Securing regional industries for Victoria

Address to the Municipal Association of Victoria Rural and Regional Conference

Gary Dawson

CEO, Australian Food and Grocery Council

26 June 2014

- $111 billion dollar sector

- About 300,000 jobs

- Half in regional Australia

- $24 billion in exports

FOOD AND GROCERY MANUFACTURING IN AUSTRALIA

VICTORIAN SNAPSHOT

• Easily the highest concentration

of food and grocery

manufacturing employees in

Australia

– Fresh – 13 910

– Grocery – 12 770

– Food and Beverage – 69 930

96 610 employees in Victoria

EMPLOYEES IN VICTORIA

4

Some iconic brands and companies

based in Victoria:: • SPC-Ardmona • BEGA • Kraft • Mars Australia • Golden Circle • Jindi Cheese • Jalna Yoghurt • Mondelez (Cadbury) • Furphys • Murray Goulburn • Unilever • Tatura Milk Industries • Fonterra • Cedecno • Simplot • Nestle • Pental Products – Little Lucifers • IXL • Visy • Amcor • Heinz Watties • Raguletto • Goulburn Valley Fruits • Casalare Speciality Pasta • Dairy Farmers • Beechworth Honey • GSK – Panadol etc

• High AUD

• Supermarket price wars

• Increased taxes – most recently carbon

• Increases in input costs – commodities, water, energy and now natural gas shortage

• Loss of flexibility in labour markets

• Regulatory costs

INDUSTRY CHALLENGES

5

CAPITAL INVESTMENT

Capital investment shows 10 per cent compound annual growth over past four years - Increased automation - Expansion - Environmental upgrading - Consolidation of smaller plants

IMPACT OF “RED TAPE"

Australia’s regulatory environment is onerous: - Subject to multiple

regulators - Lack of cross border

harmonisation - Duplication

SPC ARDMONA – A CASE STUDY

• Processes fruit from over 9700ha of orchards

• 2000 individual products

• 600-1000 employees depending on seasonality

Source: The Age - http://www.theage.com.au/victoria/shepparton-may-be-struggling-but-locals-say-it-can-survive-the-closure-of-spc-ardmona-20140205-321mz.html

Imports and Exports of Substantially and Elaborately Transformed Food Products ($, 2012-2013)

Source: AFGC State of the Industry Report 2013

-

5,000

10,000

15,000

20,000

25,000

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

$ m

illi

on

s

Trade Surplus Exports Imports

FUTURE FOR DOMESTIC FOOD PROCESSING

AUSTRALIA’S COMPETITIVENESS AND FOOD EXPORT MARKET SHARE

0

5

10

15

20

255

6

7

8

9

10

11

12

2006 2007 2008 2009 2010 2011 2012 2013

Au

stra

lia's

Glo

bal

Co

mp

etit

iven

ess

Ran

kin

g

(%)

Years

Australia's falling global competitiveness undermines Food Exports

Food Market Share in Key Markets (LH scale) Australia's Global Competitiveness Ranking (RH scale)

Source: World Economic Forum (2013): Global Competitiveness, & calculations

from UN Comtrade Database (2014): Food market Share.

THE GROWTH CHALLENGE

MARKET SHARE OF CHINA’S TOTAL FOOD IMPORTS

TO ACHIEVE DOMESTIC AND INTERNATIONAL GROWTH…

- TRADE: Improve access to market and promotion

- INVESTMENT

- INFRASTRUCTURE

- COMPETITIVENESS: Focus on regulatory, labour and energy reforms

- INNOVATION

ENERGY COSTS AND INDUSTRY TURNOVER FOR FOOD AND BEVERAGE MANUFACTURING

[CATEGORY NAME], [VALUE] [CATEGORY NAME], [VALUE]

[CATEGORY NAME], [VALUE]

[CATEGORY NAME], [VALUE]

$800.00

$1,000.00

$1,200.00

$1,400.00

$1,600.00

$1,800.00

$2,000.00

2008-09 2009-10 2010-11 2011-12

$40,000.00

$50,000.00

$60,000.00

$70,000.00

$80,000.00

$90,000.00

Tota

l En

ergy

Co

sts

($)

mil

lion

Year

Sale

s an

d S

ervi

ces

Inco

me

(Tu

rno

ver)

($

) m

illio

n

Sales and Services Income (Turnover) ($)m (LHS) Total Energy Costs ($)m (RHS)

Linear (Total Energy Costs ($)m (RHS))

Representing Australia’s Food,

Beverage And Grocery

Manufacturing Industry