AFGC hopeful for Australian food industry growth

Posted by AFN Staff Writers on 6th November 2013

There are signs of growth and strong opportunities for the Australian food and beverage, grocery and fresh produce manufacturing sector, despite experiencing difficult economic conditions, according to a new report from the Australian Food and Grocery Council (AFGC).

The AFGC’s fifth annual economic snapshot, State of the Industry 2013, was based on the most recent Australian Bureau of Statistics (ABS) data and found that industry turnover of $111 billion remained largely flat in 2011-12. It noted a marginal 0.3 per cent decline, while total industry employment declined by 0.4 per cent (1,071 people) to 298,825 in the 2012-13 financial year.

The AFGC said that the report showed the “remarkable resilience” of Australia’s food and beverage, grocery and fresh product manufacturing sector in difficult times, particularly when put in the context of significant contraction in turnover and employment in previous years.

“The findings of State of the Industry 2013 demonstrates that while the Australian food and grocery manufacturing sector – Australia’s largest manufacturing sector – is facing an environment where input costs are rising on everything from commodities to labour to energy, encroaching regulations are adding to compliance costs and retail price deflation continues to cut margins, there are signs of significant growth potential,” said Gary Dawson, AFGC Chief Executive.

“In particular a 26 per cent increase in capital investment in food manufacturing as suppliers increase investment in productivity initiatives such as automation and other cost reduction programs,” Mr Dawon said.

“Solid export growth in processed foods and beverages is also encouraging as suppliers respond to emerging market opportunities including the growing Asian middle class. This has significantly contributed to three consecutive years of improving trade surplus in processed food and beverage products,” Mr Dawson said.

Report shows increase in exports

The detailed State of the Industry 2013 report, which was commissioned from professional services firm KPMG, showed the complex industry was made up of 25,662 businesses in 2012-13 (170 fewer than 2011-12), spent about $535.8 million on Research and Development, and accounted for $50.8 billion of international trade (an increase of 0.8 per cent).

“The increase in exports for value added foods such as meat processing, grain mill products and fruits and vegetables is encouraging and we expect to see this trend continue,” said Valentina Tripp, KPMG Consulting National Leader for Consumer Products.

Exports to China increased by $770m (44 per cent on the previous year) with the meat processing and human pharmaceutical sectors accounting for 85 per cent of this increase.

“Despite a tough time for the dairy sector domestically, the sector presents strong potential to capitalise on growing global demand, particularly in the Asian markets. Investment in R&D and innovation to leverage Australia’s high quality, clean, green and safe food supply systems is key to long-term sector growth,” Ms Tripp said.

Food companies looking for stability

Food and grocery companies are looking for a return to certainty and stability from the Australian Government, according to the AFGC, and a “focus on getting the policy settings right to boost confidence and promote investment and jobs”.

“To that end we strongly support priorities including the finalisation of stalled Free Trade Agreement talks, a rollback of costly unnecessary regulation, action to reduce energy costs, targeted investment incentives and a review of competition laws to help level the playing field where there is an imbalance in market power,” Mr Dawson said.

The AFGC said the industry is currently facing “massive challenges” from high costs and retail price deflation, and that key food processing capabilities were “at risk of being lost altogether, with the flow on loss of jobs and opportunities extending into the farm supply base”.

“This report shows that getting effective policies in place will enable industry to take advantage of the massive growth potential for the future provided we can boost competitiveness and productivity, and open up market access in the growing economies of Asia,” Mr Dawson said.

The 2013 report was based on the following definition of the Australian food and grocery manufacturing industry: “Those industries that value-add to agriculture, food and other products for the purpose of producing everyday fresh and processed food, beverages and grocery products consumed and used by Australians.”

AFGC hopeful for Australia's food industry resilience