The food industry will no longer be competitive in less than a decade, and this failure will lead to 130 000 job losses across the country, the industry’s peak body says.
The Australian Food and Grocery Council, in conjunction with A. T. Kearney have conducted research that shows Australia’s $108 billion food and grocery manufacturing sector will be in serious trouble if nothing is done to prevent it from plummeting.
The report found that without providing tax incentives for investment or changes to the competition structure of supermarkets, by 2020, the industry will be in major trouble.
“Industry turn-over is forecast to decline by 0.2 per cent per annum over the coming decade from $108 billion to between $105 billion and $106 billion in 2020.
"Over that same period, retail demand is due to grow at 3.7 per cent per annum with the growth gap being increasingly filled by imports and retailers’ private label products,” the report states.
The AFGC has often voiced its concern that the food and grocery industry is in trouble, and chief executive Kate Carnell explains the report was commissioned by the industry body to find definitive facts and figures of what lies ahead if nothing changes.
“Australians and our political leaders overwhelmingly want a local, value-adding food and grocery manufacturing sector – it’s Australia’s largest manufacturing industry that we can’t live without,” Carnell says.
“Consumers want to be confident about buying affordable food and grocery brands, that they know and trust.
"I urge all political leaders – both Federal and State – to seriously consider this report and reconsider the current business-as-usual approach towards the sector.”
The report also found that more than half of those surveyed were downbeat about the future of the industry, and of the 130 000 jobs expected to be lost – and the additional 6000 associated industries like agriculture – most will be in regional New South Wales, Victoria and Queensland.
And the supermarket dominance of the big two – Woolworths and Coles – is not expected to go away anytime soon, with forecasts predicting they will have a combined market share of over 80 per cent in many categories.
Off the back of reports yesterday that Woolworths is planning on doubling the number of private-label products in-store, the report confirms these types of products could account for up to 50 per cent of total sales by 2020.
Carnell says Australia now has a “golden opportunity” to show leadership towards industry and leverage the fact that Australia’s economy is much healthier than most others in the world.
“Australia has the capacity to produce high quality, healthy food and groceries for Australia’s growing population and to contribute to feeding the world. But this will not happen unless there is commitment from government, industry and consumers,” Carnell says.
A.T. Kearney Australia Vice-President Irvinder Goodhew says the report used “a combination of economic modelling, interviews and surveys with industry leaders, our report concludes that food and grocery manufacturing is facing pressures on many fronts” to find the results.
Goodhew goes on to say the Australian food and grocery sector is a tough one to be involved in.
”Private label development continues to erode margins for many players, as does the relative cost position of Australian manufacturers – it’s simply more expensive to do business here.
"Compared to the lowest cost regional competitors, Australia has an average 22 per cent cost differential,” she says.
Carnell has called on Australian government and industry to use the report’s findings to inspire change.
“A ‘do-nothing’ approach in this area is no longer acceptable – the time for a new policy menu to encourage investment, innovation and growth is now as the jobs and livelihoods of 312,000 Australians, and the future of our food supply, depends on it.”
The entire report can be downloaded from the AFGC website.
Image: The ABC