Coca-Cola invests in Indonesian start-up Wahyoo

Free trade agreement good for agriculture

The Minister for Agriculture, David Littleproud has welcomed the news that Indonesia has completed the domestic ratification process for the free trade deal with Australia. Littleproud said this bilateral agreement has been an objective of the Australian Government for a long time and the benefits will begin to flow from the 5th July.

“This is great news for Australian farmers and Australia’s agricultural sector,” Minister Littleproud said. “Indonesia is already our 6th largest agricultural export market. This agreement will help us see the $2.5 billion export market grow even further. There is still more work to be done on technical barriers for trade with Indonesia but this is a great basis in which to start from.

“The benefits will be across the board and is a reminder of how our farmers and the agriculture sector will continue to be the bedrock of our recovery from the COVID-19 crisis. There will be duty free access for 575,000 head of live male cattle per year, increasing 4 per cent a year to 700,000. The remaining 5 per cent tariffs on Australian frozen beef and sheep meat will be reduced to 2.5 percent and then eliminated after 5 years.

For Australian grain producers there will be a guaranteed duty free access for 500,000 tonnes per year of feed grain such as wheat, barley and sorghum and that will increase 5 per cent each year.

Dairy farmers will benefit from the elimination of 5 per cent tariff for milk and cream, concentrated or containing added sugar. There will also be the elimination of 5 per cent tariff for grated and powdered cheese of all kinds.

“And there will be improved access for citrus fruits such as mandarins, oranges, lemons and limes,” said Littleproud. “The Nation’s farmers have been calmly going about feeding the Australia and exporting to the world. The Australian Government will stand with our farmers and continue to work to find new and expand existing markets to give them a competitive edge.”

Trade agreements critical to Australia’s regions and red meat jobs

The Australian red meat industry urged both sides of Government to proceed with ratification of two critical free trade agreements without delay, following today’s release of a Joint Standing Committee on Treaties (JSCOT) report.

The report (#186 tabled 9 October 2019) into the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) and Australia-Hong Kong Free Trade Agreement (A-HK FTA) determined that the IA-CEPA and the A-HK FTA are in Australia’s national interest. The Committee therefore recommended binding treaty action in both cases.

“The Australian industry strongly endorses the JSCOT outcomes for both the IA-CEPA and A-HK FTA,” said Red Meat Advisory Council (RMAC) Chair Don Mackay.

“Indonesia is a vitally important trading partner for the Australian live cattle and beef industry – along with a steady requirement for sheepmeat. Combined, the existing trade was worth over a $1 billion in 2018.

“The benefits of ratifying IA-CEPA and securing more trade certainty with a key export market are unsurpassed – particularly at a time of global trade disruption.”

In addition, the implementation of the A-HK FTA promotes a closer economic relationship between Australia and Hong Kong and will ‘lock in’ Australia’s current duty free access for red meat products.

“The A‑HK FTA will complement the benefits our sector has derived from the China-Australia Free Trade Agreement as well as Australia’s other trade agreements throughout Asia – bilaterally with Japan and South Korea, regionally with ASEAN and via the Trans-Pacific Partnership (TPP-11),” Mackay said.

“In 2018 alone, we exported just over 7,000 tonnes of beef to Hong Kong, worth $96 million, demonstrating the critical importance of diverse markets to returning prosperity back to Australia’s red meat businesses and regions.

“We applaud the efforts of the Australian Government in pursuing trade reform globally and look forward to the ratification of these two agreements in the Parliament, and the subsequent entry into force of both agreements at the earliest possible opportunity.

“Our industry represents in excess of 80,000 businesses and 405,000 jobs, with a large portion of these located in rural and regional Australia.

“For every 10 jobs in our industry, six rely on our trade with the world. Deals like the IA-CEPA are vital for these jobs and vital for our regions, especially Australia’s north.

“Trade agreements such as these are integral to helping ensure the cost competitiveness of the Australian supply chain – at a time of weather related challenges and mounting international competition.”

Australian Made welcomes support for Aussie manufacturers and exporters

The Australian Made Campaign Ltd (AMCL) has welcomed today’s announcement from the Federal Government outlining its commitment to support Australian manufacturers here and abroad.

The commitment will see AMCL receive up to $5M to promote the famous Australian Made, Australian Grown (AMAG) logo in key export markets, as well as establishing trade mark registrations in the United Kingdom, European Union and Canada. The announcement also details the establishment of a Manufacturing Modernisation Fund aimed at assisting manufacturers access new technologies to expand and thrive into the future.

“It’s really encouraging to see this level of commitment to Australian manufacturers,” said Australian Made chief executive, Ben Lazzaro.

“It’s important that we foster a manufacturing environment that encourages and assists manufacturers to innovate and build on their success, as well as providing pathways to new markets. The end result being a healthy manufacturing sector, job creation and better access to markets.”

The famous green and gold kangaroo brand is ideally positioned to play a key role in the Government’s effort to support local manufacturers in Australia and those taking their goods abroad.

“The AMAG logo has a proven 33-year track record in making the ‘Australian connection’ here and overseas, so it makes real sense to enhance its effectiveness as export markets continue to open up for Aussie manufacturers,” said Lazzaro.

“While much work has been done in extending the reach of the AMAG logo domestically and into Asia, with the Government’s support, AMCL will be able to further strengthen Australia’s reputation for high-quality, clean, green products further afield.”

The AMAG logo is currently used by nearly three thousand businesses across thousands of products sold all over the world. It is also a central element of the Government’s recently introduced food labelling laws in Australia; it will therefore be featured on the labels of thousands of food products exported from Australia (in addition to the thousands of non-food Australian exports).

It is also a registered trade mark in USA, China, South Korea, Singapore and India, with legal proceedings having commenced to register it in 7 other Asian countries – Hong Kong, Indonesia, Japan, Malaysia, Taiwan, Thailand and Vietnam.

“AMCL looks forward to working with the Government to help deliver this initiative and help extend the reach of the AMAG logo and that of Aussie manufacturers and exporters,” said Lazzaro.

Coca-Cola shakes up the Beverage market with 2015 financial results

Increased efficiency, improved execution and a diversified product base: that was the message Coca-Cola Amatil (CCA) pushed for its investors and consumers at its full year result briefing. 

Promises of profit growth by the company had been delivered for the first time in three years, with $100 million in cost savings potentially becoming invested to ensure long-term gains.

After a 33 per cent slump in profits during the previous two years, CCA’s underlying net profit rose 4.8 per cent to $393.4 million in 2015, assisted by a lower interest bill after selling 30 per cent of its Indonesian business to its US parent, the Coca-Cola Company.

One of the major themes of the result briefing was a shift towards meeting consumer expectations; with a new version of the reduced-kilojoule Coke Life hitting the shelves at a 50 per cent price gap with its rival Schweppes-Pepsi.

The Coca-Cola Life launch was the biggest beverage launch within the last eight years, with 60 per cent of households having some Coca-Cola trademarked product within their walls.

In an interview with Food & Beverage Magazine, CCA Group Chief Financial Officer Martyn Roberts says a personal highlight of the 2015 full year results was the amount of leverage gained in their large-scale, low-cost manufacturing sales capabilities.

“Our major focus in 2016 should be on the maintaining momentum in all of our respective markets in the face of changing consumer preferences and a challenging global market,” Roberts said.

Earnings before interest and tax rose a more modest 1.4 per cent to $660.6 million. CCA stabilised its Australian operations, earnings growth in Papua New Guinea, New Zealand and Fiji offset declines in Indonesia, and profits grew strongly in alcoholic beverages and coffee, countering a sharp drop in food and services.

According to CCA managing director Alison Watkins, CCA was aiming to be on track to return to mid-single-digit earnings per share growth "over the next few years".

"We don't want to achieve earnings-per-share growth only through doing clever things on our finance or tax line – we want to achieve it throughout our business," the former GrainCorp and Berri chief said.

""When you're relying on investing as we are in our brands, in innovation, in our sales capabilities, you'd expect those investments would pay, but it's impossible to be too scientific about when."

In Australia, non-alcoholic beverage volumes returned to growth for the first time since 2012, although volumes fell 1.5 per cent in the second half, in line with broker reports of tough trading in October and November.

CCA facing flat reception from Indonesia

Despite the consistent results between the 2014-15 financial years and placing itself ahead of the market through its reshaping and reinvention of costs for production, CCA faced some resistance from the Indonesian market.

This was largely due to a challenging environment in which economic growth was at its lowest level in five years, which placed a significant impact on which the speed of volume increased.

Although he would not comment specifically on the Indonesian government and their level of mandate, Roberts says strong revenue management and cost initiatives offset lower growth volume.

“There’s been a significant depreciation of the rupiah against the US dollar, which resulted in the increased cost of goods sold,” Roberts said.

“The entire beverage industry in Indonesia has had a bit of a set back over the past year or so. We’ve been sticking to implementing our strategies to include TCCC’s 29.4 per cent shareholding in the Indonesian business in addition to injecting equity.”

Since capital expenditure had been reduced by $29M to $256M due to deferral of spending on projects, Indonesia saw the installation of three new production lines in addition to the continued rollout of coolers.

If there was one positive note left from the Indonesian market, net debt had decreased by $725M to $1,146M reflecting the receipt of the equity injection by TCCC in CCA’s Indonesian business which equated to $647M in Australian dollars.

As 2016 continues to present opportunities for CCA to reinforce their strategy, the Indonesian market may still persist as a challenging area for profitability and growth due to the tough economic conditions. 

Fonterra drops farmgate price again as global milk glut worsens

Fonterra Co-operative Group has once again reduced its forecast Farmgate Milk Price for the 2015/16 season from $NZD4.60 per kgMS down to $NZD4.15 per kgMS.

When combined with the earnings per share range of 45-55 cents, this means a total available for payout of $NZD4.60-$NZD4.70 per kgMS and would currently equate to a forecast Cash Payout of $NZD4.50-$NZD4.55 per kgMS to New Zealand dairy farmers after retentions.

CEO Theo Spierings said that although global demand remained sluggish, Fonterra supported the general view that dairy prices will improve later this calendar year. 

“The time frame for supply and demand rebalancing has moved further out and largely depends on a downward correction in EU supply in response to the lower global prices. These prices are clearly unsustainably low for farmers globally and cannot continue in the longer term.”

And despite the perceived increased demand from regions such as Asia, according to Kelvin Wickham, Fonterra’s Managing Director of Global Ingredients, the reality is somewhat more complex with the global demand for dairy continuing to lag. 

“The main factors affecting demand are declining international oil prices, economic uncertainty in a number of emerging economies and a slow recovery of dairy imports into China.”

“On the supply side, in Europe, milk volumes have continued to increase significantly and these surplus volumes are being exported. In addition, the Russian ban on European Union dairy imports has pushed more product onto the world market,” said Wickham.

“Declining international oil prices have weakened the spending power of countries reliant on oil revenues, many which are major dairy importers, contributing to the weaker demand for dairy being seen globally.”

“It is an imbalance between supply and demand that continues to put pressure on global milk prices,” added Wickham,

“Fonterra supports the general view that dairy prices will improve later this calendar year – but this largely depends on a downward correction in EU supply in response to lower global prices,” he said.

Asked about the pain that low farmgate prices give to the farmers, Wickham noted that there was no question this reduction will be tough on New Zealand’s farmers. 

“Fonterra will look at options to assist farmers with on-farm cash flows, underpinned by the expected improvement in dividend returns and the financial strength of the Co-operative.”

However, for the medium to long term outlooks, the global dairy giant remains optimistic, at least publically, with CEO Spierings pointing out, “while a unique series of global issues are impacting the forecast Milk Price, the business is performing well, as outlined in our business update in November, and is on track to generate improved dividend returns.”

“Fonterra has remained focused on reducing costs, increasing efficiencies and shifting more milk into higher value products,” 

“It is important to state that despite the current challenges, we have confidence long term international dairy demand will continue its expansion due to a growing world population, increasing middle classes in Asia, urbanisation and favourable demographics,” concluded Spierings.

Australian exports benefiting from Indonesian wheat demands

A significant growth in Indonesia’s demand for the import of meat and produce is set to benefit Australian exporters.

Demand for meat, dairy products and fruit and vegetables have quickly grown as Indonesia’s affluent urban population becomes more integrated within the market.

According to Abares, the Ministry of Agriculture’s commodity forecaster, the market will be worth US$150bn assuming that there are no significant changes to agricultural productivity growths.

“In the case of Indonesia, the current consumption level per person is relatively low. But with income growth, for the future we expect that demand will increase quite significantly over the period to 2050,” the report said.

Indonesia is Australia’s largest export market for wheat, with more than half of Indonesia’s imported wheat (representing 20 per cent of Australia’s total wheat exports) coming from Australia in 2014.

Wheat is the major winter crop grown in Australia with sowing starting in autumn and harvesting, depending on seasonal conditions, occurring in spring and summer. The main producing states are Western Australia, New South Wales, South Australia, Victoria and Queensland.

The majority of Australian wheat is sold overseas with Western Australia the largest exporting state. The major export markets are in the Asian and Middle East regions and include Indonesia, Japan, South Korea, Malaysia, Vietnam and Sudan.

Wheat grown for domestic consumption and feedstock is predominately produced on the east coast.

Cocoa Farmers in Indonesia to receive financial support program

A two and a half year program aimed at improving the livelihood of smallholder cocoa farmers has been introduced through collaboration with Mondelez International’s Cocoa Life operation.

Driving sustainability in Indonesian farming practices, the program that started in October 2015 aims to benefit six thousand farmers and their families in the Kolaka region.

Southeast Asia Cocoa Life manager Andi Sitt Asmayanti says the program is part of the Green Prosperity –Sustainable Cocoa Production Partnership national initiative led by Swisscontact in Indonesia.

“Through Cocoa Life, Mondelez International plans to reach 40,000 farmers in Indonesia and we believe this project will be a major step forward in reaching this commitment, and supporting cocoa farmers and communities to thrive,” Asmayanti said.

According to Asmayanti, the program aims to deliver training in good agricultural practices to improve knowledge and boost productivity while also improving environmental practices to reduce the carbon footprint of cocoa farming.

Cocoa Life urges employees, suppliers and community partners to join together to develop new approaches that will have a positive impact for both communities and stakeholders.

Implemented with Swisscontact, focus on facilitating access to agro-inputs can help farmers sustain their production for longer periods of time due to extra training in financial literacy.

Since July 2014, Mondelez and Cargill worked together to strengthen Indonesia’s position as a leading cocoa producer –strengthening both companies’ commitment to improving the livelihoods of cocoa farmers and investing in their future.