Analysis and Commentary

Australia’s Food Manufacturing Opportunity – by Derek Lulham

Analysis and Commentary

The Australian food industry is an advanced sector with a wide range of competitive advantages. Here Derek Lulham explores our advantages and opportunities in the Australian and global marketplace.

Australia continues to be a solid platform to launch brands and products targeted to consumers across Asia.

This mature sector has conversations on a broad range of topics; in moderation all foods are good and provide unique benefits that may be directly related to their nutrition or to the broader benefits of sharing, gifting or being the centrepiece for cultural and social occasions.

The industry generally stands for diversity and balance and growing the Australian ‘clean food’ image.

Some of the competitive advantages that the Australian food industry enjoys include:

  • Access to high quality / clean food ingredients
  • Well educated and motivated workforce
  • Stable government with a highly regulated industry
  • Leading sustainable production techniques
  • And a diverse multicultural local consumer cohort

To understand these areas, it is important to discuss the broader landscape that the Australian food industry operates in.

Probably, the greatest challenge for the sector has been that labour, energy, and other regulatory input costs have increased significantly across the past 20 years, at the same time the highly concentrated retail sector has constrained price increases resulting in a squeeze on profitability and a reduction in capital investment in local manufacturing.

We have seen a growing number of products imported from across the world because of international price competitiveness and a desire for more cosmopolitan cuisine linked to increased migration and food culture from international travel.

Significantly more Indian and Chinese migrants now live in Australia and international travel to the Mediterranean food centric regions of Italy, France and Spain have helped change the type of food and the way food is consumed.

This has also sparked a home cooking revolution where celebrities and TV cooking shows have grown in popularity and more Australians include cooking as part of their leisure.

Generally, Australians are health conscious and have nutrition and quality as important considerations in their diet.

To balance the guilt of eating out more frequently, Australians are consuming fresher foods at home, shopping at the greengrocer and farmers markets more often. Consumers know that a varied diet is best.

The more nuts, grains, fruit, and vegetables the better. A balanced portion of fish and lean meat keeps us healthy and trying to keep the carbs down and a little less meat is probably good for us and the environment.

A vegetarian trend and a desire for more plant-based protein has grown due to a large Indian population (student and permanent), publicity around animal welfare and a perception of higher carbon emissions from animal production versus more sustainable plant-based farming practices.

And of course, the past 18 months of the global COVID-19 pandemic has resulted in many developments in the Australian food industry, which is now being treated along with utilities and medicine as industries of strategic importance to Australia.

Other developments include a widening concern of our susceptibility to global food supply chains, increased consumer trust in the major supermarket chains, lockdown driven ‘preparing home cooked meals’, the importance of supporting local cafes, restaurants and food stores and the changing business models of cafe’s, restaurants and clubs providing meals delivered to the door.

Two major factors confronting the industry today that need to be solved are the disruptions to logistics and branding.

Logistics disruptions have meant the sea freight security has been prioritised over efficiency resulting in a lot of shipping line container capacity ending up in the wrong places. Logistics costs have increased significantly.

Further, lockdowns across Asia has resulted in more on-line shopping that reduces the opportunity for in-store sampling and impulse merchandising that drives brand awareness.

Ultimately, the growing awareness of the strategic importance of the Australian food industry will support a platform of investment across the next decade.

The Covid-19 pandemic has demonstrated for all stakeholders across the food supply chain the importance of having a strong local and adaptable food industry capability.

This added to Australia’s natural competitive advantages means that Australia to be extremely well placed to be a significant supplier of manufactured food products into Asia across the decades to come.

While intentional and continued support is required from all levels of government, industry, the economy and consumers, the Australian food industry continues to demonstrate incredible resilience and adaptability to meet new challenges and opportunities.

Derek Lulham has had 36 years of experience in food production for local and international companies, including Masterfoods and Mars Inc. He is a consultant at Asiable, a B2B consulting business providing services and advice to help companies succeed in Asia.

Picture: Derek Lulham

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