AFGC report finds growth opportunities for food and beverage sector

The Australian Food and Grocery Council (AFGC) has released its fifth annual economic snapshot of the food and beverage, grocery and fresh produce industries, titled State of the Industry 2013.

The report which was commissioned by KPMG, shows signs of strong growth opportunities for the Australian food and beverage, grocery and fresh produce manufacturing sector despite challenging economic conditions.

Based on the most recent data from the Australian Bureau of Statistics (ABS) the report found that the industry turnover of $111b remained largely flat in 2011-12, noting a marginal 0.3 percent decline, while total industry employment declined by 0.4 percent in the 2012-13 financial year.

AFGC CEO Gary Dawson, said that the report was a testament to the ‘remarkable resilience’ of the Australian food and beverage manufacturing sector in such difficult times.

“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 Dawson.

 “In particular a 26 percent increase in capital investment in food manufacturing as suppliers increase investment in productivity initiatives such as automation and other cost reduction programs.

“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.” said Dawson.

The report found that the industry comprised of 25,662 businesses in 2012-13 (170 fewer than 2011-12), spent about $535.8m on R&D and accounted for $50.8b of international trade – an increase of 0.8 percent.

KPMG’s consulting national leader for consumer products, Valentina Tripp said that the increase in exports for value-added foods is highly encouraging and she expects the trend to continue. 

“Exports to China increased by $770m (44 percent on the previous year) with the meat processing and human pharmaceutical sectors accounting for 85 percent of this increase,” she said.

“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.”

Gary Dawson says that food and grocery companies are looking to the government to return certainty and stability to the industry by focusing on getting policy settings right, which will then boost confidence and promote investment.

"…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," said Dawson

“Right now the industry is facing massive challenges from high costs and retail price deflation squeezing profitability. Key food processing capabilities are at risk of being lost altogether, with the flow on loss of jobs and opportunities extending into the farm supply base."

Dawson says that through effective policies, the industry will be able to take advantage of growth potential and further open up market access in Asia. 


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