AFGC report shows export growth, but falling capital investment

The Australian Food and Grocery Council’s (AFGC) State of the Industry report for 2015-16 has shown that Australia’s food and grocery exports have offset challenging economic conditions.

AFGC CEO Gary Dawson said the report, compiled by EY, highlights export growth and a lift in overall industry turnover, but falling capital investment and stalling job growth are clear warning signs for the future.

“The good news is that industry turnover continues to increase, with food and grocery processing now making up 33 per cent of total Australian manufacturing,” Dawson said.

“This growth is largely on the back of strong growth in exports.

“In 2015-16, food and beverage exports grew by 11 per cent to $26 billion, fresh produce exports were up 49 per cent to $1.5 billion, and grocery (non-food) exports were up 32 per cent to $4 billion.

“Yet low domestic growth, rising costs for energy and other inputs, and six years of retail price deflation in the ongoing supermarket price war has created relentless pressure for the supply chain to become more efficient in order to stay competitive.”

Dawson said job growth had stalled across the food and grocery sector, reflecting the ongoing financial pressure the sector is under.

This has forced food and grocery producers and processors to cut costs across every part of their business.

Investment needed

“A key concern is the continuing decline in capital investment at a time when a step change upwards in investment is required to fully capitalise on improved market access and growing demand from middle-class consumers in the emerging economies of Asia and the Middle East,” Dawson said.

“Stimulating investment is critical, and company tax cuts for all businesses are more important than ever as a means of sparking investment."

Realise premium

Dawson also said a source of growth would be realising “premium prices for value-added food and beverage products in growing export markets”.

He mentioned the “enormous opportunity for Australia to capitalise on improved market access and growing demand from middle-class consumers in the emerging economies of Asia and the Middle East.

“However, this will require favourable policy settings to drive a step change in investment in the food and grocery sector.”