The East Asia Food Programme- Integrating NZ suppliers into the East Asian Supply Chain Presented by: Natasha D’Costa Associate Director, Food & Beverages, APAC June 2015

EAST ASIA FOOD PROGRAMME- NZTE 2 Tactical Activities Food Connections Series of 8 NZ exclusive trade shows around the region to support existing and/or find new distributors NZ Taste Promotions Ongoing supermarket ins tore NZ promotions supported with online, competitions, product demonstrations. Also excellent tool to launch new SKUs Strategic Activities Competitor Landscapes A category overview across the region to select/prioritise markets Value Chain Analysis (this report) An overview of the channels, margins and competition in a particular market. Consumer Testing To assist with product localisation of packaging, taste profiles, etc Product Registration Speeding up the process for exporters and distributors. Coming Up Webinars on markets, (eg: wine and bakery categories) Other research in more detail with NZTE’s local in market F&B experts exploring the marketplace and opportunities for NZ companies. (more info contact Viv Williams- NZTE)

East Asia Macroeconomic Overview Japan dominates the East Asian market by the sheer size of its economy, while Indonesia is a key market among developing nations 3 Nominal GDP, East Asia, 2014 GDP, USD Billion Source: Frost & Sullivan Analysis Japan dominates the region and is a key influencer of F&B trends ASEAN’s growing affluent consumer population is becoming increasingly attractive to foreign investors The F&B industry is a key contributor to GDP growth to economies in this region, and improving food security remains a high priority in East Asia

East Asia F&B Sector Overview Japan, South Korea, Indonesia lead the East Asian F&B Market in terms of demand 4 Source: Frost & Sullivan Analysis F &B Domestic Consumption, East Asia CAGR F Domestic Consumption (2014), US$ Billions Bubble size denotes total domestic consumption Japan leads the market while Indonesia is the fastest-growing market fuelled by Japanese FDI Philippines is a fast-emerging market; FDI grew by over 100% from 2013 to South Korea aims to become the “food hub” of East Asia via aggressive expansion

Understanding East Asian needs-Glocalisation is King Coca-Cola is an example of a company that has nailed the idea of customising global products to local needs at reasonable costs 5 Market Growth Rate (Unit Case Volumes) Concentration of local products in Overall Product Portfolio Coca- Cola Largest Country markets, Key Growth Countries, 2014 Understand the local story Product requirements vary from country to country Beware of the single message- there is more to us than the “green New Zealand” story Respect cultural intricacies People buy concepts not products so cultural sensitivity is imperative Coca-Cola changed their name in China as the English version meant something completely different Identify what makes consumers tick Understand the need for formats such as “on-the-go” versions We may not like “tall poppies” but the Asians love them

6 Understanding East Asian needs-Aspirational living drives demand Rise of Airpork- Australian chilled pork dominates Singapore meat consumption 50 % of Australia’s chilled pork is exported to Singapore Over 90 % of pig meat in Singaporean supermarkets is Australian produced Singaporean consumers are 5X likely to buy chilled pork over frozen pork Qantas flies in over 1000 split carcases from Australia (mainly WA, NSW and SA) to Singapore each day as ‘Airpork’ Singaporean consumers pay almost 15% higher for “Air Pork” While Brazilian and American pork is considerably cheaper, consumers prefer to spend on the Australian image of quality and strict biosecurity standards *Note: QAF a Singaporean company purchased Bunge Meat Industries (BMI) in 2001, Australia's largest fully integrated pork producer who accounts for 30 per cent of pigmeat exports.

7 Understanding East Asian needs-Surmounting logistical barriers Japanese companies such as Suntory and Asahi have learned to work around distribution channels in East Asia. Over 30% of the cost of product in Indonesia is attributed to distribution costs Indonesia consists of an archipelago of over 18,000 islands. This causes a high variance in logistic costs Indonesia produces enough food for its population but due to logistical inefficacies over 30 per cent is lost leading to food insecurity Most foreign manufacturers thus tie-up with local companies to provide distribution networks Distributor and retailer support via infrastructure and logistic support (solar powdered freezers) is seen as a priority to ensure continued patronage.

Conclusions Overall Market Strategy Increase focus on market penetration via strategic distribution tie-ups with local distributors and retail chains. Distribution Strategy Organised retail (convenience stores) set to thrive; however, improvements in product delivery is important. Innovative product delivery and packaging strategies to engage the youth market are the key to improving product demand and distribution. Country Focus Strategy While Indonesia and Vietnam have large markets with immense potential, accessibility remains low due to high levels of corruption. New Zealand companies would benefit from initially conducting business with developed markets and using these countries as a base to venture into developing markets. 8

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