Required Report - Public distribution

**Date:** 11/8/2007

**GAIN Report Number:** AS7067

AS7067

**Australia**

**Retail Food Sector**

**Annual**

**2007**

**Approved by:**

![](media/image1.wmf)Kathleen Wainio, Agricultural Counselor

U.S. Embassy

**Prepared by:**

Hassall & Associates Pty Ltd

**Report Highlights:**

The market for food grocery sales in Australia is concentrated along the
east coast where population and disposable income is greatest. The total
value of food retailing grew more than 6% in 2006, to US\$66.4 billion.
More than 70% of food expenditure occurs within the supermarket and
grocery sector. Of the total value of food imported into Australia in
fiscal year 2005/06, the US accounted for US\$454 million or 9% of total
imports and 1% of the total market. Consumers are increasingly demanding
foods that are healthy but also convenient, with organic, gluten-free
and functional foods (such as energy drinks) growing in popularity. This
report contains a road map for creating an entry strategy for the major
retail sectors, as well as best product prospects in the Australian
Market.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Canberra \[AS1\]

\[AS\]

This report was drafted by consultants:

Hassall & Associates Pty Ltd

GPO Box 4625

Sydney, NSW 2000

Australia

> Tel: +61-2-9241-5655
>
> Fax: +61-2-9241-5684
>
> Email: <hassallsydney@hassall.com.au>

Web: [www.hassall.com.au](http://www.hassall.com.au/)

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height="3.814583333333333in"}

Table of Contents

[SECTION I. MARKET SUMMARY 5](#section-i.-market-summary)

[Key Players 5](#key-players)

[Value of Overall Retail Food Sales Over the Past Six Years
5](#value-of-overall-retail-food-sales-over-the-past-six-years)

[Value of Imported Food vs Domestic Products, Over the Past Five Years
6](#value-of-imported-food-vs-domestic-products-over-the-past-five-years)

[Expected Growth Overall for Retail Food and Sub-sectors
8](#expected-growth-overall-for-retail-food-and-sub-sectors)

[Trends in Distribution Channels 9](#trends-in-distribution-channels)

[Number and Type of Retail Outlets
10](#number-and-type-of-retail-outlets)

[Trends in Services Offered by Retailers
11](#trends-in-services-offered-by-retailers)

[Advantages and Challenges for U.S. Retail Food Exporters
16](#advantages-and-challenges-for-u.s.-retail-food-exporters)

[SECTION II: ROAD MAP FOR MARKET ENTRY
17](#section-ii-road-map-for-market-entry)

[Entry Strategy 17](#entry-strategy)

[Market Structure 18](#market-structure)

[A. SUPER STORES, SUPERMARKETS, HYPER MARKETS OR SUPER CENTERS, CLUB AND
WAREHOUSE OUTLETS
20](#a.-super-stores-supermarkets-hyper-markets-or-super-centers-club-and-warehouse-outlets)

[B. CONVENIENCE STORES AND GAS MARTS
22](#b.-convenience-stores-and-gas-marts)

[C. TRADITIONAL MARKETS -- MOM/POP INDEPENDENT GROCERY, WET MARKETS
24](#c.-traditional-markets-mompop-independent-grocery-wet-markets)

[SECTION III: COMPETITION 26](#section-iii-competition)

[SECTION IV: BEST PRODUCT PROSPECTS
30](#section-iv-best-product-prospects)

[Category A: Products Present in the Market Which Have Good Sales
Potential
30](#category-a-products-present-in-the-market-which-have-good-sales-potential)

[Category B: Products Not Present in Significant Quantities but Which
Have Good Sales Potential
31](#category-b-products-not-present-in-significant-quantities-but-which-have-good-sales-potential)

[Category C: Products Not Present in the Market Because They Face
Significant Barriers.
33](#category-c-products-not-present-in-the-market-because-they-face-significant-barriers.)

[SECTION V. POST CONTACT AND FURTHER INFORMATION
34](#section-v.-post-contact-and-further-information)

[Import Regulations 34](#import-regulations)

[Australia's Food Labeling Regulations
34](#australias-food-labeling-regulations)

[Industry Information 34](#industry-information)

[Trade Shows 35](#trade-shows)

[Major Wholesalers 35](#major-wholesalers)

[Major Retailers 36](#major-retailers)

[Bibliography 36](#bibliography)

The following exchange rates were used to convert Australian dollars to
U.S. dollars for 2001 to 2007 (daily averages, calendar year basis).

  --------- -------- -------- -------- -------- -------- -------- --------
            2001     2002     2003     2004     2005     2006     2007\*

  AUD/USD   0.5128   0.5438   0.6524   0.700    0.7622   0.7535   0.8189
  --------- -------- -------- -------- -------- -------- -------- --------

Source: [www.rba.gov.au](http://www.rba.gov.au/) \*Exchange rate for
2007 is the average of January -- August only.

In circumstances where only fiscal year data is available, the following
exchange rates have been used (daily averages, Australian fiscal year
July-June):

  ---------- ---------- ---------- ---------- ---------- ---------- ----------
             2001/02    2002/03    2003/04    2004/05    2005/06    2006/07

  AUD/USD    0.5238     0.5842     0.7128     0.7524     0.7477     0.7857
  ---------- ---------- ---------- ---------- ---------- ---------- ----------

Source: [www.rba.gov.au](http://www.rba.gov.au/)

Rising food prices (due to factors such as the present Australian
drought and high world commodity prices) should also be considered when
reading this report, particularly when considering the value of retail
sales.

# SECTION I. MARKET SUMMARY

-   The market for food grocery sales in Australia is concentrated along
    the east coast where population and disposable income are greatest.
    New South Wales (NSW) and the Australian Capital Territory dominate
    with a 33% share of the supermarket and grocery sector, followed by
    25% for Victoria, 20% for Queensland, 11% for Western Australia, 8%
    for South Australia, 2% for Tasmania and 1% for the Northern
    Territory.

## Key Players

-   **Woolworths** is an Australian-owned company that has been trading
    since the 1920s. Trading under the logo of the \"Fresh Food
    People\", the company operates over 750 supermarkets and serves more
    than 13 million customers each week.

-   **Coles** is part of Coles Group Limited, which is Australia\'s
    largest retailing group. The company opened its first supermarket in
    1960 and now operates around 740 stores throughout Australia.
    Following several decades of consolidation, the Coles Group may be
    subject to restructuring and deconsolidation if an impending
    take-over bid by Wesfarmers is successful. The implications of this
    are unclear at present (with Wesfarmers' plans for Coles still
    largely unknown) however may involve increased competition for
    Woolworths.

-   **Franklins** is a discount supermarket chain selling dry groceries
    and perishables in metropolitan and rural areas throughout NSW. The
    current Franklins brand was established in 2001 after the company
    was bought by South African retailer, Pick 'n Pay. Prior to this,
    Franklins No Frills had been operating in Australia since 1978.
    Franklins has 80 stores in NSW.

-   **Aldi Supermarkets**, the German based international discount food
    retailer which began trading in Australia in 2001, has established
    itself within the Australian market with grocery stores in NSW, ACT,
    Victoria and Queensland. Aldi opened its 150^th^ store during 2007.
    The success of Aldi highlights an emerging trend towards discount
    retailing, focused on a narrow product range and targeted at a
    specific demographic.

-   **Metcash Trading Limited Australasia** is a leading marketing and
    distribution company operating in the food, and other fast moving
    consumer goods, categories. It has three business units -- IGA
    Distribution, Campbell's Cash & Carry, and Australian Liquor
    Marketers (ALM).

## Value of Overall Retail Food Sales Over the Past Six Years

-   Table 1 summarizes total food retail sales and growth for the past
    six years. The total value of food retailing in 2006 was US\$66.4
    billion, which was an increase of over US\$3.5 billion (6%) from
    2005.

-   In 2007, total food retailing is forecast to jump 18%, to US\$78
    billion. Several factors are driving retail food prices (and
    therefore the value of sales) including higher fuel prices (leading
    to increased production and transport costs), weather events such as
    drought and cyclones (which have resulted in lower production and
    increased prices for a range of commodities, in particular grains,
    dairy and bananas), tight irrigation water supplies, and strong
    export demand for food products (although this may be constrained by
    the strong Australian dollar, which is making Australia's exports
    more expensive).

-   More than 70% of food expenditure (US\$47 billion in 2006) occurs
    within the supermarket and grocery sector.

-   'Other food retailers', consisting of specialized food retailers
    such as fishmongers and bakers, are forecast to experience retail
    sales growth of 21% in 2007. Customers purchase from these stores
    due to the greater variety of fresh product offered (relative to the
    large supermarket chains) and 'old-fashioned service' provided. Many
    of these stores are also value-adding by marinating their own meat,
    and making their own salads, soup, dips and fruit preserves.

-   Building on this idea is Harris Farm- an Australian family-owned
    company that currently has 18 stores, predominantly in NSW. Harris
    Farm credits itself as the "first Australian fruit and vegetable
    company to open in a supermarket-style operation" and offers an
    extensive range of fresh fruit, vegetables, meat, dairy products,
    seafood, bakery items and imported specialty foods.

Table 1: Total Food Retailing Over the Past Six Years (US\$m)

+---------------------+--------+-------+-------+------+------+------+
| **Description**     | **     | **2   | **2   | **20 | **20 | **   |
|                     | 2002** | 003** | 004** | 05** | 06** | 2007 |
|                     |        |       |       |      |      | \*** |
+---------------------+--------+-------+-------+------+------+------+
| **Total Food        | 38,186 | 4     | 5     | 62   | 66   | 78   |
| Retailing (US\$m)** |        | 8,429 | 5,688 | ,849 | ,415 | ,202 |
+---------------------+--------+-------+-------+------+------+------+
| Nominal Growth Rate | 14%    | 27%   | 15%   | 13%  | 6%   | 18%  |
|                     |        |       |       |      |      |      |
| (US\$ value)        |        |       |       |      |      |      |
+---------------------+--------+-------+-------+------+------+------+
| Nominal Growth Rate | 8%     | 6%    | 7%    | 4%   | 7%   | 8%   |
|                     |        |       |       |      |      |      |
| (A\$ value)         |        |       |       |      |      |      |
+---------------------+--------+-------+-------+------+------+------+
| ** **               |        |       |       |      |      |      |
+---------------------+--------+-------+-------+------+------+------+
| **Supermarkets and  | 27,255 | 3     | 3     | 44   | 47   | 55   |
| Grocery Stores Food |        | 4,711 | 9,816 | ,642 | ,022 | ,027 |
| Retailing^1^**      |        |       |       |      |      |      |
+---------------------+--------+-------+-------+------+------+------+
| Real Growth Rate    | 13%    | 27%   | 15%   | 12%  | 5%   | 17%  |
+---------------------+--------+-------+-------+------+------+------+
| \% of Total Food    | 71%    | 72%   | 71%   | 71%  | 71%  | 70%  |
| Retailing           |        |       |       |      |      |      |
+---------------------+--------+-------+-------+------+------+------+
| ** **               | ** **  | ** ** | ** ** | *    | *    | *    |
|                     |        |       |       | * ** | * ** | * ** |
+---------------------+--------+-------+-------+------+------+------+
| **Takeaway Food     | 4,074  | 5,321 | 6,169 | 6    | 7    | 8    |
| Retailing**         |        |       |       | ,938 | ,085 | ,310 |
+---------------------+--------+-------+-------+------+------+------+
| Real Growth Rate    | 13%    | 31%   | 16%   | 12%  | 2%   | 17%  |
+---------------------+--------+-------+-------+------+------+------+
| \% of Total Food    | 11%    | 11%   | 11%   | 11%  | 11%  | 11%  |
| Retailing           |        |       |       |      |      |      |
+---------------------+--------+-------+-------+------+------+------+
|                     |        |       |       |      |      |      |
+---------------------+--------+-------+-------+------+------+------+
| **Other Food        | 12,609 | 1     | 1     | 14   | 16   | 18   |
| Retailing^2^**      |        | 2,872 | 3,861 | ,785 | ,334 | ,152 |
+---------------------+--------+-------+-------+------+------+------+
| Real Growth Rate    | 22%    | 22%   | 16%   | 16%  | 9%   | 21%  |
+---------------------+--------+-------+-------+------+------+------+
| \% of Total Food    | 18%    | 17%   | 17%   | 18%  | 19%  | 19%  |
| Retailing           |        |       |       |      |      |      |
+---------------------+--------+-------+-------+------+------+------+

\* Forecasts for calendar year 2007

1\. This category consists of units mainly engaged in retailing
groceries or non-specialized food lines, whether or not the selling is
organized on a self-service basis.

2\. This category consists of units mainly engaged in specialized food
retailing e.g. butchers, fresh fish retailing, fresh fruit and vegetable
retailing, bread and cake retailing, milk vending and confectionery.

Source: ABS Cat. No. 8501.0

## Value of Imported Food vs Domestic Products, Over the Past Five Years

-   The total value of imports for the food and beverage sector from
    July 2006 to June 2007 (the Australian fiscal year) (Figure 1) was
    almost US\$6.3 billion (or 8% of the total market). This includes
    products at three levels of transformation, including minimally
    transformed (indicates basic refining or manufacturing processes),
    moderately transformed (implies that manufacturing processes have
    processed or refined raw material into a recognizable product) and
    elaborately transformed (indicates commodities have undergone
    processes to create an end use product).

-   Of the total value of food imported into Australia in 2005/06 (\$5.1
    billion), the US accounted for US\$454 million or 9% of total
    imports and 1% of the total market. The majority of Australia's
    imports are sourced from New Zealand (Error: Reference source not
    found). However, this may change as the impact of recent free trade
    agreements with the US and Thailand may not yet be fully felt.

-   Food and beverage imports have risen over the last five years and
    have a five-year average annual growth rate of 10% (in Australian
    dollar terms). When converted to U.S. dollars a significant trough
    appears in the 2005/06 growth rate, however, the five-year average
    annual import growth rate is 21%.

Figure 1: Total Australian Food Imports from 2002/03 to 2006/07

  -----------------------------------------------------------------------
  ![](media/image3.wmf){width="5.114583333333333in" height="2.9375in"}

  -----------------------------------------------------------------------

Source: ABS Cat. No. 5368.0

Figure 2: Value Shares of Australian Food Imports, by country of origin\
(A\$ terms)

  -----------------------------------------------------------------------
  ![](media/image4.wmf){width="5.455555555555556in" height="3.45in"}

  -----------------------------------------------------------------------

Source: ABARE Australian Food Statistics 2006

-   The value of domestic farm and fishery food production reached
    US\$26.0 million in 2005/06, representing a 9% increase from
    2004/05. However this is forecast to fall in 2006/07 to US\$22.8
    million, reflecting the impact of the drought on crop yields.

-   Domestic processed food industry sales and service income totalled
    US\$52.5 billion in 2004/05 (the most recent data available), with
    industry value added of US\$13.1 billion (compared to US\$11.8
    billion the year prior).

## Expected Growth Overall for Retail Food and Sub-sectors 

-   Supermarkets and grocery stores continue to maintain the vast
    majority of the retail food market share, at around 60% over the
    period 2004-2006. The market share of takeaway food outlets has been
    stable, at just less than 10%. Cafés and restaurants have also
    maintained market share (at around 14%), reflecting consumers'
    continued desire for convenience. Other food retailers, such as
    butchers and bakeries, have experienced a gradual growth in market
    share, to 16%.

Figure 3: Market Share by Food Channel, 2004-2006

  -----------------------------------------------------------------------
  ![](media/image5.wmf){width="6.4944444444444445in"
  height="4.032638888888889in"}

  -----------------------------------------------------------------------

Source: ABS Cat. No. 8501.0

-   Woolworths has continued to increase store numbers, opening 22 new
    stores in the 2005/06 financial year.

-   Coles opened 20 new stores in 2006/07 and converted 129 of its Bi-Lo
    stores to Coles stores. This strategy proved unsuccessful however,
    and resulted in 71 of these stores being 'unconverted' back to the
    Bi-Lo name.

-   Metcash opened 42 new IGA stores in 2006/07, and plan to build a
    further 60 stores in 2007/08.

-   Supermarket and grocery store openings should allow the market share
    of this food channel to be maintained in 2007.

-   Uncertain irrigation water supply and drought are expected to
    continue to place upward pressure on retail prices.

-   Industrial relations reforms in Australia may place downward
    pressure on employment costs in shop front, delivery and shelf
    stacking, however the employment market is highly competitive and
    may partially offset this effect. Any net reduction in employment
    costs may reduce the effect of ongoing high commodity and packaging
    prices.

## Trends in Distribution Channels

-   Distribution points in Australia are centralized. All major
    supermarket chains and warehouse/wholesale clubs operate their own
    network of national and regional distribution centers.

-   Woolworths is continuing to reduce its supermarket distribution
    centers (DCs) from 31 national DCs to 9 regional and two national.
    Seven regional DCs and both national DCs have been completed, with
    construction on the remaining 2 DCs underway. Two liquor DCs are
    also under construction and expected to be completed during 2008.

-   Coles opened two purpose-built national distribution centers in
    2006/07 (one each in Victoria and NSW) and four regional DCs. The
    company closed five DCs during the year, with another 13 to be
    closed in 2007/08. This is part of a broader plan to boost
    efficiency, with the aim of reducing the number of DCs from more
    than 40 to just 26.

-   Banner groups are used by a large number of independent retailers to
    improve the buying, advertising and competitive power of smaller
    grocery and convenience stores. Under banner groups, retailers are
    able to negotiate better prices, coordinate marketing campaigns and
    collaborate to establish new programs that benefit consumers.

-   IGA Distribution has twelve distribution centers carrying around
    21,000 items, which serve the dry, chilled and frozen grocery
    requirements of over 2,700 independent retail grocery stores on the
    Eastern seaboard of Australia and South Australia.

-   Campbell's Cash & Carry operates 55 wholesale warehouses across New
    South Wales, Victoria, Queensland, South Australia and the Northern
    Territory carrying 12,000 liquor, food service, grocery, dairy,
    frozen, confectionery and tobacco products. Campbell's also
    specializes in distribution to the gasoline and organized
    convenience store sector.

-   Australian Liquor Marketers is the leading broad range liquor
    wholesaler in Australia. It operates 18 distribution centers across
    Australia and New Zealand, carrying more than 8,000 products to meet
    the wine, spirits and beer requirements of more than 14,500 licensed
    premises.

-   Aldi currently operates from two distribution centers, one in Sydney
    (40,000m^2^) and the other in Melbourne (50,000m^2^). A A\$60
    million distribution center is currently being built in Stapylton,
    which is between the Gold Coast and Brisbane in Queensland.

-   There is a general trend of consolidation within and between
    alcoholic and non-alcoholic beverage manufacturers, bottlers and
    distributors.

## Number and Type of Retail Outlets

Table 2 outlines the number of food retail outlets and percent change
for the period 2003-2006.

Table 2: Grocery Market Breakdown by Outlets in Australia and Growth
over the Period, 2003-2006

+--------------------------+-------+-------+-------+-------+---------+
|                          | **2   | **2   | **2   | **2   | **%     |
|                          | 003** | 004** | 005** | 006** | Growth  |
|                          |       |       |       |       | (t      |
|                          |       |       |       |       | otal)** |
+--------------------------+-------+-------+-------+-------+---------+
| Chain Store Outlets ^1^  | 1,521 | 1,592 | 1,665 | 1,693 | 11      |
+--------------------------+-------+-------+-------+-------+---------+
| Convenience Chain Store  | NA    | NA    | NA    | 1,807 | NA      |
| Outlets ^2^              |       |       |       |       |         |
+--------------------------+-------+-------+-------+-------+---------+
| Banner Traders & Other   | 684   | 1,224 | 1,707 | 1,871 | 174     |
|                          |       |       |       |       |         |
| Independents ^3^         |       |       |       |       |         |
+--------------------------+-------+-------+-------+-------+---------+

1\. Grocery chains including Woolworths, Coles Myer Ltd, Franklins and
Aldi

2\. Including Woolworths/Caltex, Coles/Shell, 7-eleven and other groups

3\. Including Foodworks and IGA

Source: Retail World Annual Report 05; Foodmap, 2007.

-   The number of chain store outlets increased 11% between 2003 and
    2006, with the expansion of the Aldi chain (120 stores in 2006
    compared to 54 stores in 2003) a key driver.

-   The number of banner traders and other independents rose
    substantially over the period, with both Foodworks and IGA boosting
    store numbers.

-   Aside from Foodworks and IGA stores, there were 850 'other'
    independent retailers as at June 2006 (Foodmap 2007) including Night
    Owl and independent corner stores. There are currently 43 Night Owl
    stores in Australia. These are predominantly located in Queensland,
    but there are also stores in Sydney, Canberra, Adelaide, Melbourne
    and Hobart.

## Trends in Services Offered by Retailers

-   Retailers are offering an increasingly diverse range of products and
    services, and extending both their offerings and store formats.

-   The leading chain supermarkets (Coles and Woolworths) are continuing
    in their attempt to provide a 'one stop shop' that fulfills
    customers' shopping needs under the one roof.

-   Woolworths supermarket **departments** include: bakery, seafood,
    delicatessen, meat, produce, and dry groceries. Coles supermarkets
    have the following departments: produce, delicatessen, meat,
    patisserie and cappuccino café; and dry groceries.

-   **In-store services** offered at Woolworths include: Clover Hill
    flowers, flexible payment options, fresh food platters, WISH gift
    cards, home delivery, in-store butchers, mobile phone / recharge
    cards, parcel pick-up, and carpet cleaning equipment hire.

-   Coles in-store services include: choice of payment methods, customer
    accounts, FlyBuys, Coles 7 a day (a healthy eating program in
    collaboration with the Dietitians Association of Australia), Coles
    Baby Club (including free information, magazines, special offers and
    discounts to expectant and new parents), discontinued lines, fresh
    flowers, Coles Meal Ideas (recipe ideas that are healthy and quick
    to prepare), newspapers, fresh food platters, parcel pick-up,
    carry-to-car service, cash-on-delivery for elderly or disabled
    customers, carpet cleaning equipment hire, dry cleaning, gift cards,
    phone cards, photo processing, and photocopying.

-   Retailer catalogues are widely used throughout Australia and each of
    the major retailers distributes a full color 12-16-page catalogue to
    more than six million homes every week.

-   Opening hours for retailers, across most segments, have been
    deregulated with the exception of retailers in Western Australia. A
    referendum was held in WA as part of the state election in 2005,
    proposing to extend trading hours to 9pm Monday-Friday and allow
    Sunday trading for up to six hours. However, 58% of voters rejected
    the proposal and thus only those retailers who already operated
    extended hours were able to continue doing so. Extended trading
    hours in all other states has enabled the large supermarket chains
    to compete for the 'convenience shopper'.

-   Woolworths, Coles and IGA offer **discounted fuel**. Woolworths
    customers that spend \$37 or more in one transaction at any
    Woolworths/Safeway supermarket or Big W can save 15¢ per gallon at
    any CALTEX WOOLWORTHS or CALTEX SAFEWAY outlet on presentation of
    their shopping docket. Customers can save an additional 15¢ per
    gallon, if they spend \$5 or more on in store items at a CALTEX
    WOOLWORTHS or CALTEX SAFEWAY outlet when purchasing discounted fuel.

-   Coles offers a 15¢ per gallon saving at any Coles Shell outlet when
    customers spend \$37 or more at participating Coles, BI-LO,
    Liquorland, Coles Central, Pick \'n Pay Hypermarket and Liquorland
    Express stores, or online with Coles Online and ShopFast.

-   IGA customers can purchase fuel from any gas mart, spend a minimum
    of \$37 at a participating IGA store, and present their fuel
    receipt, to receive a 15¢ per gallon reimbursement.

-   **Liquor** -- Woolworths sells liquor through its BWS and Dan
    Murphy's outlets. Coles owns a variety of liquor outlets including
    Liquorland, Vintage Cellars, and 1st Choice Liquor Superstore.
    Liquor is also available through Woolworths HomeShop and Coles
    Online.

-   **Pharmaceuticals** -- The restrictions in place to prevent
    pharmacies operating within supermarkets will remain until 30
    June 2010. Supermarkets are competing with pharmacies in
    non-prescription drugs and other over the counter products.

-   **Organic --** The demand for organic food in Australia is estimated
    to be growing at 25-30% per annum, with the Australian organic
    industry valued at US\$339 million in 2006. The 'Woolworths
    Organics' range currently includes fresh fruit and vegetables,
    poultry, tinned products, milk and cheese. Woolworths also offers a
    'Naytura' range which currently includes nuts, dried fruits,
    cereals, spreads and biscuits that have been selected to "provide
    the highest quality taste while being low in salt, sugar, fat and
    additives".

-   There are more than 500 products in Coles' organic range (including
    home brands and leading organic brands). 'You'll Love Coles Organic'
    includes selected products in the following areas: baby, bakehouse,
    dairy, fruit and vegetables, general merchandise, grocery and meat.

-   **Generic labels** - 'Woolworths Select' offers customers "a range
    of grocery lines with the highest quality products that are second
    to none". The product range is still under development however
    currently includes: canned and frozen vegetables, fruit tubs, canned
    tuna and salmon, cheese, nuts, baby care items, hair accessories,
    marinades, condiments, sauces and dressings, side dishes, coffee,
    pasta, pet food, and cleaning and laundry products.

-   Woolworths 'Home Brand' products are available across most grocery
    departments and aim to provide "everyday household products at great
    value for money".

-   'You'll Love Coles' aims to provide Coles customers with "great
    tasting quality products without spending a fortune". The product
    range is being expanded but currently includes: milk, cereal, honey,
    chocolate spread, ready-to-eat and layered salads, vine-ripened
    tomatoes, mince meat, canned salmon and tuna, ice cream, choc-chip
    cookies, baby clothing, body wash, and toilet tissue.

-   Other generic labels include Franklins' 'No Frills' and IGA's 'Black
    and Gold'.

-   **Trend away from plastic bags towards reuseable bags -** Coles
    offers the following alternatives to conventional plastic bags:
    plastic bags using recycled content, polypropylene 'Go-Green' bags,
    calico bags, paper bags, and Smart Box (a heavy duty plastic box
    made from recycled material). Other initiatives being developed
    include Go Green Box (a wax-lined green cardboard box made from
    fully recycled material) and R Bag (a multi-use plastic bag made
    from HPDE plastic).

-   Woolworths has introduced a policy of only offering plastic bags to
    customers purchasing more than three items. As an alternative to
    plastic bags, Woolworths customers can purchase a 'Green Bag'. This
    has been an extremely successful initiative with over 5 million
    Green Bags sold in Australia by the end of 2004. In addition, more
    than 30,000 Woolworths employees have undertaken 'Fill the Bag not
    the Environment' training.

-   Plastic bag recycling bins are located in-store at both Coles and
    Woolworths outlets.

```{=html}
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```
-   **Home shopping via the Internet** -- Coles Online is available
    throughout metropolitan Melbourne and in selected Sydney suburbs.
    Woolworths HomeShop is available throughout Sydney, Canberra and
    Melbourne.

-   Convenience stores offer a range of services (Error: Reference
    source not found). In 2001 the most common service offered was an
    **ATM**, with 92% of stores having this facility.

Figure 4: Proportion of Convenience Stores offering specialty services,
2001

  -----------------------------------------------------------------------
  ![](media/image6.wmf){width="6.499305555555556in"
  height="3.598611111111111in"}

  -----------------------------------------------------------------------

Source: Australian Association of Convenience Stores, 2002

-   An increasing consumer demand for convenience and a trend towards
    more frequent shopping (ABARE 2005-06) has caused a shift in the
    break-down of product sales in convenience stores. Basic items such
    as cereal and milk have seen an increase in value within the total
    product sales for convenience stores (AC Nielsen). This reflects a
    trend towards the convenience of smaller stores for single or small
    purchases and just-in-time shopping patterns.

-   The largest selling product category in convenience stores is
    cigarettes, which account for 37% of product sales (Figure 5).
    Despite significant limitations imposed on, and regulation of,
    advertising, brand extension and presentation, this category has
    experienced a growth in value of 2% from 2006. This growth largely
    reflects taxation increases being passed on to consumers rather than
    sales volume growth. The next largest category (carbonated
    beverages) accounts for a share in value which is less than half
    that held by cigarettes. A few large producers dominate the
    cigarettes and carbonated soft drinks categories.

-   The product categories which have experienced the largest increase
    in percentage of value are energy and sports drinks. These product
    groups saw an increase in value of 22% and 19% respectively from
    2006 (Figure 6)

-   Communications is the next biggest retail growth category in
    convenience stores, having seen an increase in value of 16% from
    2006 (Figure 6). This category is driven by sales of pre-paid mobile
    phone credit, which account for half of the top ten new products
    based on sales value.

Figure 5: Convenience Categories Value Share of Sales, year ended\
March 2007 (%)

![](media/image7.png){width="6.497222222222222in"
height="3.078472222222222in"}

Source: Nielsen Convenience Report 2007

Figure 6: Convenience Categories Value Growth, year ended March 2007 (%)

![](media/image8.png){width="3.9555555555555557in"
height="5.295138888888889in"}

Source: Nielsen Convenience Report 2007

## Advantages and Challenges for U.S. Retail Food Exporters

Table 3: Advantages and Challenges for U.S. Retail Food Exporters

  ----------------------------------- -----------------------------------
  **Advantages/Opportunities**        **Challenges/Weaknesses**

  Australian dollar has appreciated   Country of origin labeling is
  against the U.S. dollar making      compulsory and many Australian made
  imports relatively cheaper for      products bear the Australian Made
  Australians, however European and   logo. Australian Grown label
  Asian imports are also less         launched June 2007. Consumers are
  expensive.                          therefore becoming more aware and
                                      many prefer to buy Australian
                                      products over those from overseas
                                      (where possible).

  Purchasing for wider geographical   With the exception of a few high
  areas will expand. There is a trend profile brands (such as Coca-Cola
  towards global retailing due to the and Arnotts biscuits), few brands
  global sourcing of products.        have significant bargaining power
                                      with the larger, concentrated food
                                      retailers.

  Northern hemisphere seasonal        A focus on fresh food presentation
  advantage for fresh foods, e.g.     by the major supermarket chains has
  fruit and vegetables.               provided advantages to local
                                      producers.

  Many imported products are not      Australia has strict quarantine
  subject to tariffs, and those that  requirements for fresh products.
  are tend to be charged tariffs of   Import permits are required for
  between 0-5%.                       fresh produce and some products are
                                      prohibited.

  Australian consumers are            Increasing customer awareness of
  experimental and desire new and     diversity in food products is
  innovative ideas and authentic,     fragmenting some traditional single
  restaurant-quality taste            offering markets.
  sensations.                         

  Opportunity to trial innovative     Need to produce innovative food
  products and capture/gain market    products to break into highly
  share in the canned food category,  competitive retail food sector as
  including organic foods.            most categories have substantial
                                      market leaders.

                                      The canned food category is
                                      exhibiting slow growth because of
                                      the onset of alternative packaging
                                      and lack of manufacturer innovation
                                      in some segments.

  No language barriers.               There is significant community
                                      discussion regarding the potential
                                      for restrictions on advertising
                                      certain food groups on children's
                                      television and other restrictions
                                      of promotional strategies targeting
                                      children.

  Organic products are one way that   Australia is a net exporter of high
  US exporters could differentiate    quality commodity foods- in some
  their products in the Australian    segments, Australia is increasingly
  market.                             recognized as producing
                                      internationally competitive 'clean
                                      and green' products, and there is a
                                      trend towards regionally branded
                                      labels.

  Affluent consumers concentrated in  
  only a few geographical regions.    

  Around 7% of Australians shop       
  online for food/groceries. This     
  offers an alternative avenue for    
  marketing and advertising.          
  ----------------------------------- -----------------------------------

Source: various industry publications, websites, local knowledge

# SECTION II: ROAD MAP FOR MARKET ENTRY

## Entry Strategy

***Market Access for Imported Products***

-   Import or license the manufacturing and distribution of the product
    to a local food manufacturer.

-   Enter the market through a distributor, importer, agent or broker
    who then targets specific food category/merchandise managers at
    major wholesalers and major supermarket chains. Major chains and
    wholesalers have their own distribution centers and national
    coverage. Targeting major chains through an agent/distributor will
    reduce the risk of entering an inappropriate state market in
    Australia. Specialist distributors or wholesalers may also be
    approached.

-   Product promotion - product launches for supermarkets are popular
    and effective. Provide agent/distributor with promotional material
    and product suitable for in-store demonstrations. Promotional
    formats may vary. For example:

```{=html}
<!-- -->
```
-   EDLP: Every Day Low Price, including Rollback. Incremental lift is
    achieved by using display and catalogue only - the price remains
    constant from week to week.

-   Multi-buy: 3 for the price of 2 and buy one get one free offers have
    become a popular way of giving consumers a discount without reducing
    sales value.

-   Bonus offer: buy product A, get product B for free.

```{=html}
<!-- -->
```
-   Couple promotion with advertising such as in-store display and store
    catalogues, major industry magazines (e.g. Retail World),
    newspapers, television, radio and public transport.

-   A 10% temporary price cut typically yields a 40% increase in sales,
    according to studies conducted by ACNielsen. However, in-store
    displays can add 65%, and catalogues another 20-25%, to baseline
    sales.

-   Exhibit at Australian food shows. Fine Food Australia, the premier
    international food, drink and equipment exhibition, was held in
    Sydney in 2007. It featured over 750 exhibitors including over 220
    international exhibitors from 20 countries and attracted an
    estimated 30,000 trade visitors. The 2008 show will be held in
    Melbourne from September 22-25.

```{=html}
<!-- -->
```
-   Product may also be sold via the Internet; however recent surveys
    suggest that the proportion of shoppers that purchase groceries
    online has been overestimated in the past. It is now thought that
    about 7% of the population shops online for groceries.

-   For unique and innovative products it may be appropriate to join
    forces with an Australian company to manufacture under license. U.S.
    products may then obtain brand recognition and a committed sales
    force.

***Competitive Analysis***

-   Imported products will have to compete with 'Australian Made'
    products. There is a general awareness and affiliation amongst
    consumers for buying Australian made goods. This may strengthen
    further with the launch of the 'Australian Grown' label for fresh
    produce.

-   Imported products need to be competitively priced to compete with
    the growing number of discount chain stores, e.g. Aldi.

-   Convenient, healthy, fresh and diverse meal solutions that are easy
    to buy, easy to store and easy to eat, are a consumer preference
    that provides future potential for imported products.

-   The use of food brokers in Australia is increasing. Food brokers can
    assist with market entry by bridging the gap between retailer's
    reports and what is actually happening in the supermarkets. Brokers
    can also assist in getting a new product into distribution quickly.
    Some companies also offer warehousing and distribution options.

***Comparative Advantage of U.S. Products***

-   Due to the large U.S. market, U.S. manufacturers are able to develop
    a range of products far beyond that which can be achieved in
    Australia. This enables U.S. exporters to deliver innovative product
    lines that are otherwise not available from Australian
    manufacturers.

-   Ready to eat meals are still underdeveloped in Australia compared to
    the U.S. This is another area where there is opportunity for U.S.
    products to enter, although there are quarantine issues with regard
    to items containing meat and egg products. This provides an
    opportunity for US exporters to license production to manufacturers
    located in Australia.

-   Branding can be an advantage as many U.S. brands have significant
    market recognition and are presented or referenced across various
    sport and entertainment media.

***Ability or Willingness of U.S. Exporters to Meet Market
Requirements***

-   The Australian market is very 'Americanized' and most food
    categories are compatible with Australian tastes. Many categories
    are dominated by American brands, such as Mars, Campbells, Kelloggs,
    and Coca-Cola, who have been very successful in the Australian
    market. However, some American product launches have not been as
    successful, especially within the chocolate confectionary segment.
    This may be due to the wide variety of chocolate confectionary that
    is already available in the Australian retail market.

-   Many U.S.-owned food manufacturers have an existing presence in the
    Australian market thereby making market entry easier.

-   Food labeling in Australia is stringent, and manufacturers need to
    consider the costs involved with changes in labeling for a
    relatively small market (Australia's population is approximately 20
    million). Sometimes the quantity required for the Australian market
    is not compatible with large volume U.S. production runs.

-   Another option that is currently used for some American branded
    products (for example Pringles, a potato chip snack food) is
    labeling that satisfies many different export markets. This assists
    in making the Australian market more accessible.

-   It is often helpful to engage a broker who understands the market,
    knows what presentation documents the retailers require, and has
    high-level trade relationships.

## Market Structure

***U.S. Product Flow***

-   There are two main distribution channels to major supermarket and
    smaller supermarket chains: distribution centers and wholesalers.

-   Food products will be stored in warehouses prior to delivery.

-   Transport between distribution centers in Australia is predominantly
    by road.

-   Figure 7 depicts the movement of food products from the U.S.
    exporter through to the retailer.

Figure 7: Movement of U.S. Exports through to the Retailer

[]{.mark}

  -----------------------------------------------------------------------
  ![](media/image9.wmf){width="5.998611111111111in" height="3.81875in"}

  -----------------------------------------------------------------------

Source: various industry publications, websites, local knowledge

***Significant Changes or Trends***

-   Competition between major supermarket chains has encouraged segment
    and product discounting strategies. Smaller supermarket chains and
    'Mom and Pop' independent supermarkets are facing increasing price
    competition. However, they remain in the market due to their
    convenience factor, the scale of the market in remote areas, and
    customer loyalty.

-   Fundamental changes are occurring in Australia, similar to the
    United Kingdom and the United States, with a variety of formats such
    as 'express' stores. These stores offer a smaller product range,
    large fresh and pre-packed food sections, and a large number of
    check-outs.

***Flow Pattern between Different Retailers***

-   Product flows in a similar manner for each of the major supermarkets
    chains, with each operating central distribution centers.

-   Independent supermarkets and smaller supermarket chains purchase
    their food products through the major wholesalers or direct from
    manufacturers.

***Margins***

-   Gross margin data is very scarce, with the major retailers,
    wholesalers and manufacturers reluctant to make this information
    public. As an alternative, the Earnings Before Interest & Tax (EBIT)
    margins for Woolworths (Retail and Wholesale), Coles (Retail), and
    Metcash (Wholesale) are presented in Figure 8. These margins show
    EBIT as a proportion of gross sales.

-   In 2005/06, Woolworths' retail segment achieved an EBIT margin of
    almost 4.5%, compared to Coles' margin of just over 2%\*.

-   Metcash's wholesale food segment recorded an EBIT margin of over 4%
    in 2006/07.

[]{.mark}

Figure 8: Earnings Before Interest & Tax Margins, 2001/02-2006/07

  -----------------------------------------------------------------------
  ![](media/image10.wmf){width="6.492361111111111in"
  height="4.747916666666667in"}

  -----------------------------------------------------------------------

Source: [www.aspecthuntley.com.au](http://www.aspecthuntley.com.au/)

\* Coles data for 2006/07 not available at time of writing

### A. SUPER STORES, SUPERMARKETS, HYPER MARKETS OR SUPER CENTERS, CLUB AND WAREHOUSE OUTLETS

***Company Profiles***

Table 4 and Table 5 provide a list of chain supermarkets and
warehouses/wholesale clubs respectively. The lists are not exhaustive,
however include the major chains, banner groups and
warehouses/wholesalers. Woolworths and Coles Myer dominate the
Australian retail food scene. The large foreign retailers are South
African and German owned.

Table 4: Chain Supermarkets/Superstores

+-------------+--------+-------+-------+-------+----------+-----------+
| **Retailer  | **     | **Sa  | **No. | **No. | **Loc    | **P       |
| Name &      | Owner- | les** | of    | Of    | ations** | urchasing |
| Outlet      | ship** |       | Ou    | Ou    |          | Agent     |
| Type**      |        | *     | tlets | tlets |          | Type**    |
|             |        | *(\$M | (June | (20   |          |           |
|             |        | il)** | 20    | 05)** |          |           |
|             |        |       | 06)** |       |          |           |
+-------------+--------+-------+-------+-------+----------+-----------+
| **W         | **L    | **37, | **    | **    | **Na     | W         |
| oolworths** | ocal** | 734** | 756** | 744** | tional** | arehouse, |
|             |        |       |       |       |          | wh        |
|             |        |       |       |       |          | olesaler, |
|             |        |       |       |       |          | s         |
|             |        |       |       |       |          | uppliers, |
|             |        |       |       |       |          | brokers & |
|             |        |       |       |       |          | growers.  |
+-------------+--------+-------+-------+-------+----------+-----------+
| Woolworths  |        |       |       | 533   | National |           |
+-------------+--------+-------+-------+-------+----------+-----------+
| Safeway     |        |       |       | 182   | Vic, NSW |           |
+-------------+--------+-------+-------+-------+----------+-----------+
| Food for    |        |       |       | 25    | NSW, Qld |           |
| Less        |        |       |       |       |          |           |
+-------------+--------+-------+-------+-------+----------+-----------+
| Flemings    |        |       |       | 4     | NSW      |           |
+-------------+--------+-------+-------+-------+----------+-----------+
| **Coles     | **L    | **17, | **    | **    | **Na     | W         |
| Myer Ltd**  | ocal** | 768** | 737** | 733** | tional** | arehouse, |
|             |        |       |       |       |          | wh        |
|             |        |       |       |       |          | olesaler, |
|             |        |       |       |       |          | man       |
|             |        |       |       |       |          | ufacturer |
|             |        |       |       |       |          | & brokers |
+-------------+--------+-------+-------+-------+----------+-----------+
| Coles       |        |       |       | 517   | N        |           |
|             |        |       |       |       | ational, |           |
|             |        |       |       |       | except   |           |
|             |        |       |       |       | NT       |           |
+-------------+--------+-------+-------+-------+----------+-----------+
| Bi Lo       |        |       |       | 214   | NSW/ACT, |           |
|             |        |       |       |       | Vic,     |           |
|             |        |       |       |       | Qld, SA  |           |
+-------------+--------+-------+-------+-------+----------+-----------+
| Pick\`n'Pay |        |       |       | 2     | Qld      |           |
+-------------+--------+-------+-------+-------+----------+-----------+
| **          | *      | **    | *     | *     | **NSW**  | W         |
| Franklins** | *South | 807** | *80** | *80** |          | arehouse, |
|             | Afr    |       |       |       |          | w         |
|             | ican** |       |       |       |          | holesaler |
|             |        |       |       |       |          | and       |
|             |        |       |       |       |          | suppliers |
+-------------+--------+-------+-------+-------+----------+-----------+
| **Aldi**    | **Ge   | **    | **    | **    | **NSW,   | N/A       |
|             | rman** | N/A** | 120** | 109** | ACT,     |           |
|             |        |       |       |       | Vic,     |           |
|             |        |       |       |       | Qld**    |           |
+-------------+--------+-------+-------+-------+----------+-----------+

Source: company websites and Retail World Annual Report 05, December
2005

Table 5: Warehouses/Wholesale Clubs

+------------------+--------+--------+-------+-----------+------------+
| **Retailer Name  | **     | **S    | **No. | **Lo      | **         |
| & Outlet Type**  | Owner- | ales** | Of    | cations** | Purchasing |
|                  | ship** |        | Outl  |           | Agent      |
|                  |        | **(\$  | ets** |           | Type**     |
|                  |        | Mil)** |       |           |            |
+------------------+--------+--------+-------+-----------+------------+
| **No Frills      | Local  | N/A    | 3     | Tasmania  | N/A        |
| Wholesale Cash N |        |        |       |           |            |
| Carry^1^**       |        |        |       |           |            |
+------------------+--------+--------+-------+-----------+------------+
| **Metcash        | 78%    | 9,695  | 42    | NSW, VIC, | N/A        |
| Limited and      | South  |        |       | QLD and   |            |
| Campbells Cash & | A      |        |       | SA        |            |
| Carry**          | frican |        |       |           |            |
|                  | and    |        |       |           |            |
|                  | Local  |        |       |           |            |
+------------------+--------+--------+-------+-----------+------------+

1\. Cash N Carry outlets service businesses throughout Tasmania who do
not qualify to receive deliveries from the distribution centers or
require additional products that are not available from the DC\'s. Its
customer base includes supermarkets, milk bars, takeaways, hotels /
motels, restaurants, service stations, caterers, school canteens,
sporting / service clubs and others.

Source: company websites

***Trends in the Number and Type of Outlets***

-   The number of chain supermarkets is growing substantially and has
    been driven by Aldi (store numbers have tripled since 2002), Coles
    (store numbers up 10%) and Woolworths (store numbers up 9%).

-   Aldi's push into the retail food market has seen its share of NSW
    trade increase to more than 6%.

***Major Internal and External Market Drivers***

-   Customers are looking for clean, safe products that are healthy.
    According to Roy Morgan (a leading market research company),
    consumers are becoming more informed, and thus more demanding and
    discriminating. Nutritional and environmental concerns are having an
    increasing influence on purchasing decisions and, in some cases,
    this is coming at the expense of brand loyalty. However, some
    well-established manufacturers are responding to this trend and
    making adjustments to their product recipes. For example, Unilever
    has recently announced plans to remove artificial colors and flavors
    from the majority of its ice cream products.

-   There is substantial interest in new food lines. Examples of this
    include international cuisines, functional foods and beverages,
    organic, gluten-free and soy products.

-   Convenience is high on customers' agendas, with limited time to
    produce home cooked meals (both partners working, but seeking
    nutritional quality and the convenience of takeaway). Roy Morgan
    reports that the trend towards shopping more than once a week has
    grown from around 30% in 1999 to almost 45% in March 2007.

### B. CONVENIENCE STORES AND GAS MARTS

**Entry Strategy**

-   Appoint an agent/distributor in Australia to ensure distribution,
    availability of product and product promotion.

```{=html}
<!-- -->
```
-   Product flows from U.S. exporter through agents/distributors, to
    wholesalers and then through to convenience stores/gas marts.

```{=html}
<!-- -->
```
-   Major supermarket chains are entering the convenience store/gas mart
    market. Agents/distributors should market product to category
    managers for major chains.

```{=html}
<!-- -->
```
-   Entry strategy for convenience stores is similar to that for
    supermarkets except that the agent/distributor should target the
    major wholesaler category managers as well as managers of Woolworths
    and Coles, who have adopted the gas/convenience store concept.

```{=html}
<!-- -->
```
-   Convenience stores generally sell limited lines, gasoline and fast
    food, however larger convenience stores are starting to carry a
    greater product range. They are open long hours (in some cases, 24
    hours a day) and are easily accessible to customers.

**Market Structure**

**Table 6** and Table 7 summarize company profiles for major gas marts
and convenience stores that do not sell gas. Five companies (Coles
Express/Shell, 7-Eleven, Mobil Quix, BP Express and Caltex/Ampol)
dominate the gas mart sector. Data regarding the turnover of convenience
stores and gas marts is unavailable at this time.

Table 6: Convenience Stores Selling Gas

+---------------------+------------+--------+------------+-----------+
| **Retailer Name &   | **O        | **No.  | **L        | **P       |
| Outlet Type**       | wnership** | of     | ocations** | urchasing |
|                     |            | Outlet |            | Agent     |
|                     |            | s^1^** |            | Type**    |
+---------------------+------------+--------+------------+-----------+
| **Coles             | British    | 594    | National   | W         |
| Express/Shell**     | Dutch      |        |            | holesaler |
|                     |            |        |            |           |
|                     |            |        |            | Di        |
|                     |            |        |            | stributor |
|                     |            |        |            |           |
|                     |            |        |            | Man       |
|                     |            |        |            | ufacturer |
+---------------------+------------+--------+------------+-----------+
| **7-Eleven**        | Local      | 365    | All states | W         |
|                     | ownership  |        |            | holesaler |
|                     | franchise  |        |            |           |
|                     | from U.S.  |        |            | Man       |
|                     |            |        |            | ufacturer |
|                     |            |        |            |           |
|                     |            |        |            | Di        |
|                     |            |        |            | stributor |
+---------------------+------------+--------+------------+-----------+
| **Mobil Quix**      | U.S.       | 311    | NSW, Vic,  | W         |
|                     |            |        | SA, Qld    | holesaler |
|                     |            |        |            |           |
|                     |            |        |            | Man       |
|                     |            |        |            | ufacturer |
|                     |            |        |            |           |
|                     |            |        |            | Di        |
|                     |            |        |            | stributor |
+---------------------+------------+--------+------------+-----------+
| **BP Express (BP    | UK         | 225    | National   | W         |
| Australia Ltd,      |            |        | except     | holesaler |
| subsidiary of BP    |            |        | Tasmania   |           |
| Amoco)**            |            |        |            | Man       |
|                     |            |        |            | ufacturer |
|                     |            |        |            |           |
|                     |            |        |            | Di        |
|                     |            |        |            | stributor |
+---------------------+------------+--------+------------+-----------+
| **Caltex/Ampol**    | 50%        | 172    | National   | W         |
|                     | offshore   |        | except NT  | holesaler |
| **ShopStop, Road    | ownership  |        |            |           |
| Pantry, Star Mart** |            |        |            | Di        |
|                     |            |        |            | stributor |
|                     |            |        |            |           |
|                     |            |        |            | Man       |
|                     |            |        |            | ufacturer |
+---------------------+------------+--------+------------+-----------+
| **BP Food**         | Local      | 36     | Western    | W         |
|                     |            |        | Australia  | holesaler |
|                     |            |        |            |           |
|                     |            |        |            | Man       |
|                     |            |        |            | ufacturer |
|                     |            |        |            |           |
|                     |            |        |            | Di        |
|                     |            |        |            | stributor |
+---------------------+------------+--------+------------+-----------+
| **Horizon Food      | NA         | 15     | Vic        | W         |
| Stores, Horizon     |            |        |            | holesaler |
| Petroleum Pty Ltd** |            |        |            |           |
|                     |            |        |            | Man       |
|                     |            |        |            | ufacturer |
|                     |            |        |            |           |
|                     |            |        |            | Di        |
|                     |            |        |            | stributor |
+---------------------+------------+--------+------------+-----------+

1\. Not all of these outlets sell gas, however data limitations prevent
the number of gas outlets to be broken down any further.

Source: company websites

Table 7: Convenience Stores Not Selling Gas

+----------------+--------------+--------+-----------+----------------+
| **Retailer     | *            | **No.  | **Lo      | **Purchasing   |
| Name & Outlet  | *Ownership** | of     | cations** | Agent Type**   |
| Type**         |              | Out    |           |                |
|                |              | lets** |           |                |
+----------------+--------------+--------+-----------+----------------+
| **City         | Foreign      | 68     | 52 in NSW | Wholesaler &   |
| Convenience    |              |        |           | direct from    |
| Stores**       |              |        |           | vendors.       |
+----------------+--------------+--------+-----------+----------------+
| **Foodwise**   | Local        | 37     | VIC       | Wholesaler &   |
|                |              |        |           | direct from    |
|                |              |        |           | vendors.       |
+----------------+--------------+--------+-----------+----------------+
| **NightOwl**   | Local        | 43     | East      | Wholesaler     |
|                | Independent  |        | Coast (38 |                |
|                | Franchise    |        | Qld) --   | Manufacturer   |
|                | Systems      |        | urban     |                |
|                |              |        | centers   | Distributor    |
+----------------+--------------+--------+-----------+----------------+
| **Gull**       | Local        | 26     |           |                |
+----------------+--------------+--------+-----------+----------------+
| **Captain      | Local        | 8      | Sydney    | Wholesaler     |
| Cook**         |              |        |           |                |
|                |              |        |           | Manufacturer   |
|                |              |        |           |                |
|                |              |        |           | Distributor    |
+----------------+--------------+--------+-----------+----------------+

Source: company websites

***Trends in the Number and Type of Outlets***

-   The number of convenience stores selling gas is growing rapidly and
    is being driven by the in-store fuel offers of Coles and Woolworths,
    and their desire to gain a greater share of the convenience
    shopper's dollar.

-   Convenience stores are beginning to stock a larger product range.

***Major Internal and External Market Drivers***

-   Corner store convenience stores may be disadvantaged by consumer
    interest in 'fresh' and healthy foods.

-   Convenience stores may come under increasing pressure from the
    growing number of supermarket outlets in the CBD, which have long
    trading hours and offer fresh, pre-packaged meals and everyday
    items.

```{=html}
<!-- -->
```
-   Customers include: city apartment dwellers, people that work in the
    CBD, 'night owls', car owners requiring gasoline, customers in the
    middle-to-high income range and in lower age brackets, and impulse
    buyers.

### C. TRADITIONAL MARKETS -- MOM/POP INDEPENDENT GROCERY, WET MARKETS

**Entry Strategy**

***Independent Grocery***

-   Similar strategy to that for small supermarkets and convenience
    stores, with appointment of agent/distributor for sale through major
    wholesalers.

***Wet Markets***

-   Australia does not have a system of wet markets; however, there is a
    system of markets for fresh produce with substantial presence in
    major cities. The majority of fresh produce moving through these
    markets is local, although overseas produce is available. Fresh
    produce from overseas should move directly through a specialist
    wholesaler or be sold directly to major chain supermarkets to avoid
    delays in the distribution channel.

**Market Structure**

**Table 8** provides information on the major smaller independent
supermarkets in Australia.

***Major Internal and External Market Drivers***

-   Customers working longer hours, greater population mobility, and
    introduction of meal solutions places pressures on this sector.

-   This sector is also under pressure on price and opening hours from
    the major chain supermarkets.

-   However, customers enjoy the 'old fashioned service' that is offered
    by independent grocery stores and many retailers are increasing
    their product range (Supa IGA stores offer a full product range).

-   There has been an increase in value-added products such as
    deli/antipasto items, and ready made cakes and pastries.

-   Selected IGA stores also offer reimbursements on fuel, which match
    the fuel discounts offered by Woolworths and Coles.

-   Customers include commuters seeking ingredients for dinner, weekly
    shoppers, and the elderly and less mobile.

Table 8: Smaller Independent Grocery Stores/Supermarkets

  ------------------ --------------- ------------ --------------- ------------------
  **Retailer Name &  **Ownership**   **No. of     **Locations**   **Purchasing Agent
  Outlet Type**                      Outlets **                   Type**

  **IGA**            **Local**       **1,268**                    Warehouse
                                                                  wholesaler

  Foodland IGA                       101          SA/NT            

  Supa IGA                           191          NSW/ACT, VIC,    
                                                  QLD             

  IGA/IGA Everyday                   542          NSW/ACT, VIC,    
                                                  QLD, SA/NT      

  IGA                                177          VIC, QLD         
  Express.Friendly                                                
  Grocer                                                          

  Other IGA                          124          TAS              

  Other Independents                 133          TAS              
  in Tasmania                                                     

  **Foodworks**      **Local**       **696**                      Wholesaler &
                                                                  direct from
                                                                  vendors.

  Foodworks                          341          NSW/ACT, VIC,    
                                                  QLD, TAS        

  Liquorworks                        6            VIC              

  Non-bannered                       141          NSW, QLD, NT,    
  stores                                          VIC, TAS        

  Associates                         208          NSW, QLD, NT     

  **Dewsons**        **Local**       **241**      WA              Manufacturers,
                                                                  wholesalers,
                                                                  brokers, cash vans
  ------------------ --------------- ------------ --------------- ------------------

Source: company websites and Retail World Annual Report 05, December
2005

# SECTION III: COMPETITION

For half of the categories in Table 9, New Zealand (NZ) is the major
supply source of imports and for two of the remaining categories is in
the top three. In large part this is due to its geographic closeness and
the Australian-New Zealand Closer Economic Relationship Trade Agreement
(ANZCERTA), a bilateral trade agreement that exists between the two
countries.

Table 9 details the net imports for 10 major retail product categories.
Major supply sources are limited to major import sources as data is not
available on the total local production for each category.

Table 9: Summary of the Overall Competitive Situation Facing U.S.
Imports in the Retail Food Sector

+------------+--------------+------------------+---------------------+---+
| **Product  | **Major      | **Strengths of   | **Advantages &      |   |
| Category** | Supply       | Key Supply       | Disadvantages of    |   |
|            | Source of    | Countries**      | Local Suppliers**   |   |
|            | imports**    |                  |                     |   |
+============+==============+==================+=====================+===+
| **Snack    | NZ 23%       | -   Trade        | -   Australian      |   |
| Foods^1^** |              |     Agreements   |     processing      |   |
|            | China 11%    |     with NZ and  |     plants have     |   |
| Net        |              |     Singapore    |     access to a     |   |
| Imports:   | Germany 7%   |                  |     large range of  |   |
|            |              | -   Close        |     raw materials   |   |
| 67,547     | Singapore 6% |     proximity    |                     |   |
| tons       |              |     and          | -   Lower transport |   |
|            |              |     therefore    |     costs           |   |
| US\$265.7m |              |     reduced      |                     |   |
|            |              |     transaction  |                     |   |
|            |              |     costs        |                     |   |
|            |              |                  |                     |   |
|            |              | -   Brand        |                     |   |
|            |              |     recognition  |                     |   |
+------------+--------------+------------------+---------------------+---+
| *          | NZ 30%       | -   Trade        | -   Many Kellogg's  |   |
| *Breakfast |              |     Agreements   |     products sold   |   |
| ce         | Philippines  |     with NZ and  |     in Australia    |   |
| reals^2^** | 26%          |     US           |     are 'Made in    |   |
|            |              |                  |     Australia'      |   |
| Net        | UK 10%       | -   Close        |                     |   |
| Imports:   |              |     proximity    |                     |   |
|            | US 8%        |     and          |                     |   |
| 13,968     |              |     therefore    |                     |   |
| tons       |              |     reduced      |                     |   |
|            |              |     transaction  |                     |   |
| US\$30.9m  |              |     costs        |                     |   |
|            |              |                  |                     |   |
|            |              | -   Brand        |                     |   |
|            |              |     recognition  |                     |   |
+------------+--------------+------------------+---------------------+---+
| **Red      | NZ 78%       | -   Trade        | -   Australia is    |   |
| meat^3^**  |              |     Agreement    |     the world\'s    |   |
|            | Australia    |     with NZ      |     largest beef    |   |
| Net        | 16%          |                  |     exporter and    |   |
| Imports:   |              | -   Close        |     one of the      |   |
|            | Vanuatu 4%   |     proximity    |     largest lamb    |   |
| 4,098 tons |              |     and          |     and mutton      |   |
|            | Egypt 1%     |     therefore    |     exporters       |   |
| US\$16.5m  |              |     reduced      |                     |   |
|            |              |     transaction  | -   Rigorous import |   |
|            |              |     costs        |     requirements    |   |
|            |              |                  |     are in place    |   |
|            |              | -   NZ product   |                     |   |
|            |              |     seen as      |                     |   |
|            |              |     'clean and   |                     |   |
|            |              |     green'       |                     |   |
+------------+--------------+------------------+---------------------+---+
| **Po       | Australia    | N/A              | -   Uncooked        |   |
| ultry^4^** | 100% (i.e.   |                  |     Poultry imports |   |
|            | this product |                  |     banned          |   |
| Net        | has been     |                  |                     |   |
| Imports:   | re-imported  |                  | -   Import          |   |
|            | into         |                  |     conditions for  |   |
| 19 tons    | Australia)   |                  |     cooked poultry  |   |
|            |              |                  |     products are    |   |
| US\$0.01m  |              |                  |     strict          |   |
+------------+--------------+------------------+---------------------+---+
| **         | NZ 78%       | -   Trade        | -   Australian      |   |
| Dairy^5^** |              |     Agreement    |     products are    |   |
|            | Denmark 3%   |     with NZ      |     widely regarded |   |
| Net        |              |                  |     as synonymous   |   |
| Imports:   | Italy 3%     | -   Close        |     with quality    |   |
|            |              |     proximity    |     and variety     |   |
| 95,975     | South Korea  |     and          |                     |   |
| tons       | 2%           |     therefore    | -   Comparative     |   |
|            |              |     reduced      |     price           |   |
| US\$298.9m |              |     transaction  |     advantages and  |   |
|            |              |     costs        |     the safety      |   |
|            |              |                  |     issues further  |   |
|            |              | -   NZ brand     |     assist the case |   |
|            |              |     recognition  |     for local and   |   |
|            |              |     and          |     New Zealand     |   |
|            |              |     patronage    |     product         |   |
|            |              |     with NZ      |                     |   |
|            |              |     owned brands |                     |   |
+------------+--------------+------------------+---------------------+---+
| **Egg      | UK 32%       | -   Strong and   | -   Many of the     |   |
| Pro        |              |     growing egg  |     suppliers are   |   |
| ducts^6^** | NZ 12%       |     export       |     co-operative    |   |
|            |              |     market       |     based farmer    |   |
| Net        | Denmark 11%  |                  |     groups          |   |
| Imports:   |              | -   Close        |                     |   |
|            | Belgium 11%  |     proximity of | -   Limited shelf   |   |
| 1,599 tons |              |     NZ benefits  |     life            |   |
|            |              |     transport of |                     |   |
| US\$4.3m   |              |     perishable   | -   Import          |   |
|            |              |     goods        |     restrictions    |   |
|            |              |                  |     apply to many   |   |
|            |              | -   Trade        |     egg products    |   |
|            |              |     Agreement    |                     |   |
|            |              |     with NZ      |                     |   |
+------------+--------------+------------------+---------------------+---+
| **Fish and | Thailand 29% | -   Some         | -   Australian      |   |
| Se         |              |     imported     |     fisheries       |   |
| afood^7^** | NZ 15%       |     products are |     remain unable   |   |
|            |              |     very price   |     to meet demand  |   |
| Net        | Vietnam 12%  |     competitive  |     for some        |   |
| Imports:   |              |                  |     products, and   |   |
|            | China 12%    | -   NZ has a     |     at prices that  |   |
| 193,686    |              |     'clean and   |     consumers are   |   |
| tons       |              |     green' image |     willing to pay  |   |
|            |              |                  |                     |   |
| US\$849.1m |              | -   Trade        |                     |   |
|            |              |     Agreements   |                     |   |
|            |              |     with NZ and  |                     |   |
|            |              |     Thailand     |                     |   |
|            |              |                  |                     |   |
|            |              | -   Close        |                     |   |
|            |              |     proximity    |                     |   |
|            |              |     and          |                     |   |
|            |              |     therefore    |                     |   |
|            |              |     reduced      |                     |   |
|            |              |     transaction  |                     |   |
|            |              |     costs        |                     |   |
|            |              |                  |                     |   |
|            |              | -   Australians  |                     |   |
|            |              |     are          |                     |   |
|            |              |     increasingly |                     |   |
|            |              |     willing to   |                     |   |
|            |              |     experiment   |                     |   |
|            |              |     with various |                     |   |
|            |              |     food types   |                     |   |
|            |              |     and          |                     |   |
|            |              |                  |                     |   |
|            |              |    preparations, |                     |   |
|            |              |     creating a   |                     |   |
|            |              |     market for   |                     |   |
|            |              |     species and  |                     |   |
|            |              |     products     |                     |   |
|            |              |     that are not |                     |   |
|            |              |     available    |                     |   |
|            |              |     locally      |                     |   |
+------------+--------------+------------------+---------------------+---+
| **Fruits & | NZ 37%       | -   Trade        | -   Many quarantine |   |
| Veget      |              |     Agreements   |     bans or severe  |   |
| ables^8^** | US 17%       |     with NZ and  |     restrictions    |   |
|            |              |     US           |     exist for fresh |   |
| Net        | China 14%    |                  |     fruit and       |   |
| Imports:   |              | -   NZ has a     |     vegetable       |   |
|            | Turkey 6%    |     clean/green  |                     |   |
| 217,991    |              |     image        | -   Supply chain    |   |
| tons       |              |                  |     favors locally  |   |
|            |              | -   Close        |     grown fruit     |   |
| US\$310m   |              |     proximity    |                     |   |
|            |              |                  |                     |   |
|            |              | -                |                     |   |
|            |              | Counter-seasonal |                     |   |
|            |              |     supply       |                     |   |
+------------+--------------+------------------+---------------------+---+
| *          | Vietnam 34%  | -   Efficient    | -   The Australian  |   |
| *Nuts^9^** |              |     producer     |     climate is      |   |
|            | Philippines  |     with yields  |     favorable for   |   |
| Net        | 17%          |     generally    |     nut production  |   |
| Imports:   |              |     higher than  |                     |   |
|            | US 5%        |     in competing |                     |   |
| 39,003     |              |     countries    |                     |   |
| tons       | Indonesia 5% |                  |                     |   |
|            |              | -   Processing   |                     |   |
| US\$148.4m |              |     is           |                     |   |
|            |              |     competitive  |                     |   |
|            |              |     with low     |                     |   |
|            |              |     labor costs  |                     |   |
|            |              |                  |                     |   |
|            |              | -   Trade        |                     |   |
|            |              |     Agreement    |                     |   |
|            |              |     with US      |                     |   |
+------------+--------------+------------------+---------------------+---+
| **I        | Ireland 54%  | -   Trade        | -                   |   |
| nfant/Baby |              |     agreement    |    Well-established |   |
| Prod       | Singapore    |     with         |     and respected   |   |
| ucts^10^** | 19%          |     Singapore    |     US brand HJ     |   |
|            |              |                  |     Heinz holds the |   |
| Net        | Germany 13%  |                  |     majority market |   |
| Imports:   |              |                  |     share, however  |   |
|            | France 7%    |                  |     the baby food   |   |
| 7,989 tons |              |                  |     is manufactured |   |
|            |              |                  |     in Australia    |   |
| US\$62.2m  |              |                  |                     |   |
|            |              |                  | -   Nutricia (a     |   |
|            |              |                  |     Dutch           |   |
|            |              |                  |     nutritional     |   |
|            |              |                  |     foods company)  |   |
|            |              |                  |     recently        |   |
|            |              |                  |     purchased       |   |
|            |              |                  |     Australian      |   |
|            |              |                  |     grower-owned    |   |
|            |              |                  |     Golden Circle's |   |
|            |              |                  |     baby foods      |   |
|            |              |                  |     division        |   |
+------------+--------------+------------------+---------------------+---+

The level of information available from the Australian Customs Tariff
codes restricts the analysis in this table. The primary constraint is
that imports are recorded by food type and not end use. For example, all
nuts will appear as nuts (by type and how they are prepared). However,
nuts are potentially a 'snack food' but have not been included as such.
Details of which tariff codes have been included in each category are
documented as follows to assist with the interpretation of this
information:

1\. Snack Food category includes tariff codes 1704 -- sugar
confectionary not containing cocoa and 1806 -- chocolate and other food
preparation containing cocoa.

2\. Breakfast cereal category includes import tariff code 1904 --
prepared foods obtained by the swelling or roasting of cereals or cereal
products.

3\. Red meat includes tariff codes 0201- Meat Of Bovine Animals, Fresh
Or Chilled, 0202 - Meat Of Bovine Animals, Frozen, and 0204 - Meat Of
Sheep Or Goats, Fresh Or Chilled Or Frozen.

4\. Poultry category includes tariff code 0207- Meat And Edible Offal,
Of The Poultry Of Heading 01.05 Fresh, Chilled Or Frz

5\. Dairy Category includes tariff codes 0401- Milk And Cream, Not
Concentrated Nor Sweetened, 0402- Milk And Cream, Concentrated Or
Sweetened, 0403- Buttermilk, Cream, Yogurt Etc, W/N Conc, Sweet Or Flav
Or Cntg Add Fruit Or Cocoa, 0404- Whey, W/N Concentrated Or Sweet;
Natural Milk Products W/N Sweet, Nes, 0405- Butter And Other Fats And
Oils Derived From Milk ; Dairy Spreads, 0406- Cheese And Curd

6\. Egg products includes tariff codes 0407- Birds\' Eggs, In Shell,
Fresh, Preserved Or Cooked and 0408- Birds\'Eggs Unshelled,Egg Yolks,Fr
Dried, Ckd By Wat,Mld,Frz O/W Presv, W/N Sweet

7\. Fish and seafood includes tariff codes 0302- Fish, Fresh Or Chd,
Excl Fish Fillets & Other Fish Meat Of Heading 03.04, 0303- Fish,
Frozen, Excl Fish Fillets And Other Fish Meat Of Heading 03.04, 0304-
Fish Fillets And Other Fish Meat, W/N Minced, Fresh, Chilled Or Frozen,
0305- Fish, Cured; Smoked Fish W/N Cooked; Fish Meal Fit For Human
Consumption, 0306- Crust W/N In Shell, Live, Fr Etc; Crust In Shell Ckd
In Water, W/N Chilled Etc, 0307- Mol W/N In Shell, Live, Aqua Invert O/T
Crust & Mol, Live, Fr, Chd, Frz, Cured, 1604- Prepared Or Preserved
Fish; Caviar & Caviar Subst Prepared From Fish Eggs, 1605- Crustaceans,
Molluscs And Other Aquatic Invertebrates, Prepared Or Preserved

8\. Fruits & vegetables includes tariff codes 0701- Potatoes, Fresh Or
Chilled, 0702- Tomatoes, Fresh Or Chilled, 0703- Onions, Shallots,
Garlic, Leeks & Other Alliaceous Veg, Fresh Or Chilled, 0706- Carrots,
Turnips, Salad Beetroot & Sim Edible Roots, Fresh Or Chilled, 0707-
Cucumbers And Gherkins, Fresh Or Chilled, 0708- Leguminous Vegetables,
Shelled Or Unshelled, Fresh Or Chilled, 0709- Vegetables Nes, Fresh Or
Chilled, 0710- Vegetables (Uncooked Or Cooked By Steaming Or Boiling In
Water), Frozen, 0711- Vegetables Provisionally Preserved But Not
Suitable For Immediate Consumption, 0712- Vegetables Dried, Whole, Cut,
Sliced, Broken Or In Pdr, But Not Further Prepr, 0713- Vegetables,
Leguminous Dried, Shelled W/N Skinned Or Split, 0714- Manioc, Arrowroot,
Salep, Etc & Sim Roots & Tubers ; Sago Pitch, 0803- Bananas, Including
Plantains, Fresh Or Dried, 0804- Dates,
Figs,Pineapples,Avocadoes,Guavas, Mangoes & Mangosteens, Fr Or Dried,
0805- Citrus Fruit, Fresh Or Dried, 0806- Grapes, Fresh Or Dried, 0807-
Melons (Including Watermelons) & Papaws (Papayas), Fresh, 0808- Apples,
Pears And Quinces, Fresh, 0809- Apricots, Cherries, Peaches, (Incl
Nectarines), Plums & Sloes, Fresh, 0810- Fruits Nes, Fresh

9\. Nuts includes tariff codes 0801- Coconuts, Brazil Nuts And Cashew
Nuts, Fresh Or Dried W/N Shelled Or Peeled, and 0802- Nuts Nes, Fresh Or
Dried, Whether Or Not Shelled Or Peeled

10\. This category includes tariff code 1901.10, Prep Of Cereals, Flour,
Starch Or Milk For Infant Use, Put Up For Retail Sale

# SECTION IV: BEST PRODUCT PROSPECTS

## Category A: Products Present in the Market Which Have Good Sales Potential

Products presented in Table 10 are examples of products that have
experienced strong sales growth during 2006 and are expected to continue
this trend in 2007. Grocery sales growth (value and volume) for the
12-month period ended October 2006 has been reported, due to data
limitations on category-specific 5-year annual import growth.

Table 10: Products Present in the Market Which Have Good Sales Potential

+---------+-----------+--------+----------+-------------+-------------+
| **      | **2006    | **2006 | *        | **Key       | **Market    |
| Product | Retail    | Imp    | *Grocery | Constraints | Att         |
| Cat     | Market    | orts** | Sales    | Over Market | ractiveness |
| egory** | Value     |        | Growth** | De          | for the     |
|         | (US\$m)** | **(US  |          | velopment** | USA**       |
|         |           | \$m)** |          |             |             |
+=========+===========+========+==========+=============+=============+
| *       | Energy    | US\$   | Energy   | -   Red     | -   Thought |
| *Energy | drinks:   | 98m^1^ | drinks:  |     Bull    |     to be a |
| Drinks  | US\$51m   |        |          |     and V   |     'buzz   |
| &       |           |        | Value:   |     hold    | -activated' |
| Sports  | Sports    |        | 29%      |     76%     |             |
| D       | drinks:   |        |          |     market  |    product, |
| rinks** | US\$56m   |        | Volume:  |     share   |     whereby |
|         |           |        | 28%      |     (volume |             |
|         |           |        |          |     terms)  |  consumers' |
|         |           |        | Sports   |             |             |
|         |           |        | drinks:  |             |   attention |
|         |           |        |          |             |     is      |
|         |           |        | Value:   |             |             |
|         |           |        | 32%      |             |   attracted |
|         |           |        |          |             |     by new  |
|         |           |        | Volume:  |             |             |
|         |           |        | 33%      |             |   products, |
|         |           |        |          |             |             |
|         |           |        |          |             | advertising |
|         |           |        |          |             |     and     |
|         |           |        |          |             |             |
|         |           |        |          |             |   packaging |
|         |           |        |          |             |             |
|         |           |        |          |             | -   Trend   |
|         |           |        |          |             |     towards |
|         |           |        |          |             |     impulse |
|         |           |        |          |             |     buying  |
|         |           |        |          |             |             |
|         |           |        |          |             | -           |
|         |           |        |          |             |   Consumers |
|         |           |        |          |             |     are     |
|         |           |        |          |             |             |
|         |           |        |          |             | recognizing |
|         |           |        |          |             |     the     |
|         |           |        |          |             |             |
|         |           |        |          |             |  functional |
|         |           |        |          |             |             |
|         |           |        |          |             |    benefits |
|         |           |        |          |             |     of      |
|         |           |        |          |             |     energy  |
|         |           |        |          |             |     /       |
|         |           |        |          |             |     sports  |
|         |           |        |          |             |     drinks  |
+---------+-----------+--------+----------+-------------+-------------+
| **Still | US\$121m  | US\$   | Value:   | -   Bottled | -           |
| Water** |           | 18m^2^ | 18%      |     water   |   Consumers |
|         |           |        |          |     is      |             |
|         |           |        | Volume:  |             |   demanding |
|         |           |        | 12%      |  considered |     healthy |
|         |           |        |          |     an      |             |
|         |           |        |          |     '       |    products |
|         |           |        |          | auto-pilot' |             |
|         |           |        |          |             |             |
|         |           |        |          |    product, |             |
|         |           |        |          |     with    |             |
|         |           |        |          |     habit   |             |
|         |           |        |          |     and     |             |
|         |           |        |          |     brand a |             |
|         |           |        |          |             |             |
|         |           |        |          | significant |             |
|         |           |        |          |             |             |
|         |           |        |          |   influence |             |
|         |           |        |          |     on      |             |
|         |           |        |          |             |             |
|         |           |        |          |   purchases |             |
+---------+-----------+--------+----------+-------------+-------------+
| **Por   | US\$37m   | N/A    | Value:   | -           | -   These   |
| tables: |           |        | 17%      |    Category |             |
| Br      |           |        |          |             |    products |
| eakfast |           |        | Volume:  |   dominated |     are     |
| Drinks  |           |        | 24%      |     by      |             |
| and     |           |        |          |     Austr   |   'variety- |
| Bars**  |           |        |          | alian-owned | activated', |
|         |           |        |          |             |     with    |
|         |           |        |          |  Sanitarium |             |
|         |           |        |          |     (95%    |   consumers |
|         |           |        |          |     market  |     seeking |
|         |           |        |          |     share,  |     new     |
|         |           |        |          |     volume  |             |
|         |           |        |          |     terms)  | innovations |
|         |           |        |          |             |     and     |
|         |           |        |          |             |             |
|         |           |        |          |             |  attractive |
|         |           |        |          |             |             |
|         |           |        |          |             |   packaging |
|         |           |        |          |             |     playing |
|         |           |        |          |             |     a key   |
|         |           |        |          |             |     role    |
+---------+-----------+--------+----------+-------------+-------------+
| **Co    | Chocolate | US\$2  | C        | -           | -   Mint    |
| nfectio | Singles:  | 65m^3^ | hocolate |   Chocolate |             |
| -nary** | US\$225m  |        | Singles: |     singles |    products |
|         |           |        | Value:   |             |     are     |
|         | Mints:    |        | 13.4%    |    category |             |
|         | US\$59m   |        | Volume:  |             |   'variety- |
|         |           |        | 9.7%     |   dominated | activated', |
|         |           |        |          |     by      |     with    |
|         |           |        | Mints:   |     Cadbury |             |
|         |           |        |          |     and     |   consumers |
|         |           |        | Value:   |     Nestlé  |     seeking |
|         |           |        | 25%      |     with a  |     new     |
|         |           |        |          |             |             |
|         |           |        | Volume:  |   corporate | innovations |
|         |           |        | 16%      |     share   |     and     |
|         |           |        |          |     value   |             |
|         |           |        |          |     of      |  attractive |
|         |           |        |          |     47.5%   |             |
|         |           |        |          |     and     |   packaging |
|         |           |        |          |     25.9%   |     playing |
|         |           |        |          |     re      |     a key   |
|         |           |        |          | spectively. |     role    |
+---------+-----------+--------+----------+-------------+-------------+

Source: Retail World's Australasian Grocery Guide 2007, Australian
Customs Tariff Codes

1\. Includes Customs Tariff Code 2202, Waters,Min Or Aerated,Sweet Or
Flav,Non- Alc Bev Exc Fruit & Veg Juices Of 20.09

2\. Includes Customs Tariff Code 2201, Waters, Incl Nat Or Arti Min Or
Aerated Waters Not Sweet Or Flav; Ice & Snow

3\. Includes Customs Tariff Code 1704, Sugar Confectionery (Incl White
Choc), Not Containing Cocoa and Customs Tariff Code 1806, Chocolate and
other food preparations containing cocoa

## Category B: Products Not Present in Significant Quantities but Which Have Good Sales Potential

Products identified in this category are examples of innovative products
that have recently been developed and are currently advertised in retail
industry magazines, and other foods that, by comparison to similar
products on the market, represent a small proportion of the market but
experienced strong sales growth in 2006.

Table 11: Products Not Present in Significant Quantities but Which Have
Good Sales Potential

+---------+-----------+--------+----------+------------+-------------+
| **      | **2006    | **2006 | *        | **Key      | **Market    |
| Product | Retail    | Imp    | *Grocery | C          | Att         |
| Cat     | Market    | orts** | Sales    | onstraints | ractiveness |
| egory** | Value**   |        | Growth** | Over       | for the     |
|         |           | **(US  |          | Market     | USA**       |
|         | **        | \$m)** |          | Dev        |             |
|         | (US\$m)** |        |          | elopment** |             |
+=========+===========+========+==========+============+=============+
| **Fr    | US\$12m   | N/A    | Value:   | -   Lipton | -   Appeals |
| uit/Tea |           |        | 23%      |     holds  |     to a    |
| D       |           |        |          |     93%    |     broad   |
| rinks** |           |        | Volume:  |     market |     age     |
|         |           |        | 24%      |     share  |     group   |
|         |           |        |          |            |             |
|         |           |        |          |    (volume |   including |
|         |           |        |          |     terms) |     people  |
|         |           |        |          |            |     who are |
|         |           |        |          |            |     health  |
|         |           |        |          |            |             |
|         |           |        |          |            |   conscious |
|         |           |        |          |            |             |
|         |           |        |          |            | -   Thought |
|         |           |        |          |            |     to be a |
|         |           |        |          |            |     'buzz   |
|         |           |        |          |            | -activated' |
|         |           |        |          |            |             |
|         |           |        |          |            |    product, |
|         |           |        |          |            |     whereby |
|         |           |        |          |            |             |
|         |           |        |          |            |  consumers' |
|         |           |        |          |            |             |
|         |           |        |          |            |   attention |
|         |           |        |          |            |     is      |
|         |           |        |          |            |             |
|         |           |        |          |            |   attracted |
|         |           |        |          |            |     by new  |
|         |           |        |          |            |             |
|         |           |        |          |            |   products, |
|         |           |        |          |            |             |
|         |           |        |          |            | advertising |
|         |           |        |          |            |     and     |
|         |           |        |          |            |             |
|         |           |        |          |            |   packaging |
+---------+-----------+--------+----------+------------+-------------+
| *       | US\$8m    | US\$1  | Value:   | -   Coffee | -   Appeals |
| *Coffee |           | 36m^1^ | 41%      |     is     |     to      |
| Bags**  |           |        |          |            |             |
|         |           |        | Volume:  | considered |   consumers |
|         |           |        | 36%      |     an     |     looking |
|         |           |        |          |     'a     |     for     |
|         |           |        |          | uto-pilot' |             |
|         |           |        |          |            | convenience |
|         |           |        |          |   product, |             |
|         |           |        |          |     with   |             |
|         |           |        |          |     habit  |             |
|         |           |        |          |     and    |             |
|         |           |        |          |     brand  |             |
|         |           |        |          |     a      |             |
|         |           |        |          |     s      |             |
|         |           |        |          | ignificant |             |
|         |           |        |          |            |             |
|         |           |        |          |  influence |             |
|         |           |        |          |     on     |             |
|         |           |        |          |            |             |
|         |           |        |          |  purchases |             |
+---------+-----------+--------+----------+------------+-------------+
| **Condi | Mustards  | US\$1  | Mustards | -   M      | -           |
| ments** | and       | 46m^2^ | and      | asterfoods |   Consumers |
|         | Horse     |        | Hors     |     holds  |     are     |
|         | radishes: |        | eradish: |     a 92%  |     i       |
|         | US\$18.5m |        | Value:   |     market | ncreasingly |
|         |           |        | 8.3%     |     share  |             |
|         | Gravy and |        |          |            |  time-poor, |
|         | Sauce:    |        | Volume:  |    (volume |             |
|         | US\$64m   |        | 2%       |     terms) |   therefore |
|         |           |        |          |     in     |     are     |
|         |           |        | I        |            |     seeking |
|         |           |        | ncluding |    squeezy |             |
|         |           |        | Squeezy  |            | convenience |
|         |           |        | Co       | condiments |     and     |
|         |           |        | ndiments |            |     health  |
|         |           |        |          | -          |             |
|         |           |        | Market   | Quarantine |    benefits |
|         |           |        | value of |     re     |     (e.g.   |
|         |           |        | U        | strictions |     reduced |
|         |           |        | S\$4.5m: |     on     |     salt,   |
|         |           |        |          |     gravy  |     low     |
|         |           |        | Value:   |     that   |     fat)    |
|         |           |        | 21%      |            |             |
|         |           |        |          |   contains |             |
|         |           |        | Volume:  |     meat   |             |
|         |           |        | 14%      |            |             |
|         |           |        |          |   products |             |
|         |           |        | Gravy    |            |             |
|         |           |        | and      |            |             |
|         |           |        | Sauce:   |            |             |
|         |           |        | Value:   |            |             |
|         |           |        | 10.8%    |            |             |
|         |           |        |          |            |             |
|         |           |        | Volume:  |            |             |
|         |           |        | 5.3%     |            |             |
|         |           |        |          |            |             |
|         |           |        | I        |            |             |
|         |           |        | ncluding |            |             |
|         |           |        | Liquid   |            |             |
|         |           |        | Gravy    |            |             |
|         |           |        |          |            |             |
|         |           |        | Market   |            |             |
|         |           |        | value of |            |             |
|         |           |        | US\$11m: |            |             |
|         |           |        | Value:   |            |             |
|         |           |        | 87%      |            |             |
|         |           |        |          |            |             |
|         |           |        | Volume:  |            |             |
|         |           |        | 85%      |            |             |
+---------+-----------+--------+----------+------------+-------------+

1\. Includes Tariff Code, 0901, Coffee W/N Roast Or Decaff; Coffee Husks
& Skins; Coffee Subst Cntg Any Coffee

2\. Includes Tariff Code, 2103, Sauces and Preparations thereof; mixed
condiments and mixed seasonings; mustard flour and meal and prepared
mustard

Source: Retail World's Australasian Grocery Guide 2007, Australian
Customs Tariff Codes

## Category C: Products Not Present in the Market Because They Face Significant Barriers.

Products presented in Table 12 are examples of products that face
significant import restrictions and are therefore only present in the
market in limited quantities.

Table 12: Products Not Present in the Market Because They Face
Significant Barriers

+---------+-----------+--------+----------+-------------+-------------+
| **      | **2006    | **2006 | *        | **Key       | **Market    |
| Product | Retail    | Imp    | *Grocery | Constraints | Att         |
| Cat     | Market    | orts** | Sales    | Over Market | ractiveness |
| egory** | Value**   |        | Growth** | De          | for the     |
|         |           | **(US  |          | velopment** | USA**       |
|         | **        | \$m)** |          |             |             |
|         | (US\$m)** |        |          |             |             |
+=========+===========+========+==========+=============+=============+
| **      | N/A       | N/A    | Not      | -   Not     | -   N/A     |
| Chicken |           |        | a        |             |             |
| --      |           |        | vailable |   permitted |             |
| unc     |           |        |          |     in      |             |
| ooked** |           |        |          |             |             |
|         |           |        |          |   Australia |             |
|         |           |        |          |     because |             |
|         |           |        |          |     an      |             |
|         |           |        |          |     import  |             |
|         |           |        |          |     risk    |             |
|         |           |        |          |             |             |
|         |           |        |          |    analysis |             |
|         |           |        |          |     has not |             |
|         |           |        |          |     been    |             |
|         |           |        |          |             |             |
|         |           |        |          |   conducted |             |
+---------+-----------+--------+----------+-------------+-------------+
| **      | Not       | US\$2m | Not      | -   Strict  | -           |
| Chicken | available |        | a        |     import  |  Un-canned, |
| Froz    |           |        | vailable |     r       |     cooked  |
| en^1^** |           |        |          | estrictions |     chicken |
|         |           |        |          |             |     imports |
|         |           |        |          | -   Import  |             |
|         |           |        |          |     risk    |   permitted |
|         |           |        |          |             |             |
|         |           |        |          |    analysis | -           |
|         |           |        |          |             |  Australian |
|         |           |        |          |   currently |             |
|         |           |        |          |             | consumption |
|         |           |        |          |    underway |     of      |
|         |           |        |          |     (for    |     chicken |
|         |           |        |          |     all     |     is      |
|         |           |        |          |             |             |
|         |           |        |          |   countries |  increasing |
|         |           |        |          |     except  |             |
|         |           |        |          |     NZ)     |             |
+---------+-----------+--------+----------+-------------+-------------+
| **Fresh | Not       | US     | Not      | -   Many    | -           |
| Fru     | available | \$149m | a        |     fresh   |    Seasonal |
| it^2^** |           |        | vailable |     fruit   |             |
|         |           |        |          |     imports |   advantage |
|         |           |        |          |     are     |             |
|         |           |        |          |             |             |
|         |           |        |          |  prohibited |             |
|         |           |        |          |     and     |             |
|         |           |        |          |     very    |             |
|         |           |        |          |     strict  |             |
|         |           |        |          |             |             |
|         |           |        |          |  quarantine |             |
|         |           |        |          |             |             |
|         |           |        |          | regulations |             |
|         |           |        |          |     are     |             |
|         |           |        |          |             |             |
|         |           |        |          |    enforced |             |
|         |           |        |          |     for     |             |
|         |           |        |          |     those   |             |
|         |           |        |          |     that    |             |
|         |           |        |          |     are not |             |
|         |           |        |          |             |             |
|         |           |        |          |  prohibited |             |
+---------+-----------+--------+----------+-------------+-------------+

Source: Retail World's Australasian Grocery Guide 2007, Australian
Customs Tariff Codes

1\. This category includes Customs Tariff Code 0207, Meat And Edible
Offal, Of The Poultry Of Heading 01.05 Fresh, Chilled Or Frozen; and
1602.3, Other prepared or preserved meat, meat offal or blood of poultry
of 01.05.

2\. Customs Tariff Codes include 0803, 0804, 0805, 0806, 0807, 0808,
0809 and 0810 and include both fresh and dried fruit. This analysis was
unable to be further refined.

# SECTION V. POST CONTACT AND FURTHER INFORMATION

## Import Regulations

Information on Food Law and Policy in Australia can be obtained from the
[www.ausfoodnews.com.au](http://www.ausfoodnews.com.au/) website.

See the Australian Quarantine & Inspection Service import conditions
(ICON) database to identify whether your product is prohibited entry to
Australia - <http://www.aqis.gov.au/icon32/asp/ex_querycontent.asp>

## Australia's Food Labeling Regulations

In Australia, Food Standards Australia New Zealand (FSANZ) regulates the
delivery of safe food. FSANZ is a bi-national independent statutory
authority. It develops food standards for composition, labeling and
contaminants (including microbiological limits) that apply to all foods
produced or imported for sale in Australia and New Zealand. FSANZ
operates under the Food Standards Australia New Zealand Act 1991.

The Foreign Agricultural Import Regulations and Standards (FAIRS) report
from this office contains detailed information on the Food Standards
Code and other food regulations. A copy of this report can be obtained
by conducting a "AGR Number" (Option 3) search on the following page web
page: <http://www.fas.usda.gov/scriptsw/attacherep/default.asp> for
report number AS7040.

An Internet version of the code can be located on the FSANZ web site at:
<http://www.foodstandards.gov.au/thecode/foodstandardscode.cfm>

## Industry Information

***The Association of Sales & Marketing Companies Australiasia***
(ASMCA)

[www.asmca.com](http://www.asmca.com/)

The association is a representative voice for brokers, agencies,
importers, demonstration and marketing companies. The ASMCA keeps its
members abreast of matters affecting customer relations, technology,
standards, market growth and sales trends.

***Australian Food & Grocery Council***

Level 2, Salvation Army Building

2-4 Brisbane Avenue

Barton ACT 2600

Australia

Tel: +61-2-6273 1466

Fax: +61-2-6273 1477

Email: info@afgc.org.au

Web: [http://www.afgc.org.au](http://www.afgc.org.au/)

***Food and Beverage Importers Association***

181 Drummond St

Carlton Victoria 3053

Australia

Tel: +61-3-9639 3644

Fax: +61-3-9639 0638

Email: <admin@fbia.org.au>

Web: <http://www.fbia.org.au/index.html>

## Trade Shows

**Fine Food** is the largest food industry show in Australia. The show
gives buyers the chance to sample new products and talk directly to the
suppliers. The new natural product section is expected to be a major
draw card, with chefs and retailers discovering products that kind to
the environment, kind to consumers and a big hit on the menu. In 2008,
the show will be held at the Melbourne Exhibition and Convention Center
from September 22-25. For further information please contact Australian
Exhibition Services at the address below.

Timothy Collett, Exhibition Director

Diversified Exhibitions Australia

Illoura Plaza, 424 St Kilda Road

Melbourne Victoria 3004

Australia

Tel: +61-3-9261 4500

Fax: +61-3-9261 4545

Email: <food@divexhibitions.com.au>

Web: [http://www.finefoodexpo.com.au](http://www.finefoodexpo.com.au/)

[]{.mark}

[]{.mark}

## Major Wholesalers

***Metcash Limited and Campbells Cash & Carry***

PO Box 6226\
Silverwater Business Centre\
Silverwater NSW 1811\
Australia

Tel: +61-2-9741 3000

Fax: +61-2-9741 3399

Email: <josie.ianni@metcash.com>

Web: <http://www.metcash.com/>

***No Frills Wholesale Cash N Carry***

44 Gormanston Rd

Moonah

Tasmania 7009

Australia

Tel: +61-3-6211 6522

Fax: +61-*3-6278 0525*

Email: <info@siw.com.au>

Web: [www.tasiw.com.au](http://www.tasiw.com.au/)

> []{.mark}

[]{.mark}

## Major Retailers

***Coles***

[www.coles.com.au](http://www.coles.com.au/)

***Woolworths***

[[www.woolworthslimited.com.au]{.underline}](http://www.woolworthslimited.com.au/)

***Aldi***

[www.aldi.com.au](http://www.aldi.com.au/)

***IGA***

[www.iga.net.au](http://www.iga.net.au/)

***Foodworks***

[www.foodworks.com.au](http://www.foodworks.com.au/)

## Bibliography

AC Nielsen Convenience Report, 2007

AC Nielsen Grocery Report, 2005 and 2006

Australian Bureau of Agricultural and Resource Economics (ABARE),
Australian Food

Statistics 2006 Available at
[www.abareconomics.com](http://www.abareconomics.com/)

ABARE, Australian Commodities 2007 Available at
[www.abareconomics.com](http://www.abareconomics.com/)

Australian Bureau of Statistics (ABS) Catalogue Numbers 5368, 5422,
6440, 8501, 8622, 8624, Available at
[www.abs.gov.au](http://www.abs.gov.au/)

Australian Government Department of Foreign Affairs and Trade, United
States fact sheet 2007

Australian Government Department of Agriculture, Fisheries and Forestry
(DAFF)

Australian Convenience Store News 2007

DAFF National food industry strategy 2002

CEASA Australian Grocery Industry Review 2005

Euromonitor, World Retail Data and Statistics 2007

Food News Bulletins 2006 to 2007

Freshlogic report to the National food Industry Council, Australian food
industry: Retail market trends and their implications 2006

Griffith, G. (2004) The impact of supermarkets on farm suppliers,
*Australian Economic Review* 37 (3) pp.329-336

KordaMentha, Retail pharmacy: Industry vitals 2006

Progressive Grocer Annual Report 2005

Rabobank Agribusiness Review August and July 2007

Reserve Bank of Australia (RBA) Exchange Rates, Available at
[www.rba.gov.au](http://www.rba.gov.au/)

Retail World Magazine

Retail World Annual Report 2005

Retail World's Australasian Grocery Guide 2007

Smith, R. (2004) The Australian grocery industry, *Australian Economic
Review* 37 (3) pp.304-310

Spencer, S & Kneebone, M 2007, FoodMap: A comparative analysis of
Australian food distribution channels, Australian Government Department
of Agriculture, Fisheries and Forestry, Canberra.

University of Western Sydney, The processed food product system in
Australia, 2001