Latest AFGC State of Industry report released

The effects of years of pandemic and supply chain disruptions have become evident for Australia’s food and grocery manufacturers, with a new analysis showing a drop in food product investment and a dip in job numbers.

AFGC State of Industry (SOI) data shows the food and grocery manufacturing industry increased in value by 7.4% to $144.1 billion in 2021–22 as domestic consumption and prices rose while exports rebounded from declines during the pandemic.

Despite headline value growth, driven by inflationary prices and recovering exports, employment in the sector slipped by 1%, particularly affecting regional areas.

At 1.6% growth, capital investment across the industry was almost flat. Though investment in beverage manufacturing grew 55% on the previous year to $1.02 billion, investment in the larger food manufacturing sector showed a 12.3% contraction, year-on-year, to $2.23 billion.

The report analysed the 2021–22 period, which was affected by pandemic-related disruption, the war in Ukraine and supply chain impacts.

Tanya Barden, AFGC CEO, said cost pressures on domestic industry remain high with limited relief after the past three years and higher costs in areas including freight, labour and energy.

There has been a shift from ‘just in time’ supply chains to ‘just in case’ since the pandemic, and manufacturers are now holding higher inventory levels to maintain supply.

Separate from the SOI report, data from the Australian Bureau of Statistics (ABS) showed producer prices in food manufacturing, including the cost of inputs used by manufacturers and the wholesale price of goods, rose 12.5% between June 2021 and June 2022. This is higher than Consumer Price Index (CPI) inflation of 6.1% for the same period. Since June 2021, ABS data shows the value of inventories has risen from $8.8 billion to $11.3 billion in March 2023 for food manufacturing.

The 2021-22 SOI data shows:

• The value of turnover in the Australian food and grocery industry rose from $134bn to $144.1bn, driven by price rises, higher domestic consumption and export growth.
• In the industry, employment fell from 273,002 in 2020–21 to 270,661 in 2021–22, likely due to labour shortages and border closures.
• In regional Australia, industry employment remained strong with 36.9% of the industry workforce located outside major metropolitan centres, down slightly from 40.3% in 2020–21.
• Sector exports increased by 15.3% to $39.4bn, regaining most of the losses of the previous year but still down on pre-pandemic levels.
• Food and grocery manufacturing accounted for 31.3% of Australian manufacturing activity, down from 32.1% in 2020–21 but still the nation’s largest manufacturing sector.

Top image credit: iStock.com/Minerva Studio