China Research Project Update ACA meeting August 2010

ANALYSIS OF PRODUCT DIFFERENTIATION OPPORTUNITIES FOR AUSTRALIAN WILD CAUGHT ABALONE IN CHINA

In Market Research MAP Research Reports 2007/2008 Consumer Restaurant Importer Grey Group/Moisson – In Market research – 2009/2010 Shanghai In Market Research Report – University of the Sunshine Coast: Dr Joanne Freeman, April 2010 Beijing In Market Research Report – USC – September 2010

China Research Project Focus Business to Business B2B Business to consumer B2C B2B – Premium Restaurants – First Tier Cities Shanghai Guangzhou Beijing B2C – Emerging affluent class in First Tier Cities Restaurants Premium Food Retail Outlets

Channel Penetration by Phase Club/ High-end restaurant/ Private Kitchen/Fusion 54% Sea Food Hot pot 27% Premium Sea food 9% Club high end restaurant/ Private Kitchen/Fusion 41% Sea Food Hot pot 25% Premium Sea food + Chinese Abalone Restaurant 12% Club high end restaurant/ Private Kitchen/Fusion 47% Sea food Hot pot 21% Premium Sea food + Chinese Abalone Restaurant 7% Phase 1 50 Restaurants Phase Restaurants Phase Restaurants (Accumulated) Japanese Restaurant 9% Japanese Restaurant 20% Japanese Restaurant 23%

Abalone in Shanghai – situation analysis * Premium restaurants in Shanghai generally do not use live Abalone due to variable quality *Premium restaurateurs generally travel to Hong Kong on a monthly basis to purchase Dry Abalone *There is little known about Australian Abalone other than it exists in the live market *Restaurateurs were unaware of an Australian Dry Abalone product in the market

Abalone in Shanghai – situation analysis Supply chain service levels are low – if you want abalone, go to the wet market - Tong Chuan is major market for abalone in all forms – larger restaurants and hotels utilise services of a trusted seafood supplier/distributor Prices are volatile for all abalone product forms Market education is required – poor understanding of Australian Wild abalone product portfolio The Australian Abalone industry has not engaged the premium restaurant segment and expected product quality is continually undermined by the dumping of alternate product within the Shanghai market

Abalone in Shanghai – situation analysis High end hotels report a preference for direct channel products with HACCP certificates required on all products – hotels are heavily regulated in purchasing behaviour both from a government regulatory perspective (Food safety and hygiene) and self imposed constraints to maintain high standards and image. COO (Country of origin) and HACCP (health) certificates are enforced by regular government inspections Smaller restaurants have greater flexibility with product sourcing as they are not subject to regular government inspections that require COO and HACCP certificates

Research Opportunities For directly imported product, the key market segment is within 5 star hotels and prestige restaurants – specifically establishments with stringent quality, health and hygiene standards Customisation and value adding to save cooking preparation time - opportunity for ready to cook packaged product placement in premium retail food sector Stability in quality, pricing and supply is welcome There is a desire for authentic, safe, quality product that meets all certification requirements for both restaurant and premium retail food outlets Opportunity to impart product knowledge to chefs and F&B managers

Where to from here Development of a working relationship with Chinese import authorities is the key to expediting friendly import environment for direct channel imports Establishment of a direct import abalone product portfolio with COO and HACCP certification Establishment of a restaurant and consumer focused promotional strategy for the Australian Wild Abalone product portfolio Seek out suitable Chinese entity to engage in restaurant recruitment, sales and product supply functions Development of product variants customised to suit top end restaurant and food service sector

Progress to date Engagement of Chinese partners for Research management, Promotional, PR and Data management functions (Grey Group, Moisson and MAP) Ongoing development of direct import Australian Wild Abalone product portfolio Recruitment of 6 flagship restaurants in Shanghai Foundation discussions with a further 40 restaurants in Shanghai and Guangzhou re likely recruitment Shanghai Trade Launch event planned and ready for execution on 25 th of August 2010 Guangzhou Trade Launch event planned and ready for execution on 15 th of September 2010 Contact established with key Chinese Import Regulatory Authorities

EXTENDING THE FOOTPRINT

APPLICATION OF TRADEMARK Industry Endorsement – Q A (Heart Foundation ) Geographic Indicator – Appellation (Product adopts Geography) Place Of Origin Brand – Supply Chain Management and Marketing Model

PROJECT LAUNCH 25 th August 2010 The Lan Club Shanghai