Page 40 - Food & Drink Business Jan-Feb 2020

BY ASSOCIATION
The customer is watching
The Australian food and beverage manufacturing industry is strong, but 2020 will offer challenges including ever-growing scrutiny from consumers. Australian Food and Grocery Council CEO Tanya Barden writes.
AUSTRALIA’S food and grocery manufacturing industry has been characterised by its resilience, but in recent times the pressure on the sector has started to take a toll.
And in 2020, there is no doubt the strength of the sector will again be put to the test.
Some of the challenges will remain the same – global economic uncertainty, drought, increasing energy and other input costs, and seven consecutive years of supermarket price deflation will continue to squeeze manufacturers’ margins.
However, an emerging factor that will have a big impact is undersupply, which is expected to drive production prices up and profit margins down.
This is occurring against a backdrop of changing consumer needs and expectations.
Consumers are more empowered and more informed. There is ever-growing scrutiny of our industry’s products
and processes, especially in regards to the environment, nutrition, ethical sourcing
and supply chains.
Despite the mounting pressures, food and grocery manufacturers still strive to be competitive and are constantly seeking new and innovative ways to keep prices down for consumers.
This is essential to maintain the viability of a sector that makes a huge contribution to Australia’s economy, worth $122.1 billion a year.
The food and grocery industry remains our largest manufacturing sector,
MAIN: Ever-growing scrutiny from more informed and empowered consumers is a mounting pressure on manufacturers.
representing 32 per cent all Australian manufacturing.
And it is one of our largest employers, providing more than 273, 300 jobs.
Regional Australia is
at the heart of the sector and it is a key regional and rural employer, with 39.3 per cent – just over 107,000 jobs – in regional Australia.
For many of these communities, food and grocery manufacturing is their lifeblood – directly through jobs, but also through their use of local companies to supply agricultural inputs and a range of other goods and services, from welding or transport
services to the local newsagency. Currently, more than 95
per cent of New South Wales and two-thirds of Queensland is impacted by drought.
The effect on production
has been significant, with smaller crop and herd sizes pushing prices north.
The Federal Government’s economic modelling shows that over the last two years the output of Australia’s farm sector has decreased by about 14 per cent. This is weighing on food manufacturing and export capabilities.
In addition, African Swine Fever has decimated global pork supplies, driving international
40 | Food&Drink business | January-February 2020 | www.foodanddrinkbusiness.com.au
“ The food and grocery industry remains our largest manufacturing sector... with 39.3 per cent – just over 107,000 jobs – in regional Australia.”