A snapshot of the Australian food and grocery industry

Posted by Daniel Palmer on 29th October 2009

Australia’s food and grocery sector contributes more than $100 billion a year in turnover to the national economy and employs about 315,000 people with half in rural and regional areas, according to a landmark new report by the Australian Food and Grocery Council (AFGC) and KPMG.

Launched by Federal Agriculture Minister Tony Burke in Canberra yesterday, the first-ever economic snapshot of the food and grocery sector called ‘State of the Industry 2009’ confirms the industry is Australia’s largest manufacturing sector, highlighting its importance to growing Australia’s economy.

The industry is currently made up of 38,000 businesses, spends about $3.8 billion a year on capital investment and accounts for $49 billion of the nation’s international trade.

AFGC Chief Executive Kate Carnell said the wide-ranging report highlights that the industry is one of the few manufacturing sectors in Australia that continues to grow and employ people during tough economic times.

“On a turnover basis, the report found Australia’s food and grocery sector is comparable in size to the Australian mining industry – and the sector is more than four times larger than Australia’s automotive industry,” said Ms Carnell who noted the “essential information” has not been previously available. “The industry employs more than 3 per cent of all employed people in Australia, paying salaries and wages of about $14 billion a year.”

Future challenges

With predictions that the world population will reach 9 billion by 2050 and Australia’s population is expected to hit 35 million by 2040, many experts believe that the world will need to double its current food production to meet these challenges in a carbon and water constrained environment.

“There are also some real challenges facing the industry including the increasing cost of energy, availability of water, rising imports and exports becoming more expensive with the strengthening Australian dollar,” Ms Carnell noted. “Having a robust and prosperous food industry provides many opportunities for Australia into the future including increasing job opportunities in rural and regional areas. Australia can play an important role in addressing future world food needs.”

“To protect Australia’s food supply and overcome these challenges, we must ensure the $100 billion food and grocery industry’s long-term growth, increase export earnings and boost competitiveness.”

Exports surge

KPMG’s lead partner for the food and drink segment Mark Epper advised that the value of food, beverage and grocery imports in Australia has grown by 40 per cent in the past five years.

“While the industry is export focused, imports are rising and eroding the trade surplus historically enjoyed by the industry,” Mr Epper said.

KPMG’s economic modelling used in the report looked at the impact of a 20 per cent contraction of the industry which, if realised, would cause more than 100,000 jobs to be lost.

“This significant contraction of the industry would necessitate increased imports, increasing the cost of household consumption,” Mr Epper said. “Under this scenario, Consumer Price Index (CPI) is expected to be 6.4 per cent higher.”

The full report is available to download at www.afgc.org.au.