Economic snapshot of the food and grocery sector

Australia’s food and grocery sector contributes more than $100 billion a year in turnover to the national economy and employs about 315,000 people, with half in rural and regional areas, according to a landmark report by the Australian Food and Grocery Council (AFGC) and KPMG.

Launched by federal Agriculture Minister Tony Burke in Canberra on 28 October, the first-ever economic snapshot of the food and grocery sector called State of the Industry 2009 confirms the industry is Australia’s largest manufacturing sector, highlighting its importance to growing Australia’s economy.

The report - which comprehensively examines the fresh and processed food, beverage and grocery industries - shows the growing and sustainable industry is made up of 38,000 businesses, spends about $3.8 billion a year on capital investment and accounts for $49 billion of the nation’s international trade.

AFGC Chief Executive Kate Carnell said the wide-ranging report highlights that the industry is one of the few manufacturing sectors in Australia that continues to grow and employ people during tough economic times.

“On a turnover basis, the report found Australia’s food and grocery sector is comparable in size to the Australian mining industry - and the sector is more than four times larger than Australia’s automotive industry,” said Carnell, who noted the “essential information” has not been previously available.

“The industry employs more than 3% of all employed people in Australia, paying salaries and wages of about $14 billion a year.”

Carnell said the report also recognises the importance of protecting the industry in terms of job growth as well as meeting the significant food supply needs into the future.

With predictions that the world population will reach nine billion by 2050 and Australia’s population is expected to hit 35 million by 2040, many experts believe that the world will need to double its current food production to meet these challenges in a carbon- and water-constrained environment.

“There are also some real challenges facing the industry, including the increasing cost of energy, availability of water, rising imports and exports becoming more expensive with the strengthening Australian dollar,” Carnell said.

“Having a robust and prosperous food industry provides many opportunities for Australia into the future, including increasing job opportunities in rural and regional areas. Australia can play an important role in addressing future world food needs.

“To protect Australia’s food supply and overcome these challenges, we must ensure the $100 billion food and grocery industry’s long-term growth, increase export earnings and boost competitiveness.”

KPMG’s lead partner for the food and drink segment, Mark Epper, said the value of food, beverage and grocery imports in Australia has grown by 40% in the past five years.

“While the industry is export focused, imports are rising and eroding the trade surplus historically enjoyed by the industry,” Epper said.

KPMG’s economic modelling used in the report looked at the impact of a 20% contraction of the industry which, if realised, would cause more than 100,000 jobs to be lost.

“This significant contraction of the industry would necessitate increased imports, increasing the cost of household consumption,” Epper said.

“Under this scenario, consumer price index (CPI) is expected to be 6.4% higher.”

The report was based on the definition of the Australian food and grocery industry, which reads: ‘Those industries that value-add to agriculture, food and other products for the purpose of producing everyday fresh and processed food, beverages and grocery products consumed and used by Australians.’

The full report, including essential facts and figures about the industry, is available to download at www.afgc.org.au.