Cost pressures leading companies to consider increasing prices, ending production altogether: AFGC

The Australian Food and Grocery Council, the peak industry lobby for that sector, has warned that manufacturing costs have soared and are threatening the viability of its members.

In a statement on Tuesday, the AFGC said while some costs – including for some commodities, energy, and shipping have slightly moderated – others are increasing, and that “it remains tougher than ever for manufacturers in Australia”.

The warnings come following the Australian Industry Group’s comments last week on persistently high inflation for business costs – despite moderating consumer inflation data – such as electricity and transport.

The Australian Bureau of Statistics' CPI figures showed annual inflation falling to 2.8 per cent, down a per cent compared to mid-year, and at its lowest in three-and-a-half years.

The AFGC said that over the last three years energy and gas costs for business were up in price by more than 50 per cent, sugar by 46 per cent, and some packaging by about 30 per cent. Since late-2023, cocoa prices have spiked 200 per cent.

“The hard truth is that manufacturing costs have soared, creating a supply-side inflation issue that calls for supply-side solutions,” AFGC CEO Tanya Barden said.

Barden’s group was responding to the Australian Competition and Consumer Commission’s Interim Report for its inquiry into supermarket pricing. 

According to the AFGC, the current inflationary environment “was preceded by years of costs rising faster than wholesale prices”, and “manufacturers had already trimmed the fat and while they continue to adopt efficiencies where they can, they now risk cutting into the bone.”

Businesses were offsetting costs “where possible” but “are often left with the difficult decision whether to increase prices, reduce pack size, reduce quality, or cease production in Australia completely.”

In response, the AFGC recommended the government “adopt a cost of doing business agenda and develop a long term strategic focus to boost productivity and global competitiveness” of manufacturing.

Picture: credit Ferndale Foods

Further reading

AFGC: annual figures show resilience in tough era, though “strategic intervention” needed

Food manufacturing managed to grow in 2020/2021, but that’s likely over: AFGC

Food manufacturers starting to pass on rising costs: AFGC

Towards 3% R&D – A future made feeding Australia

Some industrial costs continuing to rise despite slowing CPI: Ai Group