Page 10 - Food&Drink Magazine November-December 2021

INDUSTRY UPDATE
A defining moment
The Australian food and grocery manufacturing sector is at a defining moment, with potential to become a $250 billion powerhouse by 2030. In its Sustaining Australia and State of the Industry reports, the Australian Food and Grocery Council has called for greater innovation and investment if decline or stagnation are to be avoided. Kim Berry writes.
THE Australian Food and Grocery Council (AFGC) CEO Tanya Barden says our well-deserved ‘clean and green’ reputation is not enough to guarantee the sector remains competitive in either the domestic or export markets.
“The sector’s growth is contingent on significant investment – in new product development, sustainable packaging, advanced manufacturing and digital technologies – to boost the sector’s competitiveness, agility and resilience.”
Food and grocery is the largest manufacturing sector in Australia, producing more than 30 per cent ($133 billion) of total manufacturing output. The Sustaining Australia: Food and Grocery Manufacturing 2030 report said in the last decade, profitability has declined and capital investment stagnated. In that time, food manufacturers’
input prices have increased by 49 per cent from 2010 to 2020, whereas output (wholesale selling) prices only increased by 24 per cent. The unavoidable result has seen R&D spend fall to 2009/10 levels.
From the report: “Food and grocery manufacturers have little opportunity to pass on higher input costs due to the highly concentrated nature of Australia’s retail marketplace. In a market already dominated by two major supermarket retailers, the arrival of overseas- based competitors has driven a focus among the majors on cutting purchasing costs.
“The result has been a limited ability for manufacturers to pass through cost increases, a progressive decline in operating margins, and stagnation in the new investment required to stimulate innovation and productivity.”
The AFGC’s annual State of the Industry report looked at 2019/20
data and found the sector grew four per cent, largely due to a rise in the value of exports, which were up almost eight per cent on the previous financial year to $41.3 billion.
Barden said the result highlighted the importance of export to local companies.
“In a period affected by drought, bushfires and the onset of COVID-19, food and grocery manufacturers demonstrated their resilience and resourcefulness by growing the value of this very important industry.”
COVID-19 lockdowns caused an increase in consumption through supermarket channels, but this was dampened by the drop in food service and convenience channels.
“While the lift in sales is a positive for the industry, it hides the fact that businesses have incurred increased costs including COVID-19 related expenses of maintaining safe
workplaces, operational changes to meet increased demand and supply chain disruptions, a tripling of sea freight charges, and increases in commodity and packaging prices,” Barden says.
The report showed a modest 5.2 per cent increase in capital investment, well below levels needed to reach the vision of doubling the industry by 2030, as set out in the federal government’s Modern Manufacturing Strategy Food and Beverage Roadmap.
“Important decisions to encourage investment need to be made now so that the industry can secure a strong future and help the Australian economy rebound from the challenges of the COVID-19 pandemic,” Barden says.
Global investment on food and beverage manufacturing innovation is increasing globally. It is vital Australian businesses attract these new funds for growth. ✷
10 | Food&Drink business | November - December 2021 | www.foodanddrinkbusiness.com.au