FOOD INDUSTRIES

GABRIEL CHOCOLATE

ADDRESS: 135 Puzey Rd, Yallingup, WA 6282 ADDRESS: 19 - 23 Knock Place, Jandakot, WA 6164 ADDRESS: Caves & Quininup Rd, Yallingup WA 6282

PHONE: 08 9757 1034 PHONE: 08 9417 4088 PHONE: 08 9756 6689

WEBSITE: www.bahenchocolate.com WEBSITE: www.ffiholdings.com.au WEBSITE: www.gabrielchocolate.com.au

45 Sources: Coriolis from a wide range of sources

JOHN WALKER CHOCOLATIER

MARGARET RIVER CHOCOLATE CO.

ADDRESS: Unit 5, 20-22 Boag Pl, Morley, WA 6062 ADDRESS: 415 Harman’s Mill Rd, Metricup, WA 6280

PHONE: 08 9276 3599 PHONE: 08 9755 6555

WEBSITE: www.johnwalkerchocolatieros.com.au WEBSITE: www.chocolatefactory.com.au

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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