Volume sales of fresh foods increased to 5.3 billion tonnes in 2014, up 1.5 per cent from 2013, according to Euromonitor International’s latest Fresh Food in Australia report.
The report found that fresh food sales up 1.5 per cent in 2014, with nuts experience highest growth of all fresh food categories, increasing by 5.9 per cent in volume in 2014. Within the meat category, pork (2.6 per cent) and poultry (2.2 per cent) experienced the highest volume growth in 2014.
Lily Lam, Research Analyst says in 2014, Australians were encouraged by the media (cooking shows, celebrity chefs, social media) to explore new cuisines and flavours, with retailers consequently encouraged to broaden their product ranges. New fads and diets such as paleo, raw food, superfoods and sugar-less diets created a new health-conscious consumer who wants to eat healthily and Australians are showing interest in fresh food as opposed to processed alternatives. Australian-made products are also growing in popularity as the country is well-renowned for growing its own fresh fruit and vegetables, and producing some of the world’s best meat products. However, high prices, which reflect high wages and living standards in Australia, are currently limiting growth in fresh food.
Other key findings include:
Proposal to impose GST on fresh food sparks debate
Fresh food, along with health and educational services, are currently exempt from the goods and services tax (GST) in Australia. In 2014, a proposal to impose a GST on fresh food was made by the government as a way to deliver up to A$21.6 billion in extra revenue annually. This sparked debate and criticism from the opposition, as well as farmers and the public alike. This is because one of the most important factors consumers takes into account when buying food is price. Therefore, if a 10 per cent GST were applied to fresh food, overall consumption would inevitably fall. Lower demand in fresh fruit, vegetables and protein would only lead to a decrease in overall sales and poorer health outcomes. The GST debate has yet to be concluded and will be examined in the government’s strategic review of the tax system in 2015.
Supermarkets dominate fresh food sales
Supermarkets dominate fresh food in Australia, accounting for over 50 per cent of total volume sales in 2014. Leading supermarket players Woolworths and Coles continue to increase their sales share at the expense of specialty retailers such as fruit grocers and fishmongers through ongoing price wars and promotional campaigns. The major supermarkets also drive sales by sponsoring popular TV cooking shows, My Kitchen Rules and Masterchef (Coles), and Recipe to Riches (Woolworths). The online retail market continues to grow, albeit gradually, with Woolworths opening its first ‘dark store’, a dedicated online store to fulfil online grocery orders. However, internet retailing has not yet taken off as it is still considered an inconsistent service in Australia. Also new in 2014 was the emergence of fruit and vegetable bars (vending machines) to challenge Australians’ poor snacking habits.
Stable demand for fresh food expected over forecast period
Total volume sales within fresh food in Australia are expected to rise at a CAGR of 1% over the forecast period, with growth set to be driven by increasing consumer demand for fresh food over frozen and processed food. All categories are expected to grow, with nuts and fish and seafood expected to be the strongest performing areas. This will be due to promotional activities, such as nuts being promoted with the daily consumption of fruit and vegetables and fish and seafood being promoted as an excellent alternative source of protein. However, sugar and sweeteners as well as meat will continue to experience declining demand due to the fact sugar consumption is being linked with obesity while beef is associated with cancer and its harmful impact on the environment. The resultant effect will be consumers looking for product substitutes or opting for smaller volumes of high-quality premium products.