The Australian Food and Grocery Council (AFGC) has released its Towards 2030: A food and grocery snapshot, an assessment of the food and grocery manufacturing sector following the Sustaining Australia: Food and Grocery Manufacturing 2030 report released in 2020.
Towards 2030 reflects on the achievements and challenges experienced between 2020 and 2025, a period of major global and domestic disruption. Despite COVID-19, geopolitical tensions, inflationary pressures, and the transition to new energy and regulatory settings, the sector has continued to supply Australian households and support export markets. The AFGC also acknowledged the ongoing contribution of retailers and wholesalers in supporting the sector’s ambitions.
The snapshot outlines key developments since 2020 and highlights structural challenges shaping the operating environment, including rising costs, sustained margin pressures, and persistent investment gaps that constrain long-term growth.
Towards 2030 will guide AFGC’s engagement with government and industry to ensure policies support domestic manufacturing, regional jobs, and a resilient, competitive food and grocery sector.
Global trends 2020-2025
According to the AFGC, the key takeaway from the first half of the decade is that the global economy’s reliance on long and complex supply chains has made manufacturers more vulnerable to global disruptions.
Regional conflicts, political tensions, trade disruptions, and technological innovation have created an era of instability and rapid change, with inflation becoming a major global trend.
The report stated that the collision of reduced supply and increased demand saw an outbreak of inflation at a scale not seen in decades, with some OECD nations experiencing double-digit inflationary peaks in 2022.
With advanced economies adopting new industrial policies and protective measures, the AFGC stated the overall impact on Australian food and grocery manufacturers has been to amplify the challenges of operating within the sector.
Domestic trends
Although the inflationary wave in Australia was less severe than the OECD average, the purchasing power of the Australian dollar has declined by roughly 20 per cent since the beginning of the decade.
As an island nation, the country has been particularly impacted by maritime transport challenges, and weather-related disruptions have increased cost and other pressures to domestic transport, warehousing, and commodity prices. Overseas migration has driven Australian population growth, yet the economy has been impacted by significant workforce shortages across all skill levels.
A shift in government has resulted in the creation of the National Reconstruction Fund and Future Made in Australia program, aiming to increase government investment in building sovereign manufacturing capability.
There has also been an increase in regulatory burden for producers across industry, particularly for sustainability measures. Net zero aspirations, single use plastics bans, and recycled packaging targets have led to new compliance costs, an increased need for skilled reporting and auditing professionals, and the need for companies to integrate sustainability into operations.
Reform for the Australian food regulatory system has not progressed significantly, despite considerable changes in trade and supply chains, consumer behaviour and expectations, and the greatly increased availability of information on foods and beverages.
Progress toward 2030 goals
Industry challenges and the domestic economy since 2020 have impacted the sector’s 2030 objective, given the significant variance between the assumptions underpinning the original scenario and actual real-world experience.
The high growth objective in the original Sustaining Australia report required an average compound annual growth rate (CAGR) of 6.8 per cent through to 2029-30. Since its publication in 2020, the sector has shown a five-year CAGR of 6.3 per cent, but falls to 3.9 per cent when adjusted for increased inflation. There has also been a decline in the sector’s profit to turnover ratio since 2020, indicating that industry revenue has grown faster than profit, and that the sector has experienced reduced margins.
Although there was a Covid-era uptick in investment, the AFGC stated it has not been at sufficient scale to compensate for the preceding years of underinvestment. There has also been no growth in R&D spending, portending continued declines in the sector’s competitiveness.
Despite a net trade surplus in food, exports also remain below expectations, with Australia struggling to compete on value-added manufacturing, limiting its ability to capture higher margins and diversify its export base – seen in more detail in the recent Harvard Economic Complexity Index. The AFGC stated the trend has accelerated since 2020, demonstrating that Australian food manufacturers are suffering from reduced competitiveness even in the home market.
Recommendations
Looking ahead to 2030, the AFGC stated strong policy and investment will be essential to secure long-term growth and competitiveness. The organisation recommends policy changes surrounding;
- Industry support – recognise the vital contribution of food and grocery manufacturing to Australia’s economy by ensuring the sector’s access to industry support measures, such as Future Made in Australia and the National Reconstruction Fund.
- Grid stability and gas supply – ensure that reliability and stability are prioritised as the electricity grid transitions to renewable and distributed energy sources, and ensure the continued supply of affordable gas for commercial and industrial users, as the sector electrifies its processes over the longer term.
- Investment incentives – reintroduce the Instant Asset Write-Off to incentivise companies with turnover up to $150m to invest in productivity-enhancing assets with a value up to $150,000, introduce a scheme of accelerated depreciation for business assets with a value in excess of $150,000, and expand the existing Research and Development Tax Incentive to cover the implementation of innovative process improvements.
- Regional employment skills – develop a federal grant program that companies can access to incentivise skilled workers’ relocation to regional areas in order to plug key skills gaps.
- Regulatory reform – reform the FSANZ Act to streamline approvals for low-risk products, expand FSANZ’s remit to include enforcement of national food labelling and compositional standards, work with industry to identify policy settings to facilitate the uptake of digital labelling, establish a national regulatory framework that includes uniform standards for packaging design, kerbside collection, recycling infrastructure, and mandatory value chain traceability.
- Scope 3 reporting standardisation – partner with industry to develop an interoperable Scope 3 reporting methodology.
- Network mapping – map the supply chain network, noting risks and challenges specific to the food sector, to identify key vulnerabilities to be mitigated.
- Export growth strategy – develop an export growth strategy that will support Australian food and grocery manufacturers to deliver export growth, including through increased access to new international markets.
AFGC CEO, Colm Maguire, said Towards 2030 takes stock of how the sector has navigated a challenging period and provides a practical lens on where focus is now needed, as priorities are set for the years ahead.
“This is a forward-looking contribution to the policy conversation,” said Maguire.
“For Australia to unlock the full potential of food and grocery manufacturing, we need to sharpen our focus on investment, productivity, and competitiveness. The foundations are strong, but continued collaboration is essential if we are to build a sector that is globally competitive, future-ready, and able to seize emerging opportunities.
“The next phase of the decade is critical. Building on the resilience demonstrated between 2020 and 2025 will be essential to ensuring the sector continues to thrive and remain a cornerstone of Australia’s prosperity,” he said.
The full Towards 2030: A Food and Grocery Snapshot is available online at afgc.org.au.
