China Research Project Update

1. China Research Project Update ACA meeting August 2010

2. “ANALYSIS OF PRODUCT DIFFERENTIATION OPPORTUNITIES FOR AUSTRALIAN WILD CAUGHT ABALONE IN CHINA”

3. 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

4. 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

5. Channel Penetration by Phase Club/ High-end restaurant/ Private Kitchen/Fusion 54% Japanese Restaurant 9% Sea Food Hot pot 27% Premium Sea food 9% Phase 1 50 Restaurants Club high end restaurant/ Private Kitchen/Fusion 41% Japanese Restaurant 20% Sea Food Hot pot 25% Premium Sea food + Chinese Abalone Restaurant 12% Phase 2 120 Restaurants Club high end restaurant/ Private Kitchen/Fusion 47% Japanese Restaurant 23% Sea food Hot pot 21% Premium Sea food + Chinese Abalone Restaurant 7% Phase 3 210 Restaurants (Accumulated)

6. * 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

7. 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

8. 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

9. 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

10. 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

11. 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 25th of August 2010 • Guangzhou Trade Launch event planned and ready for execution on 15th of September 2010 • Contact established with key Chinese Import Regulatory Authorities

12. EXTENDING THE FOOTPRINT

13. EXTENDING THE FOOTPRINT

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

15. PROJECT LAUNCH 25th August 2010 The Lan Club Shanghai