Opportunities for growth exist for processing, report shows

Despite difficult economic conditions, strong growth opportunities exist for the Australian food and beverage manufacturing sector, the Australian Food and Grocery Council’s (AFGC’s) ‘State of the Industry 2013’ report shows.

The report is based on the most recent ABS data and finds that industry turnover of $111 billion remained largely flat in 2011-12, noting a marginal 0.3% decline, while total industry employment declined by 0.4% to 298,825 in the 2012-13 financial year.

“The findings of State of the Industry 2013 demonstrate that while the Australian food and grocery manufacturing sector - Australia’s largest manufacturing sector - is facing an environment where input costs are rising on everything from commodities to labour to energy, encroaching regulations are adding to compliance costs and retail price deflation continues to cut margins, there are signs of significant growth potential, in particular a 26% increase in capital investment in food manufacturing as suppliers increase investment in productivity initiatives such as automation and other cost reduction programs,” said AFGC CEO Gary Dawson.

“Solid export growth in processed foods and beverages is also encouraging as suppliers respond to emerging market opportunities including the growing Asian middle class. This has significantly contributed to three consecutive years of improving trade surplus in processed food and beverage products.”

According to Valentina Tripp, KPMG Consulting national leader for consumer products, the increase in exports for value-added foods such as meat, grain mill products and fruits and vegetables is encouraging. Tripp says this trend is expected to continue.

“Exports to China increased by $770m (44% on the previous year) with the meat processing and human pharmaceutical sectors accounting for 85% of this increase,” Tripp said.

“Despite a tough time for the dairy sector domestically, the sector presents strong potential to capitalise on growing global demand, particularly in the Asian markets. Investment in R&D and innovation to leverage Australia’s high-quality, clean, green and safe food supply systems is key to long-term sector growth.”

“Right now the industry is facing massive challenges from high costs and retail price deflation squeezing profitability. Key food processing capabilities are at risk of being lost altogether, with the flow-on loss of jobs and opportunities extending into the farm supply base,” Dawson said.

“This report shows that getting effective policies in place will enable industry to take advantage of the massive growth potential for the future, provided we can boost competitiveness and productivity, and open up market access in the growing economies of Asia.”