IN-PROGRESS REVIEW DRAFT · INHERENT LIMITATIONS This work was commissioned by the Department of...

TARGET MARKET OPPORTUNITIES IN ASIA FOR VIRGIN OLIVE OIL 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 150910

Product Olive oil, virgin

Out-of-scope Non virgin olive oil, blends, dressings, supplements, etc. as all are covered under other screened trade codes

Origin Olive tree native to Mediterranean, oil being produced by 6,000 BC

Example ingredients

Olives

Forms/usage -  Extensively used in Middle Eastern cuisines -  Used in Asia when cooking Mediterranean cuisines -  Cooking oil, ingredient, dressings, dip, marinating -  Ingredient in cosmetics, pharmaceuticals, soaps, oil lamps

Drivers of consumer/market success

-  Health benefits of virgin olive oil

-  Flavour profile

-  Status as premium oil to use as dip and dressings

WHAT IS THE PRODUCT? Virgin olive oil emerged in Phase I as one of twenty “high growth, high potential” opportunities for Western Australia; virgin olive oil is the first pressing of the fruit of the olive tree

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 is well-positioned to grow virgin olive oil exports to Asia

7

-  Asian virgin olive oil imports are increasing, with import value growth being driven by rising volume across low/no FOB (free-on-board) price increases

-  Asian & Middle Eastern import supply is effectively two countries: Spain and Italy

-  Spain and Italy have been the drivers of export growth to Asia and the Middle East

-  Spain leads in both absolute volume growth and rate of growth, followed closely by Italy

-  Average FOB price to target Asian markets vary by supplier, with Australia achieving a slight discount to Italy, but a premium to Spain

-  While virgin olive oil goes to a wide number of the target markets, East Asia is the key region; both Japan and China have large imports

-  East Asia – in particular Japan – is driving regional import growth

-  Market growth is coming from Japan, China, South Korea and Taiwan

-  Average import prices vary by market, with Taiwan and Japan standing out as attractive

-  Virgin olive oil consumption and aggregate imports appear strongly driven by income per capita; a number of markets appear to have long-run penetration upside (China in particular)

-  Italy and Spain trade off leadership across most markets; Australia has pockets of strength, particularly in China

-  Western Australia has clear opportunities for further virgin olive oil export growth in Asia, particular in East Asia

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

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

Asian virgin olive oil imports are increasing, with import value growth being driven by rising volume across low/no FOB (free-on-board) price increases

0

20

40

60

80

100

120

140

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

200

4

200

5

200

6

200

7

200

8

200

9

2010

2011

2012

2013

2014

AVERAGE PRICE PER KILOGRAM US$; 2004-2014

$-

$100

$200

$300

$400

$500

$600

200

4

200

5

200

6

200

7

200

8

200

9

2010

2011

2012

2013

2014

VALUE US$m; 2004-2014

CAGR* 10%

CAGR 2%

CAGR 13%

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

Asian & Middle Eastern import supply is effectively two countries: Spain and Italy

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

Australia

NA

/ME/C

A

Europe

$505 $23 $7

Greece $17

Australia $5

NA/ME/CA $23

Other $7

Turkey $33

Spain $265

$5 Other Europe

$6

Italy $184

TOTAL = US$541m

Spain and Italy have been the drivers of export growth to Asia and 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

Italy

Spain

Other Europe

2007 2008 2009 2006 2004 2005

Other

2013 2014

Australia

2012 2010 2011

NA/ME/CA

Greece

10y ABS

Turkey

$107

$140

$411

$222

$385

$148

$265

$219

$331

$113

$92

+$16

$541

$510

$120

$193

$140

$476

$166

$77

$207

+$6

$81

+$18

$90

+$188

+$125

$176 $282

$346

+$5

$81

+$5

+$12

$242

$184

$90

$1

$1

$4

$2

$45

$28

$23

$37

$4

$7

$7

$5

$5

$4

$3

$6

$6

$80 $3 $2

$4

$5

$2

$0

$3

$1

$6

$84

$48

$81 $114

$5

$4

$18

$7

$6 $4

$4

$5

$33

$44

$2

$1

$4

$71

$59 $80 $82

$5

$5

$6

$5

$27

$15

$11

$19

$18

$8 $6

$9 $7

$17

$25 $17

$20

$22

$19

$15

$16 $18

CAGR 13%

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

Spain leads in both absolute volume growth and rate of growth, followed closely by Italy


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

-20%

$100

15%

$80

25%

20%

-15%

10%

0%

$140 $160

-5%

-25% $120

-10%

5%

$-20 $-40 $-60 $0 $60 $40 $20

NA/ME/CA

Spain

$50m

Australia Greece

Turkey

Other

Other Europe

Italy

5y absolute change in value

5y CAGR

Average FOB price to target Asian markets vary by supplier, with Australia achieving a slight discount to Italy, but a premium to Spain


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

Australia

Greece

Italy Spain Turkey

Other

NA

/ME/C

A

Other Europe

$3.98 $3.93

$4.38

$5.34

$8.80

$5.94

$4.94

$5.15

Volume imported by defined target market

Average FOB

value

While virgin olive oil goes to a wide number of the target markets, East Asia is the key region; both Japan and China have large imports


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

NA/ME/CA East Asia Indian Sub SE Asia

China $125

$9 $29 $411

Other $4

Other $2

$91

Israel $18

Egypt $4

Singapore $5

India $7

Saudi Arabia $31

Bahrain $1

UAE $23

Kuwait $7

Qatar $3

South Korea $51

Japan $205

Hong Kong SAR $8

Taiwan $22

Vietnam $4

Thailand $7

Malaysia $4

Indonesia $4

Philippines $4

TOTAL = US$541m

East Asia – in particular Japan – is driving regional import growth


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

South Korea

2012

Indonesia

United Arab Emirates

Malaysia

2013

Thailand

Israel

2006 2004

India

2011 2005

Hong Kong SAR

Qatar Bahrain

Singapore

2008 2007

Vietnam

Other ME

Philippines

Other Ind. Sub

Japan

2009

China

Kuwait

2010 2014

Saudi Arabia

Taiwan

Egypt

$1

$26

$42

$385 $1

$33

$1

$331

$33

$63

$49

$3

$84

$541

$1

$92 $95

$4

$3

$2

$75

$3

$4

$112

$186

$476

$1

$1

$411

$205

$510

$1

$112

$154

$130

$126

$27

$4

$4

$15

$136

$7

$21

$5

$3

$145

$3

$21

$5

$168

$5

$6

$25

$11 $5 $17

$13

$37 $29

$7

$81

$19

$7

$21

$48

$8

$21

$4

$242

$51

$1

$1

$5 $3

$1

$33

$346

$30

$1

$36

$282

$5

$14

$9 $166

$23

$2

$125

$22

$0

$7

$207

$7

$10 $0

$8

$2

$2

$1

$3

$1 $1

$2

$2

$2

$0 $1

$0

$11

$3 $3

$1

$1

$1

$5

$32

$34

$4

$5

$1 $1

$1

$23

$3 $3 $2

$1

$3

$3

$4

$3

$31

$7

$45

$12

$11

$17

$41

$4

$5

$15

$5

$11

$20

$14

$10

$18

$3 $5

$0

$14

$3

$4

$3 $2

$5

$6

$4

$2

$7

$4

$5

$6

$4

$1

$2

$4

$1 $1 $1

$3

$8

$1 $1

$1

$2

$1

$2

$3 $8

$6

$3

$3

$4

$1

$3

$7

$1

$1

$0

$2

$4

$4 $2

$1

$1

$3

$4

$3

$3

$3

$4

$0

$4

$0

$2

$4

$31

$35

$4

$2

$4 $4 $3

$12

$2

$29

$36

$1

$2

$3

$3

$2

$42

$1

$2

$7

$6

$4

$11

$3

$2 $2

$4

$5

$10

$4

$7

$7

$8

$5

$5

CAGR 13%


Market growth is coming from Japan, China, South Korea and Taiwan


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

-5%

-10%

5,000 0 -500 10,000 -15%

20,000 15,000

20%

15%

10%

35%

30%

25%

0%

5% UAE

$100m

Egypt

Kuwait

China

South Korea

Sri Lanka

Malaysia

Lebanon

Indonesia

Hong Kong SAR

Jordan

Japan

Israel

Singapore

India

Thailand

Vietnam

Bahrain

Saudi Arabia

Pakistan

Oman

Taiwan

Qatar

Philippines

5y absolute change in volume

5y CAGR

Average import prices vary by market, with Taiwan and Japan standing out as attractive


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 K

uwait

$5.34

$4.74

$4

.65 $4

.58

$3.35

$3.02

$4.33

$4.95

$4.79

$4.96

$4.96

$5.21

$4.4

0

$4.55 $4

.35

$3.69

$3.96

$4.91

$4.0

5

$4.84

$4.51

Volume imported

Average import

value

Virgin olive oil consumption and aggregate imports appear strongly driven by income per capita; a number of markets appear to have long-run penetration upside (China in particular)

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

$60,000

0.6

$50,000 $20,000 $0 $10,000 $40,000 $30,000

0.7

0.5

0.2

0.3

0.4

0.1

0.0

Taiwan

South Korea

Jordan

Lebanon

Malaysia

Kuwait

China

Sri Lanka

30,000

Bahrain

Hong Kong SAR

Japan

Israel

Indonesia Oman

Singapore

Thailand Vietnam

India

Qatar

Saudi Arabia

Philippines

Egypt Pakistan

United Arab Emirates

GDP per capita

Imports per capita

Bubble scale: tonnes; 2014 A bubble this size=

Italy and Spain trade off leadership across most markets; Australia has pockets of strength, particularly in China


IMPORT VALUE MARKET SHARE BY MARKET BY KEY SUPPLIER US$m; FOB; 2014

China

Philippines

Israel

Taiw

an

Pakistan

Jordan Lebanon

Egypt

UA

E

India Singapore

Hong K

ong SAR

South Korea

Vietnam

Bahrain

Saudi Arabia

Qatar

Om

an

Thailand

Japan

Kuw

ait

Malaysia

Indonesia

Sri Lanka

49%

14%

4%

28%

3%

20%

51%

16%

64% 68%

40%

49%

32%

0% 1%

23%

73%

28%

9%

10%

1%

15%

4%

3%

3%

1% 0%

8%

0% 17% 21%

2%

3%

1%

1%

4%

61%

15%

43%

3%

4%

1% 2%

10%

1%

22%

Total value of imports

Spain

Italy

Turkey Greece Other Europe NA/ME/CA Other Australia

Western Australia has clear opportunities for further virgin olive oil export growth in Asia, particularly in East Asia


AUSTRALIAN IMPORT VALUE MARKET SHARE VS. MARKET VALUE US$m; 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

%

0.0

%

3.1%

0.0

%

1.2%

0.0

%

0.0

%

0.0

%

0.0

%

0.0

%

0.7%

0.0

%

0.0

%

0.0

%

0.5%

0.4

%

0.0

%

0.4

%

0.0

%

0.0

%

1.1%

0.4

%

Total value of imports

Australian market share; Value; 14


Data supports new high value, premium olive oil opportunities being initially launched in (1) China, (2) Hong Kong and (3) Japan


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

2% 3%

$5.00

3% 1% 0% 1% 2%

$5.50

$4.00

$3.00

$4.50

4%

$3.50

Sri Lanka

$50

India

Lebanon

Jordan

Singapore

UAE

Malaysia

Indonesia

Saudi Arabia

Vietnam

China

Kuwait

Oman

Bahrain

Qatar

Thailand

Egypt

Israel

Philippines

Pakistan

Taiwan

South Korea

Hong Kong SAR

Japan

AU share of total import value

VALUE Average

FOB $/kg 2014

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 VIRGIN OLIVE OIL OPPORTUNITY Model; 2016

1 Export market launch in China

2 Expand into Hong Kong

3 Expand into Japan

0 Product development and testing

Potential in-market partners identified later in this document

-  Growing middle-class with increasing income

-  Japan & S. Korea suggest significant further consumption growth will occur driving market growth

-  WA/AU already achieving the #3 market position

DOCUMENT STRUCTURE





22

Western Australia can grow extra virgin olive oil exports to Asia, but innovation is required

23

IS THE MARKET DEVELOPED & COMPETITIVE?

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

-  Extra virgin olive oil prices are competitive in Asia; there is a premium for “origin” and organic in some markets

-  Asian markets have a much less developed virgin olive oil range and offer than Western countries

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

-  Olive oil appears to support a market structure of ~5-6 brands and private label; global leaders exist (e.g. Colavita, Bertolli, Filippo Berio) and are in Asia

WHAT IS WA CAPABLE OF DELIVERING?

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

-  Western Australian virgin olive oil producers need to continue to move forward and improve through new products

-  Multiple potential positions exist to develop a premium extra virgin olive oil offer for Asia

-  Products from other processors in other markets demonstrate what is possible in terms of developing a premium Western Australian extra virgin olive oil offer

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

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

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

24 Source: Coriolis

SIMPLIFIED MODEL OF SUPPLY CHAIN: OLIVE OIL Model; 2016

Retailers

Foodservice & Institutional

Exports

Wholesalers

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

Agent/Broker/ Distributor

Packer/Processor Sales/Marketing

Logistics Providers

(Airfreight, Seafreight, Trucking)

WA Olive Processor

Other Australian Processor

WA Farmer

Spanish Processor

Italian Packer/Processor

Greek & Turkish Processors

Middle Eastern Processor

Other Packer/Processor

This stage branches and adds multiple layers in large markets

WHO IS THE COMPETITION? PRICING Extra virgin olive oil prices are competitive in Asia; there is a premium for “origin” and organic in some markets

$7.01

$13.72

$4.53 $5.80 $6.69 $6.18 $6.60

$7.88

$15.25

$4.21

$7.35 $8.04 $10.35

$12.78 $14.06

$17.89

$42.19

$2.75 $3.44 $5.15

$6.80 $7.56

Bertolli EVO

O

Tesco Sicilian EV

OO

Naturel EV

OO

Bertolli EVO

O

Colavita EV

OO

Naturel EV

OO

Farmgate EV

OO

Bertolli EVO

O

Waitrose EV

OO

O

rganic

Select EVO

O

Bertolli EVO

O

Filippo Berio EVO

O

De C

ecco EVO

O

Meridian EV

OO

O

rganic

Napa V

alley EVO

O

Organic

Filippo Berio Tuscany

EVO

O

Ardoino V

OO

La Espanola EVO

O

Coles A

ustralian EV

OO

Red Island EVO

O

Colavita EV

OO

Minerva K

alamata

EVO

O

25 Source: Coriolis from store checks

SHELF PRICE PER 500ML BOTTLE ACROSS SELECT SE ASIAN MARKETS AND AUSTRALIA: VIRGIN OLIVE OIL US$/500ml; Jan 2016

SELECT SE ASIAN RETAILERS AUSTRALIA

AU AU

Malaysia Thailand Singapore Hong Kong

WHAT IS ON THE SHELF? RANGE IN MARKET Asian markets have a much less developed virgin olive oil 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 500ML VIRGIN OLIVE OIL RANGE ON SHELF Jan 2016

London: GDP/Capita US$75,200 Hong Kong: GDP/Capita US$40,169

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

41 40 40

36 35

31

25 25

20 17

11 10 8

Coles (AU)

Wegmans (NY)

Waitrose (UK)

Tesco (UK)

Woolworths (AU)

Sainsbury (UK)

Safeway (CA)

Tesco (MY)

Park'N Shop (HK)

Fairprice (SG)

Cold Storage (SG)

Tesco (TH)

Wellcome (HK)


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

SE Asia Anglo-American

Average 15.2 sku/store

Average 35.4 sku/store

2 x

IS THE MARKET DEVELOPED & COMPETITIVE? SHARE DISTRIBUTION Olive oil appears to support a market structure of ~5-6 brands and private label; global leaders exist (e.g. Colavita, Bertolli, Filippo Berio) and are in Asia


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

Private label 55%

Filippo Berio (IT)

7%

Goya (US) 7%

California Olive

Ranch(US) 8%

Colavita (IT) 5%

Other 18%

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

Filippo Berio (IT) 20%

Naturel (SG) 16%

Colavita (IT) 16%

Bertolli (IT) 12%

Basso (IT) 12%

Borges(ES) 8%

Allegro (UAE)

8% Other 8%

Tesco (MY)

Private label 30%


Borges(ES) 10%

Bertolli (IT) 5%

Other 30%

Park ‘N Shop (HK)

Private label 23%

Naturel (SG) 17%

Ravika (TR) 18%

Bertolli (IT) 12%

Borges(ES) 12%

Sumich (AU) 6%

Other 12%

Fairprice (SG)


Private label 25%

Carbonell (ES) 8%

Castillo de Canena (ES)

5%

Colonna (IT) 5%

Other 30%

Cobram Estate (AU)

29%

Private label 15%

Red Island (AU) 12%

Moro (AU) 12%

Squeaky Gate (AU)

10%

La Espanola (ES) 7%

Ollo (AU) 5%

Other 10%

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

22%

15%

8%

7%

5%

Premium 250mL size

Origin in title

Organic

Flavoured

Spray


PERCENT OF OBSERVED PRODUCTS ON SHELF MAKING THE CLAIM ON PACK % of SKU; N=343; Jan 2016

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

-  Western Australian virgin olive oil producers looking to grow value and share should focus in these areas

-  Packaging and promoting origin stand out, with many observed product SKU using these approaches

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

TAKEAWAYS

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

30

SUGGESTED STRATEGIC DIRECTION: WESTERN AUSTRALIAN VIRGIN OLIVE OIL Model; 2016

Generic olive oil/virgin olive oil

Extra virgin Premium bottle

and label Named region

Named olive varieties

Organic Provenance

Proven EVOO

Middle Eastern suppliers are here

WA suppliers are here in Asia

High growth, high potential opportunities

are here

USA & UK suppliers are here

WHAT IS WA CAPABLE OF DELIVERING? CLAIMS Multiple potential positions exist to develop a premium extra virgin olive oil offer for Asia

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

IDENTIFIED POTENTIAL PREMIUM POSITIONS Model; 2016

Organic Cold-pressed Pourers Heart healthy

Identified source region Gourmet varieties Range of sizes Reduces inflammation

Unadulterated Attractive packaging Dressings and marinades Lowers LDL-cholesterol

Track & trace Fresh Rich in antioxidants

High in vitamin E

Decreases blood pressure

Preventative of arthritis

Helps calcium absorption

HEALTH PROVENANCE INDULGENCE CONVENIENCE

Flavoured

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 extra virgin olive oil 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

Convenient Unique packaging Equal Exchange/Fairtrade Convenience

Healthy Origin in name Organic Pop up pourer in cap

100% olive oil spray Variety of olives named Origin in name “New & exclusive”

For dressings & flavouring Limited edition Region/variety in name

No added water “Exclusive selection” Supporting small farmers

No added alcohol Since 1981

No aerosol propellant

“Passion in every drop”

PDO

Low calorie cooking

WHAT IS A POTENTIAL WA OFFER? There are a wide range of potential product positions or claims available for a premium extra virgin olive oil 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 High in vitamin E

From Western Australia

Organic Unadulterated

Cold-pressed

Pourer container

Heart healthy

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 extra virgin olive oil product with select characteristics for export market launch

34

PRELIMINARY “STRAW MAN” DEVELOPMENT & ROLLOUT PLAN FOR VIRGIN OLIVE OIL OPPORTUNITY Model; 2016

CURRENT WA POSITIONING IN ASIA

IDENTIFIED HIGH GROWTH, HIGH VALUE OPPORTUNITY FOR WA

High in vitamin E

High in antioxidants

From Western Australia

Organic

Australian Flag

Unique packaging

Pourer in cap

Heart healthy

Origin and variety

From Australia

Standard bottle

POTENTIAL FUTURE PRODUCT LINE EXTENSION

Spray

Low calorie cooking

DOCUMENT STRUCTURE





35

FOCUS MARKET – 1 – 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

36 Source: Coriolis from a wide range of sources

TURNOVER & PURCHASES US$b; 2014

ESTIMATED WHOLESALE FOOD & FMCG PURCHASES US$b; 2014

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 – 1 – 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 – 1 – 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 – 1 – 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

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


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 – JAPAN Japan has a robust and well-developed food retailing and foodservice sector

$331

$232

$310

$93

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Turnover Purchases




Foodservice Retail

Convenience $112.9

$93.0

Small grocers $27.5

Specialists $22.5

Foodservice $93.0

Other grocery $16.6

$287.1

Supermarkets $102.3

Online $5.3

Foodservice

Retail 711,000 restaurants, bars & clubs, 87,927 hotels/motels/etc., vending machines,

institutions (schools, hospitals, airline


0.0%

2.4%

Retail

Foodservice

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

FOCUS MARKET – 3 – JAPAN Eight potential in-market partners are identified for Western Australian firms in Japan


POTENTIAL IN-MARKET PARTNERS – JAPAN 2015 or as available

Firm AEON Retail Seven & I Holdings Uny Group Holdings Izumi Co. Ltd. Life Arcs Lawson Family Mart

Ownership Japan; listed Japan; listed Japan; listed Japan; listed Japan; listed Japan Japan; listed Japan; listed

Website www.aeon.info www.maxvalu.co.jp www.daiei.co.jp www.ministop.co.jp

www.7andi.com www.sej.co.jp www.itoyokado.co.jp

www.unygroup-hds.com www.uny.co.jp www.circleksunkus.jp

www.izumi.co.jp

www.lifecorp.jp www.arcs-g.co.jp www.lawson.jp

www.family.co.jp


US$61.2b US$16.8b

US$49.1b US$17.5b

US$9.0b US$6.7b

US$4.7b US$2.1b

US$4.7b US$3.8b

US$4b US$4b

US$17.4b US$14b

Food store formats

Hypermarket Supermarket Department stores Convenience (3.4% share) Pharmacy/HBC

Convenience 17,900 (41% share) Supermarkets 185 Department stores

Supermarket Convenience (9.6% share) HBC Foodservice

Supermarkets Hypermarkets Malls

Supermarket Convenience 12,254 (20.5% share)

Convenience 9,975 (19% share)

# of stores 1,882 18,262 226 102 239 290 12,254 9,975 (JP) 16,970 (Global)

Store fascia

DOCUMENT STRUCTURE





44

IDENTIFIED WA COMPANIES

AUSTRALIAN ORGANIC OLIVE OIL CO

DANDARAGAN ESTATE FINI OlIVES

ADDRESS: 6/41 King Edward Rd, Osborne Pk WA6017 ADDRESS: 7/97 Garling Street, O’Connor, WA 6163 ADDRESS: 237 Orange Springs Road, Gingin WA 6503

PHONE: 08 6336 8220 PHONE: 08 9214 9747 PHONE: 08 6253 8988

WEBSITE: www.goldengrange.com.au WEBSITE: www.dandaraganestate.com.au WEBSITE: www.finiolives.com.au/

45 Sources: Coriolis from a wide range of sources

FRANKLAND RIVER OLIVE COMPANY

SUMICH GROUP

ADDRESS: 1 McDowell St, Welshpool, WA 6160 ADDRESS: Mandogalup Rd, Mandogalup, WA 6167

PHONE: 08 9494 2044 PHONE: 08 9437 2066

WEBSITE: www.jingilli.net.au WEBSITE: www.sumich.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.

IN-PROGRESS REVIEW DRAFT · INHERENT LIMITATIONS This work was commissioned by the Department of...

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