Minister puts supermarkets on notice as Oz grocery shows Asian promise

By RJ Whitehead

- Last updated on GMT

Minister puts supermarkets on notice as Oz grocery shows Asian promise

Related tags International trade Food Australia

Australia’s food and beverage, grocery and fresh produce manufacturing sector is poised for growth in spite of tough economic conditions.

Having released its fifth annual economic snapshot, Gary Dawson, chief executive of the AFGC, said that Australia’s largest manufacturing sector is seeing greater investment while poised to capitalise on exports to Asia.

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​,” said Dawson.

Overseas trade growth

The 25,662 businesses in the sector (170 fewer than the previous year), accounted for A$50.8bn of international trade – an increase of 0.8%. 

 “The increase in exports for value added foods such as meat processing, grain mill products and fruits and vegetables is encouraging and we expect to see this trend continue​,” said Valentina Tripp of KPMG.

Exports to China increased by A$770m [44% on the previous year] with the meat processing and human pharmaceutical sectors accounting for 85% of this increase​.

On the home front, Australia’s small business minister, is expected to fire a shot later today at the country’s two main supermarket chains, Coles and Woolworths over what the new government sees as harsh bargaining tactics that damage food producers.

Impact on viability

Bruce Billson will tell industry leaders in Canberra that market pressures will “stifle​” local suppliers and lead to higher prices at a time when Australian producers are battling against cheap imports.

"While intensified competition between the two major chains has reduced grocery retail prices, there are concerns that those reductions come at the expense of suppliers and impact on the longer-term durable benefit to consumers​," he will say, according to a draft speech obtained by The Australian​.

"We have to ask ourselves: will these price and market pressures impact on the viability of the food-and-grocery industry over the long term and will they stifle innovation and investment by suppliers? And will this result in higher grocery prices in the longer term​.”

Government demands

According to Dawson, food and grocery companies are looking for a return to certainty and stability from the government, and a focus on getting the policy settings right to boost confidence and promote investment and jobs.

To that end we strongly support priorities including the finalisation of stalled free-trade agreement talks, a rollback of costly unnecessary regulation, action to reduce energy costs, targeted investment incentives and a review of competition laws to help level the playing field where there is an imbalance in market power​.”

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​.”

Related topics Markets Oceania Industry growth

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