Country of Origin Labelling: it’s changing, but what is the cost?

The country of origin labelling debate has been gaining momentum for years and new Country of Origin labels will appear on shelves before the end of the year – but what will be the cost of these changes, and will they really make a difference?

Although the legislation will be introduced in the Federal Parliament in Early December, the verdict is in and the new labels have been released.

What we've got

The proposed country of origin labels will include new standard phrases and a kangaroo and bar-chart graphic. This will be supplemented by online information and smart phone apps.

The new labels will communicate two key messages:

  1. Whether the food was grown or made in Australia: this will be the first part of the phrase (E.g. Made in Australia) and the kangaroo will only be used if the food was grown or made in Australia.
  2. What percentage of the ingredients in the food/product was Australian grown: the bar chart will communicate the percentage (in bands/increments) of the ingredients that were grown in Australia, this will be the second part of the standard phrase (E.g. Made in Australia from 100% Australian ingredients)

There will also be the option to change the label seasonally, to depict the percentage of Australian ingredients in the product, or make an “at least” claim all year around, e.g. “Made in Australia from at least 20% Australian ingredients,” or use a seasonal average, e.g. “Made in Australia from seasonal produce – average 50% Australian ingredients, scan barcode for more info.”

There is no requirement to provide any further information. Companies will be encouraged to provide specific ingredient information, but it will only be on a voluntary basis. This means that while the labels will show if none of the ingredients were grown in Australia, they will not specify where they were grown, unless the company decides to display that information.

New rules have also been brought in to make it clear what “made in” means. In order to make a “made in” claim, the company must be “substantially transforming ingredients so the end product is something fundamentally different to the grown ingredients.” The claim ‘made in’ does not mean importing ingredients and just performing minor processes on them, like slicing, freezing, canning, bottling, reconstituting or packing. When the origin of the ingredients is Australian, additional claims such as ‘grown in Australia’ or ‘product of Australia’ may also be used.

New rules will also require any “packed in” statements to include a clear country of origin statement, specifying where the ingredients are from.

Above: some of the new labels.

Who cares?

In 2012, in a survey of 743 CHOICE members, 71 per cent of said it was crucial or very important to know where food comes from.

When asked about their reasons for buying Australian food, two-thirds of consumers said they feel strongly about buying Australian to keep food manufacturing jobs in Australia, while three quarters said they feel strongly about buying Australian to support Australian farmers.

It’s a seemingly simple equation; improve the country of origin labelling and Australians will buy Australian, right?

The Australian Food and Grocery Council (AFGC) is not convinced.

In its submission to the Country of Origin Food Labelling Inquiry, the AFGC said while there are many surveys that indicate consumers “want” origin labelling and that they “would” buy Australian if it were more clearly labelled, actual consumer behaviour is demonstrably different.

The submission referenced a 2014 Catalyst survey of Australian grocery buyers, that found as few as one in six (and possibly only one in nine) shoppers cite country of origin or “Australian” as a top three driver of their purchasing decisions, although 61 per cent of respondents regularly check country of manufacture. For Australian consumers, key drivers of actual purchasers are price, quality, brand and habit.

All CoOL claims are not created equal

The survey also found that consumers placed roughly equal value on the importance of place of manufacture, as they did to the source of ingredients. Consumers place more importance on where the product is grown for fresh food like meat and vegetables, while the place of manufacture is important for processed products like confectionary and baked goods.

Simon Crabb, Owner of SJC Food Processing Consulting says consumers care if a product is Australian because they are either patriotic and they buy Australian to support the industry, or do so because of Australia’s high standards.

“People feel that if they’re buying something from overseas, they might not understand too much about how those products are grown or processed or packed overseas and they may rather buy Australian and spend a bit more because I believe we’ve got a better ability to keep the key factors in production right.”

While Crabb admits that not every consumer cares about CoOL, he says “more and more from what I can see, more people want to know ‘what am I eating and where did it come from and how was it produced?’ …So I think some people will certainly applaud the change.”

Who will it effect?

Australia’s pork, horticulture and seafood industries are three food commodities that are closely involved in the country of origin debate, according to the CEO of Australian Pork Limited (APL), Andrew Spencer.

“Australian agriculture is the only big commodity where we compete in Australia, in our own market with imported produce,” Spencer says.

“That basically applies to pork, where we have imported pork being used to make ham and bacon, it applies to horticulture, where we are importing some fruit and vegetables and it also applies to seafood, where we are importing fish and prawns. If you think of the rest, beef, lamb, grains and other types of commodities, there’s very little or no imports whatsoever.

“There’s a range of reasons for that. Some of it’s to do with biosecurity protocols at border…so that means you don’t get competition internally where domestic goods compete with imported goods. There’s also of course the market issues. For example, Australia’s one of the most sufficient producers of lamb in the world, so no one can really afford to start trying to compete against us in our own market,” he says.

The pork industry’s processed products, in particular, ham and bacon, are likely to feel the positive impacts of a clearer labelling system.

“Today around 70 per cent or more of all ham and bacon consumed in Australia is made from imported pork,” Spencer says.

Under the new system, the “Made in Australia” claim can no longer appear on imported pork without specifying that it is made from imported pork, a move that Spencer calls “a significant step forward.” While the new system has been criticised for leaving it up to the manufacturers to voluntarily declare the origin of a product’s main ingredient, Spencer isn’t phased.

“Actual country of origin can’t always be mandatory as this changes for many processors through the year, who swap between the US and Canada as source countries.”

Whether changes to labelling will put pressure on processors to source Australian, will all depend on consumer preference.

Not so simple

The issue with CoOL is that it must be applicable to many different commodities, and while one solution works for one industry, it may disadvantage another.

Over-regulating CoOL requirements could penalise Australian food exporters from trading on “Brand Australia” – particularly popular in Asian markets. This would be a huge disadvantage, at a time when many food manufactures have their eye on the Asian market.

Australia also has an agreement with the World Trade Organisation (WTO) that requires that any technical measures (such as origin labelling) not to discriminate against imported products and be based upon demonstrated need for regulation. This means that changes to CoOL must not be more trade-restrictive than necessary to fulfil its objective; to inform.

Imported products will continue to be required to be labelled with a country of origin (Product of Thailand, Made in Canada etc.), and labels on foods claimed to be packed in a particular country must indicate whether they include ingredients imported into that country. Importers will also be required to make their country of origin claim in a box on the label, like Australian producers, so it can be easily found by consumers.

The US recently ran into trouble with the World Trade Organisation (WTO), after it introduced mandatory CoOL, in response to small scale beef producers who believed consumers would support local product and pay more. But, unfortunately for the producers, they didn’t. The WTO Dispute Settlement Body panel declared several aspects of the CoOL requirements to be in violation of international law as it created a cost structure that favoured domestic suppliers, without meeting a legitimate objective.

Where to from here?

The next step for the government is to work with the States and Territories, with plans to introduce the legislation to Federal Parliament in early December 2015. But the government expects the new labels will be voluntarily displayed before Christmas. Once the policy is legislated, a staggered phase-in period will come into force on the 1st of April 2016.

A spokesperson for the Minister for Industry and Science said to assist with the transition to the new labels, “there will be further consultations including industry workshops across the country as well as an online portal where companies can access information and download the labels.

“With some companies sourcing produce from all over the world and ingredients changing regularly printing different labels isn’t practical. Importantly, all imported products must clearly state their country of origin which will be printed in a box with the country of origin is defined as where a product was made or grown, such as ‘Made in Italy’ or ‘Product of Canada’.”

While businesses previously had to pay up to use the green and gold kangaroo, those who qualify for the ‘Made in’ claim will be able to use the kangaroo as part of the new label at no cost.

The maximum cost for those in the food sector manufacturers, according to the Department of Industry and Science, “is around 0.2 of a percent on a product that costs $2.50, or half a cent. This is a cost that is only incurred in cases where a company wasn’t already going to change their label between now and when it’s enforced and a lot of companies will indeed want to revamp their labelling to highlight the Australian ingredients included in the product.”

So, will it really make a difference? It’s over to the consumers.


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