The Australian Food & Grocery Council has raised its concerns over mounting cost pressures on the food industry in its response to the ACCC’s Interim Report for its inquiry into supermarket pricing.
Recent data indicates that rising costs are significantly eroding industry profits. While some expenses—such as commodities, energy, and shipping—have eased somewhat, they remain higher than pre-COVID levels, and other costs continue to rise. Additionally, wholesale price hikes to supermarkets are not fully capturing the increase in manufacturing costs.
“The reality is that it’s tougher than ever for manufacturers in Australia,” AFGC CEO Tanya Barden said.
“The hard truth is that manufacturing costs have soared, creating a supply-side inflation issue that calls for supply-side solutions.”
Over the past three years, energy and gas prices have risen by over 50 per cent, sugar by 46 per cent, and some packaging costs have increased by around 30 per cent. Since late 2023, cocoa prices have surged by approximately 200 per cent.
This inflationary environment follows several years of costs rising faster than wholesale prices, leaving manufacturers with little room to absorb additional increases.
Having already streamlined operations, they now face the risk of cutting into core operations. While manufacturers continue to implement efficiencies where possible, they are increasingly confronted with tough decisions: raise prices, reduce pack sizes, compromise on quality, or potentially halt production in Australia altogether.
The industry urges the government to adopt a comprehensive “cost of doing business” agenda and to focus on long-term strategies that will enhance the productivity and global competitiveness of Australian manufacturing.
A shift toward greater automation and digitisation, supported by government tax incentives and other policies, could significantly improve productivity and help maintain the competitiveness of Australia’s largest manufacturing sector on the global stage.
AFGC also urges the government to revisit the Food and Grocery Code of Conduct, as the recent review missed critical updates that could improve commercial relationships between retailers and suppliers.