Supermarket ‘price wars’ will damage Australia’s food processing industry, consultant says

Posted by AFN Staff Writers on 16th August 2011

A leading food industry consultant has warned that more Australian food processors will be driven out of business as a result of competition between and commercial powers held by major food retailers.

In a speech to the Crawford Fund Annual Conference, held this week in Parliament House, Canberra, food industry expert Dr David McKinna, founder of McKinna et al, said Australian food processors’ margins are no longer sufficient to support the reinvestment needed for global competitiveness.

The comments follow recent plant closures or imminent closures of food processing plants around Australia. These have included Heinz’s Wagga Wagga and Girgarre factories closed in May 2011, and Coca-Cola Amatil’s announcement last week of the closure of the Mooroopna tomato and fruit processing factory of its subsidiary, SPC Ardmona.

“The tension between major supermarkets is driving massive restructuring of the agrifood supply chain. The turning point in the power shift has been the dramatic weakening of producer brand power,” Dr McKinna said.

“Food processors have been wounded by competition from private labels, the inability to reinvest in innovation and branding and being forced to de-engineer products to meet price points.

“Without doubt, global food companies must all be considering closing Australian processing facilities.”

According to the Austrade, trade in processed food products makes up 20 per cent of Australia’s manufacturing industry and accounts for around 18 per cent of employment in the manufacturing sector.