Food and grocery industry sees weak investment, high costs: report

Food and grocery manufacturing turnover grew 7.4 per cent in value over 2021-22, though capital investment stalled and employment shrunk by a per cent, according to a report from the industry’s peak body.

The Australian Food and Grocery’s annual State of the Industry report recorded an increase in revenues to $144.1 billion – driven by “inflationary prices and recovering exports” — though sees the sector impacted by labour constraints, particularly in regional locations, and cost pressures. 

The AFGC cites CPI inflation data up 6.1 per cent between June 2021 and 2022 though this being outstripped by producer price increases of 12.5 per cent (according to Australian Bureau of Statistics figures.)

The industry had seen “limited relief” in the last three years from natural disasters, war and COVID issues, said CEO Tanya Barden in a statement on Tuesday.

“Just like anyone doing their weekly shopping is feeling the effects of higher inflation, Australian manufacturers are also battling higher costs in areas including freight, labour and energy,” she added. 

“We’ve also seen a shift away from ‘just in time’ supply chains to ‘just in case’ since the pandemic and  manufacturers are now holding higher inventory levels to maintain supply which pushes costs higher. 

“These are significant challenges for an industry that must attract new capital to embrace new technologies  and remain competitive with offshore competitors after more than a decade of stagnant investment.”

Capital investment was up only 1.6 per cent in total, led by beverage companies (up 55 per cent to $1.02 billion) and down 12.3 per cent to $2.23 billion in the larger food category.

The fall in employment of 0.9 per cent to 270,0661 was explained as “likely due to labour shortages and border closures”. 

The report also found that the sector’s share of manufacturing overall in Australia declined from 32.1 per cent to 31.3 per cent, and exports gained by 15.3 per cent to $39.4 billion, through were “still down on pre-pandemic levels”.

Picture: credit AFGC