Big retailers a global challenge for food and beverage sector

Australian food and beverage manufacturers aren't the only victims of powerful retailers, with recently released research claiming it's a global challenge.

Launched today by advisory firm Grant Thornton, Hunger for growth: Food and Beverage looks to the future, found that the rise of mega-retailers around the world has left industry executives wondering how they can get ahead, with more than half rating market dominance by retailers as a significant or moderate risk to their supply chains and organisations.

National leader food & beverage, Grant Thornton France, Vincent Frambourt, said three-quarters of food and beverage organisations sell into supermarkets or grocery stores, and this is a world-wide problem.

"Food and beverage companies cannot do much to fight against retailers’ power," he said.

Grant Thornton Australia’s food & beverage national leader, Tony Pititto, said Australian food and beverage companies were similarly affected by the global rise in mega-retailers, with Coles and Woolworths controlling some 70 percent of retail sales.

"The market power of the mega-retailers is an international phenomenon with small retailers and suppliers getting squeezed everywhere around the world," Pititto said.

Supporting Thornton's comments, the study found that nearly half (48 percent) of food and beverage executives are considering merger and acquisition opportunities as a way to strengthen their market position over the next 12 months.

Thornton suggested industry executives improve their bargaining power by diversifying customer and product portfolios, building product leaders and developing niche markets.

Despite their concerns, the outlook for food and beverage companies is positive and is poised for growth amid an improved global economic outlook. This is particularly true in Australia, which is leading a wave of renewed optimism as more producers look to China and South East Asia as export markets. 

"China alone has seen a 15 to 20 percent rise in salaries, which is helping fuel consumer demand for food and beverages," Pititto said.

Getting in the way of manufacturers' ability to capitalise on export opportunities is the flow-on effects of the high Australian dollar, increasing logistics and distribution costs as well as pricing, with 92 percent of Australian F&B executives expecting an increase in raw material costs in the next 12 months, compared to 85 percent of the world.

The study found that many Australian companies believed that government assistance to address logistics and distribution costs was a key area that would help their business to capitalise on the Asia exports opportunity.

The global study, which surveyed 248 business leaders in food and beverage companies around the world, found the top five food trends that will positively impact companies in the next 12 months are:

  • Premium/luxury (60%),
  • Hhealthy/nutritious (59%),
  • Locally sourced (49%),
  • Sustainably produced (46%), and
  • Convenience foods (44%)

Earlier this year the ACCC announced it was investigation Australia's supermarket duopoly, amid claims Coles and Woolworths employ bullying tactics when negotiating with suppliers. Read more here.


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