AFGC’s State of the Industry Report 2014: what does it mean?

2014 AFGC's state of the industry report

The Australian Food and Grocery Council (AFGC) recently released its annual “State of the Industry Report”. Here we strip it back to reveal the seven key facts you need to know.

The report’s sixth edition focuses on five key issues in the food and beverage manufacturing industry: turnover, employment, international trade, capital expenditure, and research and development. As with the other reports, it draws on data mainly from the Australian Bureau of Statistics for 2013-14, and 2012-13 where necessary.

Here’s what’s up, what’s down and what stayed the same:

1. Turnover is up…slightly

In total, the Australian food and beverage, grocery manufacturing and fresh produce industry had a turnover of $114 billion in the 2012-13 financial year. This is an improvement of 0.9% on the previous year — so nothing to shout from the rooftops about, but an increase nonetheless. This sum represents 28.9% of Australia’s total manufacturing industry turnover. Food and beverage processing contributed the bulk share of this ($91.6b) with grocery and fresh produce contributing $16.2b and $6.2b, respectively.

2. Dairy and fresh produce are on the rise

Meat and meat processing make up the largest share (24.6%) of the food and beverage sector turnover, but its standing hadn’t changed significantly from the previous year. On the contrary, dairy increased its share by 9.1% to a total of 14.7%. Fresh produce also increased its share of the total turnover by around 12.3%. Most of this comes down to the vegetables category and tropical and other fruits category (nuts, bananas, etc.), which recovered well from extreme weather events. At the other end of the spectrum, seafood processing declined by 4.2% to 1.2% — the sector’s smallest share.

3. Employment is down

But not by much; employment decreased by 2,571 people (0.9%) from the previous financial year. However, in 2013-14, the sector still employs almost 300,000 Australians, with a large proportion of jobs (45%) in regional and rural Australia. Interestingly, this is more people than the mining and transport-equipment-manufacturing industries employ — combined.

4. We’re exporting more

In 2013-14, exports across the sector are up by more than 8%. This is dominated by meat-processing exports, which is valued at $10.5b and increased by a massive 24.5% over the previous year. Dairy also saw a huge rise in exports of 19%. This export growth is attributed to factors such as the weakening Australian dollar, as well as growing global demand for our processed meat, seafood, and cheese and other dairy products. It’s very promising moving into the future.

5. We trade with the same countries

The industry’s top 10 trading partners hasn’t changed over the past year. The United States remains Australia’s largest overall trading partner, taking over from Japan as our largest export market. In terms of what we trade, the USA can’t get enough of our wine and alcoholic beverages, while Japan favours our meat and dairy products. No big surprises there, then!

6. Fresh produce imports from NZ are up

Along with the USA, New Zealand is our top import partner for goods into Australia. We especially like their fresh produce, with imports from NZ growing by 60% from 2012-13 and contributing to a total increase of 23% for fresh produce imports. We also keep hold of most of our own fresh produce, with 86.8% of all fresh produce grown in Australia in 2012-13 remaining in the domestic market.

7. Capital investment flat lined

At a time when the industry really needs an infusion of capital, it has flat lined. In fact, capital investment in food-product manufacturing declined by 3.5% from $2.5b to $2.4b. This has heavy consequences for manufacturers who need to keep pace with technology, machinery and processing improvements to improve their efficiencies and meet global demand. (SPCA’s story is an interesting reminder on what capital investment and innovation can achieve.)

The bottom line

In summary, the report shows there are plenty of growth opportunities for the Australian food and beverage, grocery and fresh produce sectors. The huge growth in dairy, fresh produce and meat alone show this is an industry worth backing — even despite challenging economic conditions and barriers to growth, such as rising commodity and energy costs.

However, for the industry to grow, it needs some support. Dedicated government policies and programs are essential to reduce the overall cost of doing business and improve the industry’s competitiveness. We need to find ways to encourage greater investment into the sector if we are to continue increasing exports — particularly to the Asia region. (See the Global Food Forum wrap-up, which looked at how Australia is poised to become Asia’s deli.) Innovation is also key.

But what about the decreasing employment level?

AFGC Chairman Terry O’Brien says this is a microcosm of the country at large. “The juxtaposition of growth and declining employment reflects the reality of companies automating to reduce labour costs and drive higher efficiency and productivity.”

If we are to buck the employment trend, the simple fact is we need to grow faster.

What do you think about the AFGC’s State of the Industry Report 2014? Were any parts particularly surprising? Tell us what you think. We think its content hits the nail on the head, and have included it as one of our “manufacturing lessons for 2015”.

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Mark Dingley
Mark Dingley is Chairman of the Australian Packaging and Processing Machinery Association (APPMA) and is the CEO at Matthews Australasia. With 25 years of experience in the product identification industry and the wealth of knowledge gained from working closely with industry associations in developing and implementing standards & best practice, Mark is able to assist manufacturers with a range of issues from getting real-time visibility of their production line, improving automation, establishing quality assurance using machine vision to selecting the best fit technology for coding and labelling applications. Mark Dingley's LinkedIn Profile
Mark Dingley

by Mark Dingley

Mark Dingley is Chairman of the Australian Packaging and Processing Machinery Association (APPMA) and is the CEO at Matthews Australasia. With 25 years of experience in the product identification industry and the wealth of knowledge gained from working closely with industry associations in developing and implementing standards & best practice, Mark is able to assist manufacturers with a range of issues from getting real-time visibility of their production line, improving automation, establishing quality assurance using machine vision to selecting the best fit technology for coding and labelling applications. Mark Dingley's LinkedIn Profile

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