Investment Opportunities in the New Zealand Honey … · Investment opportunities in the New...

INVESTMENT OPPORTUNITIES IN THE NEW ZEALAND HONEY INDUSTRYAugust 2012

1

ThisinformationwaspreparedbyCoriolissolelyfortheuseofourclient;itisnottobereliedonbyanythirdpartywithout priorwrittenconsent.

InvestmentopportunitiesintheNewZealandHoney industry

PartoftheFood&BeverageInformationProjectAugust2012v1.01d

www.foodandbeverage.govt.nz

STAGEIIIThisdocumentrepresentsthethirdstageofawiderindustryscreendesignedtoidentify,develop&highlightemerginggrowthopportunitiesinNewZealandfoodandbeverageexportsforpotentialinvestorsandotherinterestedparties

StageIISecondaryScreen

StageIIIDevelopOpportunities

StageIPreliminaryScreen

Initialinputtoprocess

559

Metcriteria

129Metcriteria

25Identified

20

Exploredindepth

3

HoneySalmonSpirits

SeerelatedStageI&IIdocumentfordetailsAvailableatwww.foodandbeverage.govt.nz

Youarehere

PAGE3

TABLEOFCONTENTS

Section Page

Contents 4

Glossaryofterms 5

Methodology&datasources 6

Summary&conclusions 7

1.Strongexportgrowth 8

2. Manukadrivinggrowth 11

3.Premiumproduct 16

4.Success acrossrichmarketsEastandWest 22

5.Significantfurther growthpotential 26

6.Extensibleplatform 29

7.Investmentopportunities 37

8.Challengesandissues 44

Appendices 56

GLOSSARYOFTERMS

PAGE5

Thisreportusesthefollowingacronymsandabbreviations

ANZSIC AU/NZStandard IndustryClassification

b Billion

CAGR CompoundAnnualGrowthRate

Ce Coriolis estimate

e Estimate

f Forecast

FOB FreeonBoard

FT Fulltime

HSCodes Harmonised SystemCodesforcommodityclassifications

K SourceisKompass

Ke Kompass estimate

m Million

n/a Notavailable/notapplicable

NZ NewZealand

NZ$/NZD NewZealanddollar

PT Part time

S.H./N.H. Southern/NorthernHemisphere

T/O Turnover

t Tonne

US/USA United StatesofAmerica

US$/USD United Statesdollar

UK United Kingdom

METHODOLOGY&DATASOURCES

PAGE6 *FoodandAgricultureOrganisationoftheUnitedNations

Datawasfromavarietyofsources,andhasanumberofidentifiedlimitations

- Thisreportusesarangeofinformationsources,bothqualitativeandquantitative.

- Thenumbersinthisreportcomefrommultiplesources.Whilewebelievethedataaredirectionallycorrect,werecognisethelimitationsinwhatinformationisavailable.- Inmanycasesdifferentdatasourcesdisagree(e.g.

StatisticsNewZealandvs.FAO*vs.UNComtrade).- Manydatasourcesincorporateestimatesofindustry

experts.- Asoneexample,inmanycases,thevalueand/orvolume

recordedasexportedbyonecountrydoesnotmatchtheamountrecordedasbeingreceivedasimportsbythecounterparty[forunderstoodreasons].

- Inaddition,insomeplaces,wehavemadeourownclearlynotedestimates.

- CoriolishasnotbeenaskedtoindependentlyverifyoraudittheinformationormaterialprovidedtoitbyoronbehalfoftheClientoranyofthedatasourcesusedintheproject.- Theinformationcontainedinthereportandany

commentaryhasbeencompiledfrominformationandmaterialsuppliedbythirdpartysourcesandpubliclyavailableinformationwhichmay(inpart)beinaccurateorincomplete.

- Coriolismakesnorepresentation,warrantyorguarantee,whetherexpressorimplied,astothequality,accuracy,reliability,currencyorcompletenessoftheinformationprovidedinthereport.

- AlltradedataanalysedinallsectionsoftheF&BInformationprojectarecalculatedanddisplayedinUS$.Thisisdoneforarangeofreasons:1. Itisthecurrencymostusedininternationaltrade2. Itallowsforcrosscountrycomparisons(e.g.vs.Denmark)3. ItremovestheimpactofNZDexchangeratevariability4. Itismorecomprehensibletonon-NZaudiences(e.g.foreign

investors)5. ItisthecurrencyinwhichtheUnitedNationscollectsand

tabulatesglobaltradedata

- Theopinionsexpressedinthisreportrepresentthoseoftheindustryparticipantsinterviewedandtheauthors.ThesedonotnecessarilyrepresentthoseofCoriolisLimitedortheNewZealandGovernment.

- Ifyouhaveanyquestionsaboutthemethodology,sourcesoraccuracyofanypartofthisreport,pleasecontactTimMorris,thereport’sleadauthoratCoriolis,on+6496231848

SUMMARY– THEHONEYOPPORTUNITY

Overview- NewZealand’shoneyexportsareonarollandgrowingrapidly.

Exportshavegrownata30%compoundrateforthepastdecade,reachingUS$70min2010.ExportsarestrongtoEurope(inparticulartheUKandGermany)andAsia.

- NewZeland’s manuka honeyisthemostexpensiveintheworldandreceivesasignificantpremiumoverothersuppliers.Theon-goinginternationalsuccessofmanuka honeyisdrivingthegrowthofthetotalNewZealandhoneyindustry.

- InthepastdecadetheNZhoneyindustryhastransformedfromasmallsleepysectorfocusedontheproductionofhoneyfordomesticconsumptionintoafastgrowing,innovative,sciencebased,highvalueexportfocusedsector,withfirmsmoreakintopharmaceuticalandbiotech.Forexample,in5yearsManukaHealthhasgrownfromnothingtoanalmost$20mcompanywith50employees.Itaimstodoubleturnoverinfouryearswitharangeofwounddressings.

Driversofgrowth- Activemanukahoneyhasscientificallyproven healthgiving

propertieswhicharedrivingglobaldemandacrossarangeofoutlets,frompharmaciesthroughtohospitals.

- TheactivityinmanukahoneyisuniquetoNZ*,creatingahighlydefensiblebarriertocompetition(anditisnoteconomictofarmmanukatrees**).

- Manukaisthe“perfectproduct”- sweet,natural,guilt-free,convenient,healthgivingandscientificallyproven– wrappedinthecleanimageryofNewZealandandpackagedinawiderangeofforms(fromlozengestoshampootomedicine).

Opportunities- Manukaisascalableplatformwiththepotentialforafullrangeof

productlineextensions.Oncedeveloped,strongbrandscanbeleveragedintofood,beverages,nutraceuticalsandtheHBC(health&beautycare)space.

- TherecentabortedattemptbySuntory/Cerebos toacquireNZlistedComvitademonstratesthesuccessoftheNZhoneyindustryhasnotgoneunnoticedglobally.

- Experienceofothersectorssuggeststheindustryislikelytobeonthecruxofanumberofwavesofconsolidation,leadingtoasmallnumberoflargeplayersratherthanalargenumberofsmallplayers.Thisconsolidationwillbedrivenbyeconomiesofscaleandscope,increasinginvestmentrequiredinR&DandNPD+ andtheneedforin-marketsalesforces.

- Therealopportunityforinvestorsinthispointintheindustry’slifecycleisprovidingcapitaltotheemergingwinnerstofacilitatethosewinnersdrivingscalethroughindustryconsolidation.

- Investmentsinthesectorwouldhaveawiderangeofavailableexitstrategiesina3-5yeartimeframe,includingsaletoaglobalnutraceutical/pharmaceuticalcompany,saletoacompetitororlisting.

*andsomeregionsinAustralia;**onlyonsteepmarginallandoftenretiredfromfarming;+NPD=NewProductDevelopment

NewZealandmanukahoneyisanattractive,highgrowthindustrywithsolidfundamentals;itoffersparticipantsadefensiblebaseplatformthatcanbeextendedintoawiderangeofproducts

PAGE7

TABLEOFCONTENTS

Section Page

Contents 4

Glossaryofterms 5





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Appendices 56

NewZealandhoneyFOB1 exportvalue(US$m;2000-2010)

NEWZEALAND– HONEYEXPORTVALUEThetotalvalueofNewZealand’shoneyexportsisgrowingrapidly

PAGE9 1.FOB:valueatborderfreeonboard(ship);2.CompoundAnnualGrowthRate(growthyearonyear);Source:UNComtradedata;Coriolisanalysis

$5.2$7.9 $9.0

$15.7

$18.8

$25.4$26.9

$40.1

$50.6

$59.3

$70.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

10yCAGR2

(00-10)30%

Year-on-year%growth +53% +14% +73% +20% +35% +6% +49% +26% +17% +18%

CompositionofNewZealandhoneycropbydestinationmarket:domesticvs.export(t;1990-2010)

NEWZEALAND– HONEYBYDESTINATIONMARKETNewZealandhoneyproductionisgrowinginresponsetoincreasingexportdemand

PAGE10 Source:UNFAOAgStat data;UNComtrade data;Coriolisanalysis

-

2,000

4,000

6,000

8,000

10,000

12,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Domestic

Export

CAGR(90-10)9%

-1%

%ofcropexported 14% 24% 19% 35% 24% 41% 28% 42% 58% 71%23% 25% 33% 21% 29% 60% 34% 45% 55% 52%25%

Year-on-yearvariationinproductiondrivenpartlyby

seasonalfluctuationsinweather

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Appendices 56

Year Event(s)

1839 TwohivesofhoneybeesintroducedtoNewZealandbyMaryBumby totheMangungu MissionStationinHokianga Harbour

1852 L.L.Langstroth ofUSA patentsmoveableframe“Langstroth hive”[stillusedtoday]andqueenexcludertriggeringmodernhoneyindustry

1878 Langstroth hiveintroducedtoNewZealand

1905 IsaacHopkinsappointedasfirstGovernmentApiarist forDepartmentofAgricultureModelbeefarmsetupatRuakura governmentfarm

1908 ThefirstApiariesActwaspassed makingthekeepingoffixedframehivesillegalandintroducedmeasurestocontrolAmericanFoulbrood

1930’s+ MuchoftheNewZealandcropbeingsoldtotheInternalMarketingDivision (agovernmentagency)

1953 FormationofTheNZHoneyMarketingAuthority(NZHMA)assingledesk sellerofhoney(excludedcombhoneyandsomeotherproducts)

1970’s-80’s Growthofkiwifruitandpipfruit industriesincreasesdemandforpollinationservices

1983 DissolutionofHoneyMarketingAuthority(singledesk)

1988 ProfessorPeterMolan attheUniversityofWaikatoidentifiesuniquetypeofantibacterialactivityinmanukahoney

1991 Governmentendsfundingforendemicbeediseasecontrol;industryusesself-funding

1997 FormationofActiveManukaHoneyIndustryGroup(AMHIG)[laterAMHA/UMFHA]; creationofUMFtrademark

Nov2003 Comvita listsonNewZealandsharemarket

Jan2008 ProfessorThomasHenle,DresdenUniversityofTechnology(Germany)identifiedmethylglyoxal astheactivecompoundinManukahoney.

Sep2009 Synergisticmoleculeinmanukahoneyidentifiedwhichincreasesitsanti-bacterialeffect

May2011 PrimaryGrowthPartnershipwithManukaResearchPartnership(NZ)LtdandComvitathatinvestsmorethan$1.7millioninresearch tocultivatehighactiveManukaplantationsonbackcountryland.Aseven-yearprogrammeofinnovationisplannedtoenablegrowthofthemedicinalManukahoneyindustry16-fold.Itscurrentestimatedworthis$75million.

Nov2011 Suntory-ownedCerebos makeanunsolicitedofferofNZ$71.6m forlistedComvita; offerrejectedbyboardandshareholders

TimelineofmajoreventsinthehistoryoftheNewZealandhoneyindustry(1800-2011)

NEWZEALAND– HONEYTIMELINEWhilehoneyhasalonghistoryinNewZealand,theuniquepropertiesofmanuka honeywereonlyidentifiedinthelate80’s

PAGE12 UMF– UniqueManukaFactor;Source:Coriolisfromvarioussources

MANUKADRIVINGGROWTH

- “Theantibacterialactivityofhoneywasfirstrecognisedin1892...Ithasbeenfoundthatmostlytheactivityisduetothehydrogenperoxideproducedenzymically inhoney,buttherehavebeensomereportsofminoradditionalantibacterialcomponents.Asurveyof345samplesofNewZealandhoneysfrom26differentfloralsourcescarriedoutbyAllenetal.(1991)foundthatwhencatalasewasaddedtodestroyhydrogenperoxidethehoneyfromonlyoneofthefloralsources,manuka (Leptospermumscoparium),hadanysignificantamountofantibacterialactivityremaining.Thiswasuniqueamongstthemanyreportsonotherhoneysaroundtheworldinthatthisnon-peroxidecomponentwasamajorcontributortotheantibacterialactivity,althoughasubsequentsurveyof340samplesofAustralianhoneysfrom78differentfloralmadeasimilarfindingforhoneyfromjellybush (Leptospermumpolygalifolium).”PeterMolan,Manukahoneyasmedicine,July2001

- “ResearchbyPeterMolan atWaikatoUniversityhasshownhoneyfromnectarcollectedfrommanuka flowerstohaveantibacterialproperties.Asdemandhasgrownforthisdarkhoneywithitsearthyscentandmineral,slightlybitter,flavour,itspricehasincreased.“DominionPost,Mar3,2009

- “ManukahoneyisauniqueNewZealandproductwhichoffersanewmethodoftreatingotherwiseuntreatablewounds.Eventheflesh-eatingbacteriasuccumbtothehighactivitymanuka honey.”BillBracks,Chairman,Comvita,April2004

- “[Manukahoneyhas]comealongway.Twentyyearsagowecouldn'tgiveitaway,becauseitstastewassostrong. Itwasusedasafeedtokeepthebeesgoingoverwinterandthatwasit. Today,withitsprovenhealthbenefits,peoplearepreparedtopaythreetimesmoreforitthantraditionalhoney.”PamFlack,Director,Arataki Honey,Mar2009

- “Manukahoneycommandsahighpricebecauseofitsprovenantibacterialandotherhealthproperties.Accordingtotheexperts it helpscombateverythingfromsunburn,sorethroatsandwrinklestothenotoriouslyhardtofightsuperbuginfections.”UnlimitedMagazine,Mar2010

PAGE13

Thesuccessofmanuka honeyisdrivingthegrowthoftheNewZealandhoneyindustry

Numberofpapersonmedicalusageofmanuka honeybyactivitystudiedinUSNationalInstituteofHealth’s(NIH)PubMeddatabase(studied;1988-2011)

RESEARCHONMULTIPLEMEDICALUSESManukahoneyhasbeenscientificallyresearchedforawiderangeofuses– itsantibacterialpropertiesanduseasawounddressingarethemostresearched/validateduse

PAGE14 Source:BasedonsearchusingPubMed,excludeschemical/processing/foodjournals

25

23

2

2

2

1

1

1

Antibacterial

Wounddressing

Toothdecay

Gutinflammation

Asthma

Immunity

Angiogenesis

Antifungal

Countryofprimaryauthor(s)ofthesepapers(studied;1988-2011)

16

14

6

4

3

3

1

1

1

1

1

1

1

UK

NZ

Ireland

Canada

USA

India

France

Poland

Slovakia

Portugal

Italy

Germany

Australia

Total=37papers(Multipleanswers

possible)

Total=37papers(Multipleprimaryauthors possible)

Delivery Mechanism CompetingProducts

- Raw honeyasafood- Honeysupplementswithroyaljelly/propolis/pollenadded- Addedtowounddressings- Combinedintoagelforwoundtreatment

Natural:

Totarol,oreganooilOtherhoneysProbioticsTea treeoil,eucalyptus

Components ConventionalMedicine:

MethylgloxalLow pHAsyetunidentifiedsynergisticfactors

AntibioticsTopical creamsRevamil® Honey

ResearchState

Antibacterial/Wound Dressing:Verywellresearched,convincingevidence,“proven”Soontobeusedaspartofhospital woundcareinseveralcountriesFDAapprovedproduct

Other:Otherusesarespin-offfromanti-bacterialcare(i.e.toothcare)orareonlyattheinitialphaseofresearchDifficulttojudgepromiseofresearchintotheseareas

History

Honeyhasbeenusedtotreatwoundsformillennia.In1988,DrPeterMolan’slabat theUniversityofWaikatodiscoveredmanuka honeyhadantibacterialproperties.

Manukahoneywaslatershowntohavebactericidalactivitydistinctfromotherhoneyandwaseffectiveinwoundtreatment.

ItisnowcollectedwidelyinNZandcertified foruseinhospitalwoundcare.

NZResearchCentres

Patents/IP/NZ-specificadvantages WaikatoHoneyResearchUnit(UniversityofWaikato)UniversityofWaikatoMasseyUniversity- ManukaResearchPartnership (PrimaryGrowthPartnership)PlantandFoodResearch

Proprietaryblendofmanuka honeystested(forinstanceComvita)Patentsonextraction/isolation ofactiveingredientandwoundgeltechnology(boughtfromWaikatoLink)ManukahoneyprimarilyNZ,alsoAustralia

PRODUCTPROFILE– MANUKA HONEYManukahoneyhasbeenvalidatedforwoundhealingandisapprovedforhospitaluse

PAGE15 Source:CoriolisbasedonsearchusingPubMedandvariousothersources

OverviewofcurrentstateofscientificresearchintoManukaHoneyasanutraceuticalsupplementandformedicalusage(various;1988-2011)

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Appendices 56

Exportmatrix:exportvolumevs.exportvalueperkgvs.exportvaluefortop20honeyexportingcountries(byvalue)(various;2010)

EXPORTMATRIXNewZealandachievesadramaticallyhigheraveragepriceforitshoneythancompetitors

PAGE17 Source:UNComtrade data;Coriolisanalysis

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

$11

$12

0 10 20 30 40 50 60 70 80 90 100 110

China

Argentina

Germany

Mexico

Spain

NewZealand

Hungary

India

CanadaBrazil

Belgium

Romania

Italy

BulgariaChile

SaudiArabia

Australia

France

Ukraine

USA

Averageexportprice

perkg(US$/kg; 10)

Exportvolume(kg; m; 10)

Sizeofcircle=export value(US$;10)

Mekko chartcomparingNewZealandexportvolumebymarketwithaverageexportvalueperkg(t;US$/kg;2010)

NEWZEALAND– EXPORTVOLUMEVS.$/KGHowever,theaverageexportvalueperkilogramvariesbymarketdrivenbyproductmix(%active/manuka)


5000

Germany

$6.17

OtherEurope

$6.67

Canada Singapore

$9.57

OtherSEAsia

$10.57

Japan

$20.66

U.K.

$10.94

HongKong

2,0001,500

$10.65

1,000 6,5006,0005,5005,0004,5004,0003,5003,0002,500

$11.45

Other

$11.65

USA

$14.51

Australia

$15.45

OtherEAsia

$15.96

Height:AverageUS$/kg

FOB(2010)

Width:Exportvolumeofhoneysentintonnes(2010)

Average$10.67/kg

- Drivenprimarilybyvarietymix- Moreactivemanuka =more$/kg- GermanyandotherEuropebuyingprimarily

non-activehoney;whatisrequiredtoconvincethemofthebenefitsofManuka?

Averagehoneyexportvalueperkilogram:Top10exportingcountriesbyvalue(in2010)(US$/kg;1996-2010)

EXPORT$/KGTheNewZealandhoneypriceisgrowingatdoubledigitrates


$-

$2

$4

$6

$8

$10

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

NewZealand

Germany

Hungary

SpainCanadaMexico

China

BrazilIndia

15yCAGR(00-10)

10%

5%

6%

3%4%5%

2%

9%4%

2000NZ2xChina

2010NZ6xChina

EXAMPLE:Sainsbury’s(UK)totalhoneyrangebycategoryandbrandownership(presence;1/2012)

HONEY– EXAMPLE– RANGEATSAINSBURYU.K.NewZealandhoneyistypicallysoldinexportmarketsaseithersuper-premiumactivemanuka – undermanufacturersorretailersbrands– oraspremiumspecificorigin(non-active)honey

PAGE20 Source:Sainsburyonlineshoppingwebsite(Londonpostcode;Jan2012);photocredit(fairuse;lowresolution;completeproduct/brandforillustrativepurposes);Coriolisanalysis

Everyday

PremiumSpecificcountry&plantorigin

Super-premium

Active Manuka

Pricefighter

PremiumSpecificplant

Retailerstorebrands Manufacturerbrands

Organic

NewZealand

China&S.America

Domestic&EU

EXAMPLE:RetailshelfpriceofselecthoneyproductsinSainsbury’sLondon(£/kg;actual;1/2012)

RETAILPRICEPERKILONewZealandactivemanukahoneyachievesalargepricepremiumontheshelf;forexampleatSainsbury’sitisupto15xtimesthepriceofthecheapesthoneyontheshelf(onaunitpricebasis)

PAGE21 Source:Sainsbury’sonlineshoppingwebsite(Londonpostcode;Jan2012);photocredit(fairuse;lowresolution;completeproduct/brandforillustrativepurposes);Coriolisanalysis

£2.91 £3.71

£6.97 £7.00 £7.03 £8.09 £8.79

£11.74

£19.98

£25.85

£44.09

1 2 3 4 5 6 7 8 9 0 11

Everyday Premium/Gourmet Active ManukaPrice

5+ 10+ 15+

15x

TABLEOFCONTENTS

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Appendices 56

NewZealandhoneyexportvaluebyselectkeymarketsandregions(US$m;2000-2010)

NEWZEALAND– EXPORTVALUEBYDESTINATIONThevalueofNewZealandhoneyexportsaregrowingatveryhighratestokeymarketsinEurope,NorthAmericaandrich/developedAsia


$-

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Germany

U.K.

OtherEurope

Australia

USACanada

Japan

OtherEAsia

9%

40%

36%

32%

38%48%

28%

40%

Other 7%

HongKong 10%

10yCAGR(00-10)

+$2

+$23

+$4

+$7

+$4+$2

+$6

+$2

+$0.2

+$7

10yabsolute(00-10)

30% +$65

OtherSEAsia 33% +$2

Singapore 33% +$6

$5.2$7.9 $9.0

$15.7

$18.8

$25.4$26.9

$40.1

$50.6

$59.3

$70.0

IMPLICATIONS- Nota“onehitwonder”

- StrongdemandacrossEurope,AsiaandN.America

- Furthergrowthpotentialgoingforward

Numberofdifferenthoneyproductsontheshelf(sku)inselectsupermarketsinkeymarketsforNewZealandhoney:NZandtotal(#;sku;actual;1/2011)

#OFHONEYPRODUCTSONSHELFNewZealandhoneyisachievinggoodshelfpresenceinsupermarketsacrossallmajormarkets

PAGE24 Source:Coriolisfromvariousretailersonlineshoppingwebsites

30

38

30

24

24

22

22

7

14

19

1

1

3

6

3

2

2

9

1

2

1

2

1

1

1

4

7

1

11

2

1

1

1

1

Countdown

Sainsbury

Tesco

Waitrose

Coles

Woolworths

Wellcome

ParkNShop

ColdStorage

FairPriceNon-NZ NZnon-manuka Manuka Active

NewZealand

UnitedKingdom

Australia

HongKong

Singapore

32

39

42

44

26

27

30

27

10

17

100%

23%

10%

32%

11%

11%

27%

19%

30%

18%

%ofrangefromNZ

EXAMPLE:UnitedKingdomimportvaluemarketsharebykeysupplyingcountriesandregions(%ofUS$;1996-2010)

UKMARKET– HONEYSHARENewZealandistakingvalueshareinitskeymarkets,asthisexamplefromtheUKshows


5% 5% 7% 7% 9% 9% 9%12% 11% 12% 13% 14% 14% 11% 10%0% 0%

1% 2%1% 1% 1%

2% 4% 3%8% 9% 10%

3%2%

2%0%

2% 1% 1%4% 3%

4%6% 7%

6% 4% 4%

3%1%

2%2%

0% 0% 1%1% 2%

3%4% 3%

5% 5% 2%

6%5%

8% 9%11% 10% 9%

9%18%

14%14% 13%

10% 9%5%

10%9%

2% 3%2% 1% 2%

1%

2% 0%0% 0%

0% 0%1%

0%

0%

1% 1%1% 1% 1%

1%

1% 0%0% 0%

0% 0%0%

0%

0%

3% 2%3% 5% 4%

6%

5% 8%6%

14%15% 19%

20%

18%20%

7% 12%12% 8% 8%

9%

8%9% 7%

9%6%

5%3%

5%3%

12%

17% 12%10%

15% 8%

13%10% 13%

7% 7%10%

11%

10%

8%

5%

9% 8%14%

10% 14%

31% 27%13%

16%17%

16%

15%

7%

7%

0%

0% 0% 0% 0%0%

1% 4%

11%9% 3%

0%

1%

6%

6%

10%

5% 4%8% 6%

6%

4% 5%8% 4% 5% 5%

5%

5%

2%

4%

4%1%

1% 2%2%

1%1% 3%

2% 3% 2%

3%

3%

4%40%

32%36% 33% 32% 30%

2% 0% 0% 2% 2% 2%6%

14%21%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Germany

FranceHungary

OtherEurope

Romania

NewZealand

Australia

Mexico

Argentina

BrazilOtherC/SAmericaOther

China

CanadaUSA

LowcostSouthAmericanandChinesehoney~50%

PeriodofEUbanonChinesehoney

OtherEU~27%

Western~50%

~30%

~70%

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Appendices 56

NewZealandhoneyvaluemixbycountryvs.globalhoneyimportvaluemix(%ofUS$;2010)

HONEY:NZEXPORTVALUEMIXVS.GLOBALIMPORTMIXNewZealandhoneyappearstohaveclearopportunitiesforcontinuedgrowth

PAGE27 Source:UNComtradedata;Coriolisanalysis

32%

7%

5%

19%

6% 32%

11%

1%5%

21%

3%

1%

11%

1%10%

7%3%1%

9%1%

3%

3%

1%6%

NZexportvaluemix Globalimportvaluemix

UK

Germany

OtherEurope

Australia

USA

Canada

HongKong

Japan

OtherEAsia

Singapore

OtherSEAsiaOther

Europe43%

Europe58%

NorthAmerica

8%

NorthAmerica22%

E/SEAsia13%

E/SEAsia36%

$70m $1,483m62%

53%

50%

20%

17%

13%

7%

4%

1%

1%

1%

0%

Singapore

Australia

HongKong

U.K.

OtherEAsia

Canada

Japan

OtherSEAsia

Germany

USA

OtherEurope

Other

NewZealandimportshare(%ofUS$;2010)

Strongopportunitiesfor

growth

$1.30

$0.34

$1.13

$0.36

$0.00

$0.06

$0.06

$0.00

$0.05

$0.01

$0.01

$0.00

$/capitafromNZ(%ofUS$;2010)

Apparentpercapitahoneyconsumptioninallformsbyselectcountries(kg/person;2007)

HONEY– PERCAPITABYCOUNTRYThehighconsumptionEuropeancountries– particularlyGermany,AustriaandSwitzerland– withhighincomesandastronginterestinnaturalhealthproducts– standoutasstrongopportunitiesforgrowth

PAGE28 Source:UNFAOAgStat data;Coriolisanalysis

1.53

1.38 1.38

1.241.15

1.081.01

0.67 0.67 0.66 0.660.59 0.58 0.57 0.57 0.55

0.44 0.44 0.430.38 0.35 0.32 0.32

0.27 0.23 0.22 0.220.12 0.10 0.09

0.04 0.01

Western/Europeancountries Dry,tropicalandAsianregionsHoneyparticularlystrong

inGermaniccountries(Swiss,Germany&Austria)

TABLEOFCONTENTS

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Contents 4

Glossaryofterms 5





3.Premiumproduct 16






Appendices 56

EXAMPLES:ProductsfromtheUSmarketwhichusehoneyasaningredient(1/2012)

RANGEOFUSESHoneyiscommonlyusedasaningredientinawiderangeofproducts,typicallyasanaturalflavourinfoodsandbeveragesorforitsperceivednaturalhealthgivingpropertiesinnaturalmedicinesandcosmetics

PAGE30 Source:GNConlineshoppingsite;Walgreensonlineshoppingsite;photocredit(fairuse;lowresolution;completeproduct/brandforillustrativepurposes);Coriolisanalysis

Energybar

Medicine

Cereal Beverage

CosmeticSkincareSupplement/Nutraceutical

Confectionery Processedmeat

Coughtreatment

Directionsfortheextensionofmanuka honey(model;2012)

EXTENSIBLEPLATFORMNewZealandmanukahoneyprovidesanextensibleplatformthatcanbeexpandedintoarangeofnewproductsandcategories

PAGE31

ManukaHoney

UniqueFlavourforfood&

beverages

Nutraceutical/Naturalhealth

products

Medicaltreatment

Ingredientincosmetics

x

u

v

w

EXAMPLES:Foodsmarketedasbeingflavouredwithmanuka honey(2012)

1.UNIQUEFLAVOUR– FOODSManukahoneyisbeingusedasaflavourinarangeoffoods

PAGE32 Source:various;photocredit(fairuse;lowresolution;completeproduct/brandforillustrativepurposes);Coriolisanalysis

FreedomFarmsShavedManukaHoneyLegHamFlavouredwithmanuka honey100gNZ$4.20

FreedomFarms(NZ)Manufacturerofhamproducts

Sanitarium LightNTastyCerealFlavouredwithmanuka honey,date&nut500gNZ$6.49

Sanitarium(NZ)(SeventhDayAdventist Church)Manufacturerofhealthfoods

Comvita Manuka HoneyBarBoostContains6superfoods (includingmanuka honey)40gNZ$3.00

Comvita (NZ)Manufacturerofhealthproducts

EXAMPLES:Beveragesmarketedasbeingflavouredwithmanuka honey(2012)

1.UNIQUEFLAVOUR– BEVERAGESManukahoneyisachievingfrontoflabelcutthroughonanumberofprominentbeverages


FireflyHealthKickFlavouredwithBloodOrange&ManukaHoney330ml£1.65atLloyd’sPharmacy(UK)

FireflyTonics(UK)Manufacturerofhealthy&convenientbeverages

42BelowManukaHoneyVodkaFlavouredwithManukaHoney700mlNZ$42.99atGlengarry

Manufacturedby42Below (ownedbyBacardi)Manufacturerofspirits

ClipperGreenTeawithManukaHoneyContainsmanuka honey40g£1.65atSainsbury’s(UK)

ClipperTea(UK)(FF&PPrivateEquity)Manufactureroftea

“Manukahoney…Oneofnature’sWonder-Foods…An

intense, broodingvodkawithanaromaofbeeswax,honeyandcaramel,withajustsweet

flavourofhoney,butterscotchandaniseed,andasmoky,spicy

aftertaste.”

EXAMPLES:Cosmetics&skincareproductsmarketedascontainingmanuka honey(2012)

2.COSMETIC/SKINCAREINGREDIENTManukahoneyisbeingusedasanamedingredientinanincreasingrangeofcosmeticandskincareproducts


Ecostore SoapContainingmanuka honey&kelp80gNZ$2.50atCountdown

EcoStore (NZ)Manufacturerofnaturalcleaners

Carex NatureProtectManukaAntibacterialHandwashContainsmanuka honey250ml£1.60atBoots(UK)

PZCussons(UK)Manufacturerofhealth&beautyproducts

AntipodesAuraManukaHoneyTreatmentMaskContains6superfoods (includingmanuka honey)75mlNZ$44.50atPharmacyDirect

AntipodesNewZealand(NZ)Manufacturerofcosmetics

EXAMPLES:Nutraceutical/naturalhealthproductsmarketedascontainingmanuka honey(2012)

3.NUTRACEUTICAL/NATURALHEALTHPRODUCTSManukahoneyisbeingusedasanamedactiveingredientonanincreasingrangeofnaturalhealthproducts


GreenBayActiveManukaHoneysuckersContainingmanuka honey&propolis12count£4.99atWaitroseUK

Green Bay(UK)Manufacturerofnaturalhealthproducts

Comvita Children’sManukaElixirContainingmanuka honey&propolis200mlNZ$22.99atAmcal

Comvita (NZ)Manufacturerofnaturalhealthproducts

ManukaGold ManukaThroatSprayContainingmanuka honey&propolis15ml£2.50atOneClick Pharmacy(UK)

FSC(UK)Manufacturerofnaturalhealthproducts

EXAMPLES:Medicalproductsmarketedascontainingmanuka honey(2012)

4.MEDICALTREATMENTManukahoneyisbeingusedinmedicine


ManukaMed ManukapliContainingmedicalgrademanuka honey2tubesat1oz/eachUS$16.99fromStarryBrook(US)

Watson&Sons (NZ)Manufacturerofmanuka healthproducts

Comvita Manukacare 18+ContainingUMF18+manuka honey50g£10.24atOneClick Pharmacy(UK)

Comvita (NZ)Manufacturerofnaturalhealthproducts

MedlineTherahoney GelContainingmedicalgrademanuka honey5ozAvailabletoUShospitalsfromMedline

Medline(US)Manufactureranddistributorofmedicalsupplies

TABLEOFCONTENTS

Section Page

Contents 4

Glossaryofterms 5





3.Premiumproduct 16






Appendices 56

Large(~25+employees)

Medium-Small(lessthan25employees)

Widerangeofhoneytypesfordomesticand

export

Manukaforhealthandmedical; primarily

exportfocused

SelectionofhoneyprocessorsinNewZealandsortedbyemploymentsize(2011)

NEWZEALAND– RANGEOFFIRMSThereareawiderangeoffirmsinvolvedintheNewZealandhoneyindustry;manywouldbepotentialinvestmenttargets

PAGE38 Source:Coriolis

IdentifiedNewZealandhoneyfirmsbynumberofemployees(#ofpeople;2011orasavailable)

CONSOLIDATIONOPPORTUNITIESTheNewZealandhoneyindustryisstillrelativelyfragmented;experienceofothersimilarindustriessuggestsconsolidationopportunitiesgoingforward

PAGE39 Source:variouspublishedarticles;variouswebsites;Kompass;Coriolisinterviews&estimates

0

20

40

60

80

100

120

1.Includesinternationalemployees;Source:variouscompanyannualreports;variouscompanywebsites;Kompass estimates(Ke);interviews;Coriolis analysisandestimates

OurresearchhasidentifiedthefollowinghoneyfirmsinNewZealand…

KeyfirmsintheNewZealandsector(2010orasavailable)

Turnover %Export Employees OwnershipYear

founded Notes

Honey/Beeproducts

$85m(2010)

1431 NewZealand; Listed(NZX:CVT)

1974 www.comvita.comManukahoney;widerangeofotherproducts

$1-5m(K;06)

59% (K) 10(K)

NewZealand;private(Watsonfamily;Daniell family)

2003 www.watsonandson.co.nzwww.manukamed.com15,000beehives

$20m 90% 50 NewZealand;private(numerous)

2006 www.manukahealth.co.nzHoneyproducts inmedifoods, cosmecueticals,70productsin40markets

$5-10m(K) 40 NZ; private(Berryfamily;others)

1944 www.aratakihoneyhb.co.nz

NZHoneyCompany

$10.8m(2010)

N/A NZ;cooperative(80-100beekeepers)

1950’s/1981

www.nzhoney.co.nzNewZealandHoneyProducersCo-operativetookovertheassetsoftheHoneyMarketingAuthorityHollands; 3Bees;SweetMeadow;Hororata

$5m (npa;09) 90% N/A NewZealand;private(Wardfamily)

2005 www.newzealandhoneyco.co.nzHoneyproducts;parentisAlpineHoney

HoneyNewZealand(International)

$3m(Ke)

25 NewZealand;private(Brayfamily)

1910 www.airborne.co.nzRegular,manuka,active manuka,andhoneylozenges

$3m(Ke)

20(K)

NewZealand;private(Pringlefamily)

2003 www.honeynz.co.nzwww.beesonline.co.nzHoney

$3m(Ke)

20(K)

NewZealand;private(Mossop family)

1952 www.mossopshoney.co.nzWiderange ofhoneyproducts

HONEY– NEWZEALANDFIRMS

PAGE40

Source:variouscompanyannualreports;variouscompanywebsites;Kompass estimates(Ke);interviews;Coriolisanalysisandestimates

…continued…



founded Notes

Honey/Beeproducts

$3m(Ke)

15(K)

1947 www.packagebees.co.nz

NelsonHoney &Marketing $2.4m(Ke)

14(K)

NewZealand;private(Cropp family)

1972 http://www.nelsonhoney.comHoney;beeproducts

$2m(Ke)

10(K)

NewZealand;private(Lyttle andBall)

1995 www.purenewzealandhoney.comManuka honey,activemanuka;otherhoneys

$1m(Ke)

10(K)

NewZealand;private(Lipscombe family)

1976 www.happyvalley.co.nz;www.happyvalleyhoney.com.hkHoneyandbee products

$2m(Ke)

10(K)

1995 www.honeylands.co.nz

Davidson’sApiaries $1m(Ke)

8(K)

NewZealand;private(Davidsonfamily)

1945 www.beewild.co.nz

$1m(Ke)

7(K)

1993 www.haddrells.co.nz;CambridgeBeeProductsBeeproducts;UMFhoney(GoldenHillsbrand)

$1m(Ke)

7(K)

1960 www.waitematahoney.co.nzHoney,UMFHoney

$3m(Ke)

6(K)

1991 www.beehealthy.co.nz;www.ecroyd.com/Honey;manuka honey;beeproducts

$2m(Ke)

5(K)3,500hives

1940 www.waitakihoney.co.nz

$1m(Ke)

4(K) 1976 www.manukahoney.co.nz/Manukahoney;UMFhoney


PAGE41

Source:variouscompanyannualreports;variouscompanywebsites;Kompass estimates(Ke);interviews;Coriolis analysisandestimates

…continued…



founded Notes

Honey/Beeproducts

HoneyandPropolisNZLtdTweeddaleApiaries

N/A 12 NewZealand;private(Tweeddale Family)

2002 Partnership inManukaResearchPartnership(60%)17,000hives;Nowebsitelocated

APIHealth N/A N/A NewZealand;private(Nikolaeva family)

1998 www.apihealth.comBeevenom;beeproducts

$1.5m(Ce)

N/A NewZealand;private(DarrenClifford)

2006 www.thehoneycompany.co.nz

N/AN/A NewZealand;private

(William Gluyas)1990 www.manukanatural.com/

Manukaproducts;honey

N/A 3(K)

NewZealand;private(Bickerstaff andWheeler)

1997 www.honeybalm.comBee productbasedsupplements

$1m(Ke)

1-5(K) NewZealand;private(Pohio family)

2000 www.naturescountrygold.co.nzHoney; ManukaBoosta honey-basedenergy-bars

$0.7m 2(K) NewZealand;private(Clarke family)

2003 www.autumnvalleyhoney.co.nz

$0.3m(Ke)

1(K)

NewZealand;private(Walkerfamily)

1986 www.honeyland.co.nz

N/A 1,200hives NewZealand;private(Dalefamily)

1959 www.strathdalehoney.comCloverhoney;bio-gro organiccertified;C.Otago

N/A N/A NewZealand;private(Cook family;Goodmanfamily)

1997/2000

www.naturebee.comPotentiatedpollen;beevenom;AMFmanuka honey

N/A N/A NewZealand;private(Steens family)

2000 www.steensnewzealand.comActivemanuka honey;inWaitroseUK


PAGE42

Source:variouscompanyannualreports;variouscompanywebsites;Kompass estimates(Ke);interviews;Coriolis analysisandestimates

…continued…



founded Notes

Honey/Beeproducts

N/A N/A NewZealand;private(Huang&Zhang)

2003 www.hauorahoney.co.nz/NACTradingLtdRangeofflorasincl UMFmanuka(controlallchain)

Otago HoneyProducts $1m(Ke) 3(K) NewZealand;private(Sales, Farhi,Walker,McCaw)

1991 Nowebsitelocated

MilburnApiaries $1m(Ke) 3(K) NewZealand;private(Walker,McCawfamilies)

1970 NowebsitelocatedPart owns,Otago HoneyProducts

AlpineHoneySpecialties $1m(Ke) 7(K) NewZealand;private(Wardfamily)

1981 Nowebsitelocated

CellLimited(FormerlyCellularImprovements)

N/A N/A NewZealand;private(Donnellyfamily)

1999 http://yhst-56964562438721.stores.yahoo.net/Potentiatedpollen

Zeal Extracts N/A N?A NewZealand;private (Butler) 1998 Websitesdown;ActiveZealax UMFhoney


PAGE43

TABLEOFCONTENTS

Section Page

Contents 4

Glossaryofterms 5





3.Premiumproduct 16






Appendices 56

NEWZEALANDHONEY– SWOT ANALYSISManukahoneyhasstrongpotentialforcontinuedgrowth;however,majoremergingissuesneedtobeaddressedswiftly

PAGE45 Source:Interviews;Coriolis

Strengths Weaknesses

- Unique/defensible product

- Strongpositioninahandfulofcountries(UK,AU,HK&Singapore)

- NewZealandtrustedcountryandproductswithsecurefoodsource

- AbletoleveragefavourableopinionofNewZealandinkeymarkets(e.g.China,Korea,Japan)

- Phytosanitary barriersprotectingdomesticmarket

- Fragmented;mostNZfirmshavelow/noeconomiesofscale

- Lackofindustrycohesion;infighting

- Multiplestandardscreatingconfusionforconsumers

- Highcostofrobustscientificvalidationofclaims(e.g.clinicaltrials)

- Significantexportsofbulkhoneyforrepackagingelsewhere

Opportunities Issues/Threats/Risk

- Hugepoolofpotentialconsumers(e.g.peoplewithcolds)whohavenotyettriedorbeenexposedtomanuka honey

- Furtherscientificresearchbuildingonmedicalcredibilityofmanuka honey

- Beediseasesdestroyingbeepopulation

- Counterfeiting

- Exaggeratedclaims(e.g.non-activebeingsoldasactive)

- Falseclaimsbringdisreputeontheindustry

- Increasingamountofregulatoryrestrictions;couldbeclassifiedasmedicine

- Backlash,negativepublicityinsectorwithproductswithunprovenclaims(e.g.cancer)

- Othercountrieslaunching“active”honeys(e.g.Chile’sUlmo activehoney)

- Scares/contaminations/diseasedamagingconsumerimageofNewZealand

SUMMARY

- Despitehavingavirtualmonopolyonsupplyoftheproduct,NewZealandhasnottrademarkedorprotectedtheterm“active”asitrelatestohoney.Thisisreminiscentofpastlackofactiontoprotect“kiwifruit”(chinese gooseberry)and“vintage”cheese(agedcheddar).

- Variousformsofactivemanukahoneyarecurrentlybeingsoldunderaplethoraofqualitystandards,includingUMF,MGO,MGSand OMA,forexample.

- Productspurportingtobemanukahoney,oractiveorbio-activeoftenhavenorecognisedassuranceofingredientintegrityortestingregimetosupporttheirhealthclaims.

- TheUniqueManukaFactorHoneyAssociation(UMFHA)isattemptingtoestablishtheirUMFratingsystemastheindustrycertificationstandard.However,asyet,therehasnotbeenanystandardisationoftheUMFlogoandlabelterminology.

PAGE46

Unitingmanukahoneystandardsseemstobethekey

ExamplesofNewZealand“active”manukahoneywithnoclearcertification(2012)

ISSUE1– POORCONTROLS– “ACTIVE”MANUKA HONEYThereisnocommondefinitionorcertificationfor“active”manukahoneyatpresent


“Active15+” “Active” “Active5+” “Active10+”

“Active20+” “Active5+”

Comments/notes

- Allhoneyis“active”atsomelevel

- NewZealandhasnottrademarkedorprotectedthephrase“active”asitrelatestohoney

- Similartofailuretoprotect“Kiwifruit”(ChineseGooseberry)and“Vintage”cheese(agedcheddar)

- Thereforeanyoneanywherecancalltheirhoneyactive

“5+ActivityLevel”

Comments/notes

- Imagineyouareaconsumerthathasheardabout“Manukahoney”andyouarepresentedwiththesefourproductsontheshelfofyourpharmacyorsupermarket

- Whichisbetter:UMF10+,MGO250,MGS16+orOMA16+

- TheUniqueManukaFactorHoneyAssociation(UMFHA)wasformerlytheActiveManukaHoneyAssociation(AMHA)

- Toincreaseconfusiontherearenumerousdifferentexecutionsonthe“UMF™”logo/word

- AsfaraswecantellWedderspoon (aUSfirm)appearstohaveinventedit’sownstandard[OMA];ifotherretailersandmanufacturersdothesame,confusionwillreign

ExamplesofonpackcertificationsystemsforactivitylevelsinNewZealandmanuka honey(2012)

ISSUE1– POORCONTROLS– MULTIPLESTANDARDSActivemanukahoneyisbeingmarketedtoconsumersunderaconfusingrange,somedubious,ofcertificationsystems


ISSUE1– POORCONTROLS

- “The[NewZealandCommerceCommission]isconsideringwhethertoinvestigateacomplaintfromPeterBray,managingdirectorofAirborneHoney,aboutthelabellingandmarketingofpremiumhoneyflavourssuchasmanuka andrata.Brayclaimsthatsomehoneyvarietiesinsupermarketscontainlittleofthehoneytypetheyclaimtobe.Despitemuchdiscussion,theindustryhasyettoadoptitsownlabellingstandardsanddebateragesaboutthescienceofidentifyinghoneytypes.”NewZealandHerald,May2003

- “Eightoutof20differentpotsof"manuka honey"testedfortheConsumersInstitutewereblendsratherthanjustthemanuka honeythathadbeenclaimed,theinstitutesaidtoday."Producersofhigh-priced'manuka'honeyswhicharesimplyblendsarerippingoffconsumersandbeingunfairtoproducersoftruemonofloral manukahoney,"theinstitutesaidintheFebruaryissueofitsmagazine,Consumer,releasedtoday.”NewZealandHerald,Feb2004

- “LotsofproductsmarketedunderlabelssuchasActive,Bio-active- orevenfakemanuka honey- havenoaccuratetestingregimetosupporttheirhealthclaims.”MGOManukawebsite,Jan2012

- “Theincreasingpopularityandpublicdemandhaveledtoafloodofproductsonthemarket.ManyofthesesocalledactiveManukahoneysarenotwhattheyseem.Manufacturersanddistributorswanttogainfinanciallybypromotingtheirproductsasbeingactive,healing,specialandunique.WhilethecoldtruthisthatalotoftheseproductsarenottestedfortheirantibacterialactivitiesandconsequentlydonothavetheuniquetraitsofgenuineactiveManukahoney.”Squidoo.com,accessedJan2012

- “Almost70%oftheManukahoneyharvestedisnotactive.ThetemptationformanycompaniesistotryandselluntestedManukaHoneyasthoughtheyhaveanactivitycertificateinordertogetahigherprice.EverydrumofManukahoneymustbetestedandeverypot shouldhaveabatchnumberrelatingtothedrumitcamefrom.Someofthelessreputablehoneyproducerswillonlytest1outofevery5-10drumsforactivity. OtherswillheattheirManukatogetashort-livedactivityreadingforthetimeoftesting,howeverafterabout10–15days,thishoneywillloseallofitsactivity.AcurrenttrendtomakemoneyistoshipManukahoneyinbulkoutofNewZealandandpackageitinanothercountrytoavoidtheexporttestingregulationsandsellnon-activeManukaasactive.Therearecurrently3brandsintheUSthatclaimactivitybutcannotorwillnotproduceaCertificateofAnalysisfortheirhoneyforeverybarrel.OnecompanyevenpackstheirManukahoneyinclearglassjarsthatallowslighttodestroytheactivity.”NewZealandManukaHoneywebsite,Jan2012

PAGE49

TheNewZealandhoneyindustryhasanongoing problemwithfake,mislabelledandcounterfeitmanuka honey,particularlythelabellingofnon-activehoneyasactive

ScottishWhisky NewZealandmanuka honey

Productdefinedinlaw

- FivecategoriesofScotchWhiskyaredefined:SingleMaltScotch Whisky,SingleGrainScotchWhisky,BlendedMaltScotchWhisky,BlendedGrainScotch Whisky,andBlendedScotchWhisky.Thesecompulsorycategorysalestermswillberequiredtoappearclearlyandprominentlyonalllabels.

No

Specificproductformulationandproduction

- AwhiskyproducedinScotlandthat- (a)hasbeendistilledatadistilleryinScotlandfromwaterandmaltedbarley(towhichonlywholegrainsofothercerealsmay be

added)allofwhichhavebeen—- (i)processedatthatdistilleryintoamash;- (ii)convertedatthatdistilleryintoafermentablesubstrateonlybyendogenousenzymesystems;and- (iii)fermentedatthatdistilleryonlybytheadditionofyeast;- (b)hasbeendistilledatanalcoholicstrengthbyvolumeoflessthan94.8percentsothatthedistillatehasanaromaandtaste

derivedfromtherawmaterialsusedin,andthemethodof,itsproduction;- (c)thathasbeenmaturedonlyinoakcasksofacapacitynotexceeding700litres- RequirementthatScotchWhiskymustbewhollymaturedinScotland; illegaltomatureScotchWhiskyoutsideScotland

None;lefttocompetingprivatesectorcertifiers

Preventionofmisleadinglabelling

- RulestopreventthemisleadinglabellingandmarketingofSingleMaltScotch- BanontheuseofadistillerynameasabrandnameonanyScotchWhiskywhichhasnotbeenwhollydistilledinthenamed

distillery.- Protectionoffivetraditionalwhiskyregionsofproduction;Highland,Lowland,Speyside,Islay,andCampbeltown.- Whenanyageismentionedonalabel,itmustonlybethatoftheyoungestwhiskyintheblend.- Banstheuseoftheterm“PureMalt”

No manuka specificrequirements

Packing/bottlingrequirements

- IllegalforSingleMaltScotchWhiskytobe exportedfromScotlandotherthaninabottlelabelledforretailsale- IllegaltoexportanytypeofScotchWhiskyinanoakorother woodencask

Bulk exportsallowed

Advertisingrequirements

- Illegaltolabel,package,advertiseorpromoteanyScotchWhiskyina waywhichislikelytodeceivethepublicintothinkingithasbeendistilledatanydistilleryotherthan thetruedistillery

Specificlegalprotection

- UKLaw- EuropeanUniongeographicindicator- WorldTradeOrganisationlevelasarecognised‘geographicalindication’

Noprotectionformanuka asgeographicindicator

ComparisonoflegalrulessurroundingScottishWhiskyandNewZealandmanuka honey(Asof1/2012)

ISSUE1– POORCONTROLS– SCOTTISHWHISKYTheNewZealandGovernmentdoesnotprotectNewZealandmanuka honeyincontrastwith,forexample,theUKGovernment’sprotectionofScottishWhisky

PAGE50 Source:http://www.scotch-whisky.org.uk/swa/files/ScotchWhiskyRegGuidance2009.pdf;variousothersources;Coriolisanalysis

Estimatedretailhoneymarketshareinspecificselectretailers(%ofvalue;1/2012)

ISSUE2– RETAILBECOMINGCHALLENGING– RETAILMARKETSHARE/STRUCTUREThehoneymarketatretailistypicallystructuredasamarketdominatedbyastrong#1and#2brandandtheretailer’sownstorebrand;thisindustrystructurepresentschallengesfornewmarketentrants

PAGE51 Source:Coriolisestimates

#1brand31%

#2brand25%

Other35%

Storebrand9%

#1brand29%

#2brand21%

Other7%

Storebrand43%

#1brand54%#2brand

23%

Other4%

Storebrand19%

#1brand28%

#2brand8%Other

10%

Storebrand54%

SafewayinCalifornia

CountdowninNewZealand

Sainsbury’sintheU.K.

ColesinAustralia

NewZealandatypicalinhavinglargeotherand

smallstorebrandshare

Wild Mountain

Comments/notes

- Isthistheultimateoutcomeorendgameforthemanuka honeyindustry?Manukahoneybecomesa“flavour”soldgloballybytheleadinghoneycompaniesineachmarketwithNewZealandreducedtobeingalowvalueaddedsupplierofcommodityingredients?

- ManukahoneyexportstotheUSandCanadaaregrowing;howlongbeforeweseeSueBeeandBeeMaid activemanuka honey

- WhatisrequiredforNewZealandbrandsandfirmstoget,keepandcontrolthemanukahoneyshelfspaceinkeymarkets

- Beevital isaCapilano sub-brand

- Buildingonpreviouspoints,theRowse honeypackageandwebsiteclaimnospecificcertificationstandardfortheiractivitynumberclaims

Examplesofmanuka honeyproductslaunchedbyin-marketmarketleaders(presence;1/2012)

ISSUE2– RETAILBECOMINGCHALLENGING– MANUKA BECOMINGAFLAVOURThesuccessofmanuka intheUKandAustraliahastriggeredleadinghoneyfirmsinthosecountriestolaunchmanuka productsthatarewinningthebattleforshelfspace,leavingNZasasupplierratherthanbrandowner


#1honeyco.intheUK…

…launchesrangeofmanuka honeyproducts,both”numberedactive”andregular

#1honeyco.inAustralia…

…launchesrangeofmanuka honeyproducts,both”numberedactive”andregular

Gourmetjamco.intheUK

…launchesrangeofmanuka honeyproducts

Comments/notes

- Sainsbury’sisoftentheleaderinstorebranddevelopmentintheUKandglobally;weexpectthatotherretailerswillfollow

- Whilethereisnothinginherentlywrongwithsupplyingretailerstorebrand,thiswilldirectlyleadtostrongdownwardpricingpressureonmanuka honeyandthecommodificationoftheproduct

- Again,thereisnocertificationforthescoredlevelsofactivitygivenhere;theconsumermusttrusttheretailer

- However,wenotethatthejarisclearglassnotdark(thereforetheactivitywilldegradeduetolight)

ExamplesofNewZealandhoneyproductsbeingsoldintheUKundersupermarketstorebrands(presence;1/2012)

ISSUE2– RETAILBECOMINGCHALLENGING– EMERGENCEOFSTOREBRANDSThesuccessofmanuka intheUKhastriggeredSainsbury’s,amid/upmarketsupermarket,tolauncharangeof“storebrand”NewZealandnumberedactivemanuka honey


Numbered“active”manuka honeyfromNewZealand

ExamplesofAustralianJellybush honeybeingsoldasactivewithanumericalrating(presence;1/2012)

ISSUE3– COMPETITORSEMERGING– AUSTRALIAENTERINGTHEGAMEAustralianfirmsarenowsellingactivejellybush (amanuka relative)honeyratedaccordingtoits“UniqueLeptospermumFactor”[+ULF];researchsuggeststhisismoreactivethanmanuka


“ActiveJellyBushHoney- Australia’sManukacomesfromthepristinecoastalforestssurroundingByronBayonAustralia’sEastCoast. JellyBushtreesbelongtotheLeptospermumgroupofplants,ofwhich85differentspeciescanbefoundgrowingthroughoutAustralia,includingthewellknownManuka(Leptospermumscoparium).

SomeLeptospermumorJellyBushplantsareknowntoproduceauniquetypeofhoneythatnotonlyhashydrogenperoxidereleasingenzymesbutalsoanon- hydrogenperoxideantibacterialpropertytermedtheUniqueLeptospermumFactor,+ULF.ActiveJellyBushHoneyistestedatindependentlaboratoriesforULF activityandisequivalenttotheUniqueManukaFactorratinggiventoNewZealandManuka.“

NourishedMagazine,Sep2008

“Anativehoneymaywellbethemostpowerfullyantimicrobialhoneyeverdiscovered,sayQueenslandresearchers.

Thehoney,cultivatedatundisclosedlocationsinnorthernNSWandsoutheastQueensland,ismadebybeesthathavefedonLeptospermumpolygalifolium,alsoknownasjellybushorthelemon-scentedteatree.

Theresearcherstested100jellybushhoneysfromarangeofareasandfoundthatsomehad1750mg/kgoftheantibacterialcompound'methylglyoxal'– thehighestconcentrationyetfoundinthiskindofhoney.ThisishighereventhantheconcentrationfoundinNewZealand'sfamedmanuka honey,madefromLeptospermumscoparium,acousintothemyrtletree.“

AustralianGeographic,Mar2011

Comments/notes

- Australianjellybush (Leptospermumpolygalifolium)isarelativeofManuka(Leptospermumscoparium)

- TheLeptospermumplantfamilyhas~86membersandoriginatedinAustralia.OnememberhasspreadtoNewZealand(Manuka)andonetoMalaysia

- ManukaappearstohavebeenoriginallynativetoAustraliaandspreadtoNewZealandonlyintheMioceneera

- Question:IfAustralianjellybush honeyismorepotent/effectivethanNewZealandmanuka honey,cantheactivityofNewZealandmanuka beincreased?

Examplesof“active”ChileanUlmo honeybeingsoldintheUKmarket(presence;1/2012)

ISSUE3– COMPETITORSEMERGING– COMPETITORSLAUNCHINGCOPYCATPRODUCTSSuccessbreedsimitation;Chileanproducershavelaunched“active”honeyproductsbasedonhoneyfromtheUlmo treeandrankedona5-20activescore


Duerr’sUlmo active10+Honey340g£4.79atWaitrose(UK)

Eucryphia cordifolia (Ulmo)

TheActiveHoneyCo.ActiveChileanRainforestHoney20+227g£18.99atBoots(UK)

ThisproductisharvestedfromtheValdivian rainforestinChilewherebeesproducehoneyfromavarietyoftheworld'soldesttreesincludingQuillay,Tineo andUlmo.

Eucryphia cordifolia (Ulmo)Quillaja saponaria (Soapbark)Weinmannia trichosperma (Tineo)

Comments/notes

- Allhoneyhassomelevelofactivity

- Ineconomics,Gresham’sLawsays:“Badmoneychasesoutgood”;areweabouttowitnessthebastardisationoftheactivehoneymarketandthedestructionofconsumerfaithintheconcept?

- ChileisoftenafastfollowerofNewZealandproductinnovation;howlonguntilothersfollow?Shouldweexpectatidalwaveof“active”honeysfromaroundtheworldallarbitrarilyrankedona5-20scale? Icelandic+15ActiveHeatherHoney?

- WeareunabletoidentifyanyscientificsupportfortheclaimedactivityoftheseChileanplantderivedhoneys

- Whileitispossibletoscoff,theseproductsareontheshelfattwomajorUKretailers

Comments/notes

- Allhoneyhassomelevelofactivity

- Claimsofactivityaredesignedtocreateapremiumhenceitisimperativethatthereisarobustandvalidrecognisedstandard

Examplesofnon-manuka NewZealandhoneysbeingmarketedashavingnumbered“activity”(presence;1/2012)

ISSUE3– COMPETITORSEMERGING– OTHERNON-MANUKA“ACTIVE”NZHONEYSInNewZealandanumberoffirmshavelaunchedarangeofnon-Manukahoneyswithrankingssimilartothoseusedonactivemanuka


NewZealandHoneyCo.Thymehoney“Antioxidant10+“

NewZealandHoneyCo.BeechforestHoneydew

“Pre-Biotic10+”

NewZealandHoneyCo.BeechForestHoneydew

“Bio-Active”“P-AXC100Antioxidants”

BeechForestHoneydew

AirborneBeechforestHoneydew

“ActiveA+H”

WedderspoonBeechwood Honey

“Active”“CertifiedOrganic”

ThymeHoney

TABLEOFCONTENTS

Section Page

Contents 4

Glossaryofterms 5





3.Premiumproduct 16






Appendices 56

NewZealandapiculturestatistics(various;actual;asatMay2011)

NEWZEALAND– PRODUCTIONMETRICSBYREGIONBeekeepingandhoneyproductionisspreadacrossNewZealand

PAGE58 Source:MAFHorticultureandArableMonitoringReport2011;Coriolisanalysis

417 3,333 49,069 1,145

571 3,79355,716

1,045

295 1,99728,543

470

694 4,563

75,117

1,965

324 3,61874,678

1,425

227

2,444 48,815

1,400

7393,701 58,585

2,000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Beekeepers Apiaries Hives Honeycrop(t)

Otago/Southland

Canterbury

Marlborough

Hawke’sBay/Wairarapa/Manawatu/Taranaki

Coromandel/BayofPlenty/PovertyBay

Waikato/KingCountry/Taupo

Northland/Auckland/HaurakiPlains

3,267 23,449 390,523 9,450

Mid/LowerNorthIsland51%

NEWZEALAND– HONEYEXPORTSAbouthalfofNewZealand’shoneyproductionisexported;roughlyathirdgoestotheUK,halfgoestoEuropeasawhole,athirdgoestoAsiaandtheremaindertoAustralia,theUSandCanada

PAGE59 Source:UNFAOAgStat data;UNComtrade data;Coriolisanalysis

Domestic5,99948%

Export, 6,554 , 52%

U.K., 2,060,31%

Germany, 619,9%

OtherEurope,644,10%

Australia,499,8%

PacificIslands3 0%

USA 255 4%Canada 92 1%

HongKong 69411%

Japan 658 10%

OtherEAsia 1442% Singapore 679

10%

OtherSEAsia 1703%

Other 361%

NewZealandhoneyutilisation:domesticvs.export(t;2010)

TOTAL=12,553tonnes

TOTAL=6,554tonnes

NewZealandhoneyexportvolumebyselectcountryandregion(t;000;2010)

Europe50%

Asia36%

EXAMPLE:Annualapparentpercapitaconsumptionofsugars/sweetenersinallformsintheUnitedStatesbytype(lbs./person;1966-2010)

PERCAPITASUGAR/SWEETENERCONSUMPTIONHoneyisarelativelyminorsugar/sweetenerinthemoderndiet

PAGE60 Source:USDAERSSugar&SweetenersYearbook;Coriolisanalysis

0

20

40

60

80

100

120

140

1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Ediblesyrups HoneyDextrose GlucoseHFCS Refined

Refinedsugar

Highfructosecornsyrup(HFCS)

GlucoseDextroseHoneyMaple,otherediblesyrups

20yearapparentpercapitahoneyconsumptioninallformsbyselectcountries(kg/person;1987-2007)

HONEY– PERCAPITABYCOUNTRYOVERTIMEPercapitahoneyconsumptionflattodowninhighconsumptionmarkets;mixedgrowthelsewhere;growingconsumptioninChina

PAGE61 Source:UNFAOAgStat data;Coriolisanalysis

-

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Switzerland

Germany

SpainAustraliaU.K.France

JapanSaudiArabiaChina

0.3%

-0.4%

-0.6%-1.1%1.4%1.9%

-0.9%6.3%2.7%

20yCAGR(87-07)

Globalhoneyproductionbyselectcountryandregion(t;000;2010)

HONEY– GLOBALPRODUCTIONHoneyproductionisspreadthroughouttheworld;ChinaisthelargestsingleproducerwhileEuropeisthelargestproducingregion;NewZealandaccountsfor~1%ofglobalproduction

PAGE62 NA/ME/CA=NorthAfrica/MiddleEast/CentralAsia;Source:UNFAOAgStat data;Coriolisanalysis

Turkey,81,5%

Ukraine, 71,5%

Russia 54 4%

Spain 34 2%Germany 23 2%

OtherEurope, 174,11%

Australia 16 1%NewZealand 13 1%USA 80

5%

Canada 34 2%

Mexico 56 4%

Argentina 59 4%

Brazil 45 3%OtherC/S

America 53 3%

NA/ME/CA 127 8%

SSAfrica 126 8%

IndianSub 45 3%

SEAsia 21 1%

China 398 26%

OtherEAsia 31 2%

Europe43729%

TOTAL=1,541tonnes(000)

Globalhoneyproductionbyselectcountryandregion(t;000;2010)

HONEY– GLOBALPRODUCTIONOVERTIMEGlobalhoneyproductionisgrowingrelativelyslowly(2%CAGR/30years);Chinaandotherdevelopingcountriesaredrivingproductiongrowth;Argentina,historicallyamajorproducer,hasbeenshrinkingrecently

PAGE63 NA/ME/CA=NorthAfrica/MiddleEast/CentralAsia;Source:UNFAOAgStat data;Coriolisanalysis

25 36 51 69 61 82 8163 52

71 71183 204236 58 54

52 5413

1623

19 2927 3415

1725

37 2021 23

101111

128

143136

174 1742528

21

1921

15 16

710

9

810

10 1391

68

90

95100

73 8029

36

32

31 3236 34

65 42

66

49 5951 56

38 50

47

70 93110 59

613

16

18 2234 45

2937

3334 35

41 53

3743

5292 90

108 127

6369

83 95 103

109 126

4651

51 57 54

4445

12

3 6 10

2021

121

157

197 182252

300

398

9

13

13 13

21

27

31

1980 1985 1990 1995 2000 2005 2010

OtherEAsia

China

SEAsiaIndianSub.

SSAfrica

NA/ME/CA

OtherC/SAmericaBrazilArgentinaMexicoCanadaUSANewZealandAustralia

Turkey

UkraineRussiaSpainGermany

OtherEurope

903

1,001

1,180 1,157

1,254

1,404

1,5414%

4%

11%0%

2%

4%

2%7%2%-1%0%0%2%-1%

4%

N/AN/A3%1%

2%

30yearCAGR(80-10)2%

3%

6%

2%1%

3%

3%

6%6%

-12%2%-1%2%5%1%

-0.3%

0%1%5%2%

0%

5yearCAGR(05-10)2%

USSR

+4

+98

+2+1

+18

+19

+13+11-51+5-2+7+3+1

-1

0+2+7+2

0

5yearAbsoute(05-10)+136

Globalhoneyutilisation:domesticconsumptionvs.export(t;000;2010)

HONEY– EXPORTVOLUMEMost(72%)honeyisconsumedinthecountryofproduction;ChinaandArgentinaarestrongincross-bordertrade;inter-EUtradeis30%ofglobaltrade;NewZealandaccountsfor1%ofglobalhoneyexportvolume

PAGE64 NA/ME/CA=NorthAfrica/MiddleEast/CentralAsia;Source:UNFAOAgStat data;UNComTrade data;Coriolisanalysis

Domestic,1,103,72%

Export 437 28%

Germany 21 5%

Spain, 22,5%

OtherEurope, 89,20%

Australia 5 1%

NewZealand7 1%

USA 11 3%

Canada 15 3%Mexico27 6%

Argentina 57 13%

Brazil 19 4%

Chile 9 2%

OtherC/SAmerica 5 1%

NA/ME/CA 9 2%

SSAfrica 2 0%

IndianSub 20 4%

SEAsia 21 5%

China 101 23%

OtherEAsia 0 0%

TOTAL=1,541tonnes(000)

TOTAL=437tonnes(000)

Globalhoneyexportvolumebyselectcountryandregion(t;000;2010)

Europe30%

Aggregateglobalhoneyimportvaluebyreceivingcountry/region(US$m;2010)

HONEY– GLOBALIMPORTVALUEThehighconsumptionwestern/Europeancountriesarethemajorimportersofhoney;Europeaccountsfor~60%ofglobalimportvalue;NorthAmerica22%andAsia13%

PAGE65 NA/ME/CA=NorthAfrica/MiddleEast/CentralAsia;Source:UNComtrade data;Coriolisanalysis

Germany, $289,20%

UnitedKingdom, $104,7%

OtherEurope, $476,32%

Australia $14 1%

USA $305 21%

Canada $14 1%C/SAmerica $4 0%

NA/ME/CA $81 5%

SSAfrica $6 0%

IndianSub $5 0%Indonesia $28

2%

OtherSEAsia $27 2%

Japan $1007%

OtherEAsia $30 2%

TOTAL=US$1,483m

Europe$869m~60%

NorthAmerica$319m

22%

Asia 13%

Aggregateglobalhoneyimportvaluebyreceivingcountry/region(US$m;2000-2010)

HONEY– GLOBALIMPORTVALUEHoneyisagrowingglobalmarket;thevalueofglobalhoneyimportsisshowingdoubledigitgrowthacrossallmajormarketandregionsoftheworld

PAGE66 Note:Someregionshotlabelledforreadability(e.g.Indiansub.);NA/ME/CA=NorthAfrica/MiddleEast/CentralAsia;Source:UNComtrade data;Coriolisanalysis

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

2000 2005 2010

Germany

U.K.

OtherEurope

Australia

USA

CanadaNA/ME/CA

JapanOtherEAsia

11%

15%

15%

34%

12%

16%13%

10%18%

OtherSEAsia 14%Indonesia 40%

10yCAGR(00-10)

+$189

+$79

+$365

+$14

+$209

+$11+$57

+$62+$24

+$19+$27

10yabsolute(00-10)

$429

$745

$1,483 13% +$1,054

Exportvolume(t;000;2010)

HONEY– TOP20EXPORTERSMETRICSNewZealandstandsoutfromotherhoneyexportersforitshighvalueperkilogramleadingtothecountrybeingthe6th largestexportergloballybyvalue

PAGE67 Source:UNComTrade data;Coriolisanalysis

$1.80

$3.03

$5.35

$3.20

$3.79

$10.67

$4.39

$3.01

$3.71

$2.95

$2.66

$3.81

$4.49

$3.50

$3.37

$2.30

$4.60

$6.19

$2.83

$4.95

101

57

21

27

22

7

14

19

15

19

18

11

7

9

9

11

5

4

7

4

China

Argentina

Germany

Mexico

Spain

NewZealand

Hungary

India

Canada

Brazil

Belgium

Romania

Italy

Bulgaria

Chile

USA

Australia

France

Ukraine

SaudiArabia

$183

$173

$110

$85

$82

$70

$61

$56

$56

$55

$49

$42

$31

$30

$29

$25

$25

$24

$20

$20

0%

-4%

0%

-2%

11%

9%

1%

26%

0%

53%

13%

4%

7%

5%

7%

9%

-5%

3%

23%

17%

8%

7%

12%

9%

19%

30%

14%

39%

10%

66%

18%

18%

16%

19%

20%

12%

6%

12%

28%

22%

Export$/kg(US$/kg;2010)

Exportvalue(US$;m;2010)

10yexportvol CAGR(%;t;00-10)

10yexportval CAGR(%US$;00-10)

8%

12%

12%

11%

7%

19%

13%

10%

11%

9%

4%

14%

9%

14%

12%

3%

11%

8%

4%

4%

10yexport$/kgCAGR(%US$;00-10)

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