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An organic line

As the organic industry booms, Australian manufacturers and processors should seriously consider the opportunities that exist in the manufacturing and processing of value-added, organic products; thereby increasing potential profits and expanding markets.

With IBISWorld figures predicting a +15.1 per cent increase in revenue growth for 2010-11 and projections for employment opportunities to grow from 6.2 per cent (in 2012-13) to 11.2 per cent in 2013-14, there has never been a better time to consider the move into organics.

Akiko Nicholls, Managing Director of Australian Certified Organic (ACO) – a subsidiary company of Biological Farmers of Australia (BFA) – says there has been a notable increase in the amount of companies taking on value-added product manufacturing in the last five years.

“The organic processed foods category has grown rapidly for both domestic and export markets, especially in the sectors of children’s snack foods, cereals and beverages,” she said.

“Organic products are becoming more mainstream and large supermarkets have increased their line of products in the past five years; many stock a range which is in excess of 500 products. There are also great opportunities for exporting organic products as well.”

“Currently the domestic demand for value-added products is very frequently being satisfied by imports. There are therefore opportunities for manufacturers to meet consumer demand for both organic and Australian items.”

Recent research conducted by the BFA indicates that the organic product processing sector is going from strength to strength, with organic processors and manufacturers making up almost a quarter of the entire organic industry.

One example of this growth is Yarra Valley Snack Foods, a company which processes a range of certified organic corn and potato chips, alongside its conventional operations.

Managing Director Andrew Blain says that the company supplemented its popular range (which used certified organic corn) with organic after receiving consumer requests for a fully certified range.

“We had a series of requests from consumers and customers asking why we didn’t make a fully certified product. We are now at a point where the vast majority of our products are certified organic,” he said.

“Our chips business is growing very strongly and in recent months some products have been growing at over 100% versus the prior year.”

Despite this growth and the obvious opportunities, there are challenges associated with value-adding and organic manufacturing.

Jessica Ramsden, Corporate Affairs Manager of Heinz Australia, says that ensuring continuous supply is critical to the success of Heinz’s operations.

“The strong and growing demand for organic fruit and vegetables in Australia means we have to work closely with our suppliers to ensure there is always enough produce to meet our production requirements.

“Heinz has been operating in Australia since the 1880s and has been manufacturing baby food here for more than 60 years.  We have a strong heritage in the organic sector, as one of the first baby food brands to offer an organic range,” she said.

Companies such as Heinz find the transition to organics much easier due to their larger “economies of scale” and already established markets – meaning smaller companies should do their research before taking the leap.

“I think you need to be a manufacturer that can produce at a certain volume level – there are a lot of niche manufacturers that don’t seem to have the economies of scale.  If you are not competitive in your processing then that will drive up the gap in price between organic and mainstream,” said Andrew Blain.

“Most important is supply chain and partnership development – you need to find the raw materials but also partner with a grower who can source additional volume as you grow – they need to be prepared to invest for growth as well.

Mr Blain believes that whether a company succeeds or not also depends on factors such as equipment.
“Equipment is critical in processing – for both volume and quality… success or failure can often occur at this point,” he said.

In terms of certification, Akiko Nicholls says that while the process itself is simple, it is essential that companies understand the requirements of the organic standards.

“Especially for those who export, the requirements for becoming certified organic are dependent on the individual countries’ standards and can be slightly different from the criteria in Australia.

“Sourcing suitable organic ingredients is also always a challenge for processors/manufacturers, but the good news is that BFA can assist in providing a list of certified organic raw ingredients suppliers,” she said.

For further information on becoming certified or to find out the suitability of organic certification to your operations, contact the ACO on 07 3350 5706 or info@aco.net.au.

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