Price increases to hit growers, manufacturers and consumers

As input costs continue to rise across a range of food and grocery categories in Australia, growers and manufacturers are finding it difficult to contain costs, resulting in a likely price increase of consumer products.

“There have always been fluctuations in prices, particularly for fresh products due to seasonal issues such as drought and floods, but there are other factors that are now impacting on the cost of producing items,” Food and Grocery Council Chief Executive Dick Wells said.

Wells commented that while suppliers and retailers are sensitive to consumer sentiment on price increases and seek to reduce costs, increases remain inevitable.

“Input costs for fuel, fertiliser, labour and other inputs have increased substantially, but the fact is that farmers and manufacturers along the supply chain have been absorbing these costs for a long time”, Wells said. “At some point this becomes unsustainable and to remain viable companies have no choice but to seek to pass some of the costs on.”

According to the Australian Food and Grocery Council, the alternative use of grains and oil seeds to produce bio-fuels has contributed to the rising cost of inputs. Despite being an unpopular reality for consumers, increased food and grocery prices are necessary if the supply is to be maintained and improvements in food safety, traceability, innovation, range and quality are to continue.

Frutarom Switzerland opens Innovation Centre

Global flavour and fine ingredients company, Frutarom Switzerland has opened its new Innovation Centre which will serve as the European site for innovation projects, inviting customers and Frutarom staff from the various sites to jointly work on creative new solutions that combine flavors, food systems, herbal extracts and other functional ingredients.

The centre is made up of modern conference facilities, flavour analysis and flavour creation areas, sensor technology, and application-related confectionery, baked goods and beverages departments, as well as a ‘show kitchen’, enabling the company to present its products to customers in an imaginative way.

Frutarom develops, manufactures and markets an extensive variety of high quality flavors and natural fine ingredients for customers in the food, beverage, flavor, fragrance, pharmaceutical, nutraceutical, food additive, and cosmetic industries.

Frutarom’s 15,000 products are sold in 120 countries around the world. The Frutarom Group has 1,200 employees worldwide and manufacturing facilities in Europe, North America, Israel and Asia. Frutarom operates through two divisions: Flavors Division, which develops, produces and markets flavor compounds and food systems. Fine Ingredients Division, which develops, produces and markets natural flavor extracts, functional food ingredients, natural pharmaceutical/nutraceutical extracts, specialty essential oils, citrus products and aroma chemicals.

FoodWorks advances in NSW market

Leading independent supermarket group, FoodWorks, continues to strengthen its presence across New South Wales (NSW), with FoodWorks Coonamble opening on schedule this week, and an additional three stores in this state secured to be operational soon.

The opening of FoodWorks Coonamble, bringing the FoodWorks Group’s total number of NSW stores to 57, with over 710 nationally, adds to the company’s recent success in internal capital raising, generating in excess of a targeted $10 million. According to the company, the Group’s recent achievements have provided tangible resources to strengthen their positioning in the competitive NSW market.

“The Australian supermarket industry is undergoing a significant restructuring with long-term changes, seeing one of the powerhouses crumbling and changing ownership, and the independents ready to surge and grow their market share,” FoodWorks national business development manager Simon Thompson said.

While the capital raised will go towards key growth initiatives that are yet to be finalised, the Group’s growth has already commenced, with 30 new stores from competitor brands joining FoodWorks over the past 12 months in addition to 16 new-to-industry stores. Plans to open a further 49 new stores over the next 12 months have been secured.

FOOD Awards dinner event dazzles guests

This year’s FOOD Challenge Awards dinner event was a huge success. Over 210 guests celebrated the achievements of 20 companies at FOOD Magazine’s third-annual FOOD Challenge Awards, held on July 11 in Sydney.

The Awards, held at Doltone House on James Bay Wharf, showcased the large amount of innovation and excellence within Australia’s food and beverage industry today. A winner and highly commended were awarded in each of the categories, which included snackfood, confectionery, soups and prepared foods, ready meals, meat and smallgoods, dairy, alcoholic beverages, non-alcoholic beverages, baked goods, and health and wellness. An award for best in show was also given to the winner that had demonstrated outstanding innovation and excellence.

Guest came from various sectors within the food and beverage industry, representing brands belonging to Heinz and Simplot, as well as smaller companies. Other guests came were suppliers to the food and beverage industry. As well as being attended by finalists, the event’s sponsors Amcor, Danisco, Flavour Makers, Kerry Ingredients, Heat and Control, Insignia, Imaje and Earlee Products, Tronics and Peacock Bros were present. Ibex Group was unable to be there.

Guest speakers Dick Wells from the AFGC, Marcus Lui from the One Centre, and Peter Baron from Uni Straw offered some valuable and entertaining insights into different trends, developments and innovations within the industry, while Master of Ceremonies, Jamie Wade of Reed Business Information, ensured the event was enjoyed by all.

All winners of the 2007 FOOD Challenge Awards will be revealed and featured in the August issue of FOOD Magazine.

Food and beverage export programme announced

The government’s work programme, partnering with industry to grow New Zealand’s high-value food and beverage exports, was launched yesterday at the Villa Maria Winery in Auckland.

The work programme is the government’s response to last year’s Food and Beverage Taskforce report Smart Food, Cool Beverage and is comprised of six initiates including $19 million for in-market assistance for the sector offshore.

“Thanks to its innovation and scale, the food and beverage sector will continue to have a long term and major positive impact on New Zealand’s economy,” Economic Development Minister Trevor Mallard said.

“This sector is central to New Zealand’s economic performance. Half of New Zealand’s exports are food-related and the sector employs one-in-five people. The growth in the sector’s productivity in both on-farm production and in food manufacturing has been consistently above the average for the whole economy.”

This package exists on top of budget and other recent initiatives to assist the food sector including $8 million for research into increasing productivity and sustainability across primary sectors, and $14 million for research into innovative foods and other products.

Mallard commented that the programme’s initiatives aim to lift New Zealand’s exports and help grow more firms that are export-capable and internationally competitive in this area.

“When we talk about economic transformation, this is what we mean — using our existing strengths and capabilities to move into high-value but related areas of export activity that deliver us higher wages and a better standard of living.”

AFGC welcomes new Coles Group

Food and grocery manufacturers in Australia have welcomed the prospect of new stability and certainty for retailer Coles Group Limited.

While the process of considering a new owner for Coles has inevitably caused some uncertainty across the entire industry, the announcement of the recommendation by the Coles board removes a considerable degree of uncertainty from the market.

“Comments by Wesfarmers, the buyer recommended by the Coles board to shareholders, indicate a commitment to be part of a secure, growing Australian food retail sector focused on serving consumers,” Australian Food and Grocery Council chief executive Dick Wells said.

According to Wells, consumers and those along the supply chain, including manufacturers and distributors, all benefit from a dynamic and competitive retail sector.

“Australians rely on the food and grocery chain to keep up the supply of quality products, well priced and consistently available on retail shelves,” Wells said.

“Food and grocery manufacturers will continue to work alongside all parties throughout the supply chain to keep delivering consistent, quality and competitive products to the Australian community.”

Jesters pies given the Tick of approval

Jesters pies have been approved with a Tick by the National Heart Foundation (NHF) under their strict new regulations for meals eaten out, becoming the first café chain and the only national pie franchise to gain the Tick for a range of pies.

By reformulating five of its pies, Jesters removed two tonnes of saturated fat and nearly one tonne of trans fat from the food supply in 2006, reducing the trans fat levels in their Tick pies by an average of 82%.

With over 150 million pies being eaten out of the home each year, there are many Australians in need of a genuinely healthier alternative.

“It’s a common misconception that pies are an unhealthy meal. We’re delighted that the Heart Foundation Tick recognises the nutritional content of our pies to be that of a healthier standard,” Jesters Manufacturing Manager Norm Nugent said.

The NHF said Jesters are to be congratulated for taking in the challenge of meeting the Tick standards.

“Jesters will be subjected to regular random audits that will assess their pie preparations, ensuring the highest standards are maintained,” NHF Tick Manager Susan Anderson said.

National Foods switches to Linde

One of Australia’s largest food companies has begun a major upgrade of its materials handling capabilities as it progressively switches over to a fleet of Linde equipment.

National Foods (NFL), a wholly owned subsidiary of San Miguel Corporation, has core activities in milk, fresh dairy foods, juice and specialty cheese, with 3500 employees and 20 processing plants around Australia and New Zealand.

“With the acquisition of National Foods Limited by San Miguel and the integration of Berri Juices, the acquisition of King Island and more recently Lactos, the group had a number of material handling equipment (MHE) suppliers,” Logistic Development Coordinator, Jody Hussey said.

“There was also a mixture of owned and leased equipment, so our aim was to rationalise that situation and ultimately select a single, national preferred MHE supplier.”

After an extensive selection process over several months, National Foods chose Linde to be that supplier and the company is now rolling out more than 200 Linde pallet stackers, forklifts and reach trucks.

“The decision came down to four key areas: occupational health and safety issues, productivity, repairs, and maintenance and battery management for our electric forklifts,” Hussey said.

Linde’s equipment came out ahead in all four areas.

Linde will assist NFL by supplying materials handling equipment as well as being a fleet management company.

“We are not MHE experts and therefore we are looking to Linde to assist in obtaining improvements in areas such as battery management, equipment utilisation and reduced down time,” she said.

“Safety initiatives are also a high priority.” As current equipment leases expire across all NFL sites, the units are being replaced with Linde equipment in a process expected to be completed within 18 months.

Although the total number of units involved is expected to be around 200, a final number has not yet been determined.

Amendments made to food standards

Changes to food regulations will significantly improve the assessment and consultation procedures for new and amended food standards.

The Parliamentary Secretary to the Minister for Health and Ageing, Senator Brett Mason, said the amendments would make the regulation process more efficient, while improving consultation with stakeholders.

“The new arrangements recognise the changing environment for food safety and food innovation, while reducing red tape,” Senator Mason said. “The Australian Government is committed to food regulation that is transparent and accountable, while providing the greatest protection to consumers.”

Until now, Food Standards Australia New Zealand has been required to use a ‘one size fits all’ model for assessing applications to amend food standards, regardless of the scope of the proposed change. This has resulted, at times, in a significant backlog of applications.

Amendments to the Food Standards Australia New Zealand Act 1991, passed in the last sitting of Federal Parliament and which became law this week (on July 1), remove this problem by allowing three different streams for applications, based on the level of complexity.

An appropriate amount of time and a corresponding level of public consultation will be introduced for each assessment stream. Although major changes to a food standard or the development of a new food standard will take up to 12 months, minor changes will now have to be processed within three months. Most changes to food standards will now take nine months, down from an average of around 16 months previously.

Senator Mason said the new process would apply to all applications received from October 1.

Organic market drives innovation spending

Consumer preferences are having a dramatic impact on research and development (R&D) in the Fast Moving Consumer Goods (FMCG) industry, according to a recent Deloitte survey of Australian manufacturers.

The movement towards a healthier lifestyle, for instance, means manufacturers are focussing their R&D on fat-free, low-carb, reduced-salt, nutritious foods. “The trend away from highly processed, salted and sugared products has led the way for the R&D budgets of the FMCG industry,” Deloitte R&D Tax Partner Karen Stein said. “80% of manufacturers surveyed said they have had their R&D impacted by the change to organic and natural products.

The organic market is currently estimated to be worth $450 million per year and is growing at 14% per annum.

“Many R&D teams are focussing on the benefits of low or no trans fat products, as well as gluten and other allergen-free products,” Stein said.

Deloitte’s survey, Innovation from the inside out — R&D in FMCG looked at the drivers of innovation in the industry.

“Competition is incredibly high as the 20 largest manufacturers make up 50% of the industry with only a couple of food and beverage companies owning 50% of the product categories,” Stein said. “This means that innovation plays a key role in helping manufacturers meet constantly changing consumer needs, while driving down costs.”

According to the company, 60% of manufacturers are now using R&D to see how they can better meet the needs of the ageing population by developing easy-to-open products as well as functional foods, like cholesterol-lowering spread and vitamin-packed fruit juice.

Price of confectionery expected to rise

The Confectionery Manufacturers of Australasia (CMA) predict a combination of local and global pricing pressures on a range of ingredients will raise the price of confectionery in the near future.

“During the past 12 months there have been significant increases across a range of raw materials that make up the core ingredients in confectionery,” CMA’s chief executive officer David Greenwood said. “As with many other food products which have had their prices raised in recent months, it is no longer possible to prevent the costs of confectionery inputs from being passed on to retailers and consumers by manufacturers in Australia and New Zealand.”

Price increases are said to vary from product to product, depending on ingredients and quality.

Continuing civil war in the Ivory Coast has contributed to price spikes in cocoa and milk production has been affected by severe drought conditions in 2006 and 2007. “Milk production is expected to be down 9.4 billion litres with no reduction in overall demand and stock feed bills are estimated to have increased by as much as 43%”, Greenwood said.

An increased demand in nuts such as almonds over the past year has also led to significant increases in global pricing, according to Greenwood.

Green measures today ensure business success tomorrow

In these times of drought and gobal climate change what is being done by the Australian food and beverage industry?

Well, manufacturers are doing their bit, often in small ways, but every little bit helps.

From using ‘green’ ink to print labels and packaging, through incorporating bio-degradable materials into product packaging, to recycling of ‘grey’ water and other water-saving measures, manufacturers from small SMEs to large multinationals are trying.

It is worth doing as much as possible to minimise a business’ impact on the environment.

There is growing concern that as climates change across the world growing seasons are being impacted and ingredients may not be readily available.

Costs could rise as a result of supply chain challenges and these would hit manufacturers, who in turn might have to pass them on to consumers in the form of price hikes.

Decreased consumption of processed foods could result and this would really hit manufacturers where it hurts.

If initiatives are not already underway, now is the time to act.

Time must be made for a review of processes and systems, and changes made no matter how painful it might be to do so.

Money and time invested now in addressing the impact of environmental damage and change on a business will safeguard that business’ future.

On reading through the FOOD Challenge Awards entry forms, it was clear that many businesses are embracing change in favour of more sustainable business practices.

It is good to see that some business owners and manufacturers are aware and acting.

Of course, more always can and should be done, and as time ticks business pressures will cause even the slow and careless to take action.

But those who do not wait will reap the rewards.

High-quality grains research supports food industry

Australian agrifood industries could soon benefit from the development of genomics technologies used in selection and development of high quality grains, after grains expert and molecular biologist, Professor Rudi Appels, was awarded a Visiting Fellowship with the Food Futures Flagship.

Through this fellowship, Professor Appels will bring together the research of CSIRO and Agricultural Research Western Australia, and work with cereal researchers to determine the quality of grain required for specific end-products.

Use of genomics technologies will allow the identification and development of desired attributes in grains, increasing overall wheat quality and Australian export opportunities.