Australian food manufacturers close factories amid external pressures

By Ankush Chibber

- Last updated on GMT

Australian food manufacturers close factories amid external pressures

Related tags: Australia, Australian food and grocery council

Two major food manufacturers in Australia have shut down factories under external pressures including the rise of the Australian dollar, high cost of raw materials, supermarket price wars and government policies.

Early this month Coca-Cola Amatil (CCA) announced that it would only retain two of its three manufacturing facilities under SPC Ardmona, its food and vegetable processing business.

Under the review, CCA decided to consolidate the production of premium packaged fruit and vegetable products at the Shepparton and Kyabram facilities, while closing the Mooroopna manufacturing plant, affecting 150 jobs.

Terry Davis, CCA’s group managing director, said in a statement that the business had been under significant pressure from the strengthening of the Australian dollar, and rising competition from cheap imported products.

Earlier, at the end of May this year, Heinz Australia announced that it was shifting its production of sauces to Hastings, New Zealand, and closing its Girgarre factory in Northern Victoria, affecting 146 employees and three tomato growers.

In addition, the company also decided to shift production of some food products from Wagga Wagga to Hastings, which resulted in the loss of 38 jobs.

Kate Carnell, chief executive officer of the Australian Food and Grocery Council (AFGC), said that the strengthening of the Australian dollar has been a major concern for Australian food manufacturers.

“The strengthening dollar has meant that imports have got cheaper. This has come at a time when the cost of Australian manufacturing are on the rise, multiplying the impact,”​ she said.

According to Carnell, Australian manufacturers are finding it difficult to compete with imports on commodities, and thus are being forced to be innovative and focus more on finished products.

Carnell noted that while there has been a consumption pattern of 'buying Australian' for a while, the trend increasingly has shifted towards looking for the best value for money.

“In effect the Australian consumer would still buy Australian, but not at a high cost, is what we have noticed,”​ she said.

Consumers are leaning towards cheaper private labels at supermarkets like Coles and Woolworths, most of them imports, said Carnell.

“The impact of this is high given that Australia has one of the highest concentrations of retail space in the world,”​ she said.

Carnell added that times are tough in Australian manufacturing given the high cost of labour, the high cost of raw materials due to various factors, and price wars between supermarkets.

“In addition, the recently introduced carbon tax, which is one of the highest in the world has also impacted food manufacturers quite heavily as it has increased the cost of power and transport,”​ she said.

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