The Australian Food and Grocery Council (AFGC) has released its annual State of the Industry Report, shedding light on key issues such as industry turnover, employment and international trade.
This is the sixth edition of the State of the Industry Report, which provides a comprehensive report of the food and beverage manufacturing industry’s turnover, employment, international trade, capital expenditure and research and development.
It uses data from the Australian Bureau of Statistics as its primary source, and where data from 2013-14 isn’t available, findings from 2012-13 are used.
Turnover
The Report found that the Australian food and beverage, grocery manufacturing and fresh produce industry had a total turnover of $114 billion in the 2012-13 financial year. Food and beverage processing contributed $91.6 billion, grocery $16.2 billion and fresh produce $6.2 billion.
Meat and meat product manufacturing continues to comprise the largest share of the total sector turnover, at 24.6 percent, despite contracting slightly (0.7 percent in 2012-13). Dairy product manufacturing was the second largest at 14.7 percent, increasing 9.1 percent. Seafood processing comprises the smallest share of the total sector turnover (1.2 percent), with a decline of 4.2 percent.
The fresh produce sector recorded a turnover of approximately $6.2 billion in 2012-13, representing an increase of 12.3 percent on the previous year. The vegetables category and the tropical and other fruits category, which includes nuts, bananas and berries, contributed the most to the growth, increasing by 10.6 and 22.5 percent respectively, due to recovery from adverse weather conditions.
The food and beverage, grocery manufacturing and fresh produce industry represents 28.9 percent of the total Australian manufacturing industry by turnover.
Employment
Employment decreased slightly, down 2,571 or 0.9 percent from the previous financial year. In 2013-14, the industry employed approximately 299,731 people, down from 302,302 in 2012-13.
In regards to the number of businesses in the industry, in the 2013-14 financial year there was an estimated 27,469 businesses, 183 fewer than in 2012-13. The vast majority of these businesses were in the fresh produce sector (18,609 businesses), while grocery manufacturing has 1,353 businesses and food and beverage manufacturing has 7,507 businesses.
“Turnover is up slightly but job numbers are down. This is a microcosm of the broader economy – growth is below trend and unemployment is creeping higher,” said Terry O’Brien, chairman of the AFGC in the Report’s foreword.
“In the food and grocery sector, the juxtaposition of growth and declining employment reflects the reality of companies automating to reduce labour costs and drive higher efficiency and productivity.”
Trade
In 2013-14, Australia’s total international trade (exports plus imports) increased by 7.3 percent to $55.9 billion.
The real value of industry imports increased by 6.1 percent, while industry exports increased by 8.6 percent (from a smaller base). This resulted in a contraction of 20.9 percent in overall trade deficit to $1.8 billion in 2013-14, with total imports in 2013-14 valued at $28.8 billion, and exports valued at $27 billion.
In 2012-13, food and beverage, grocery and fresh produce exports accounted for 21.3 percent of total industry turnover. During this period, 86.8 percent of all fresh produce grown in Australia went to the domestic market.
The Report quotes the weakening of the Australian dollar and growing global demand, particularly in processed meat, seafood and cheese and other dairy (exports grew by 24.5, 23.1 and 19 percent respectively), as the key drivers for strong export growth.
Australia’s top 10 trading partners for the industry remained the same in 2013-14 as in the previous year, with the US our largest overall trading partner and also surpassing Japan as Australia’s largest export market. Japan imported 21 percent of Australia’s meat products and dairy products in 2012-13. The US was the largest importer of wine and other alcoholic beverage products from Australia in the same year.
The US and New Zealand were the top two supplier countries for imports into Australia. Imports of fresh produce from New Zealand grew by approximately 60 percent from 2012-13.
The 2013-14 fresh produce figures indicate there has been a 23 percent increase in imports of fresh produce.
Capital expenditure and R&D
According to the State of the Industry Report, the food machinery manufacturing industry provides a proxy for the level of capital expenditure by the food and beverage industry.
It is estimated that the food processing machinery manufacturing industry revenue grew from $965 million in 2007-08 to $1.09 billion in 2012-13, a compound annual growth rate of 2.4 percent. However, the industry has been subject to fluctuations over time. For example, growth of 6.4 percent in 2010-11 followed revenue declines of 0.2 and 2.6 percent in 2007-08 and 2008-09 respectively when the global recession took its toll on demand for machinery and equipment.
Revenue is expected to grow at a compound annual growth rate of 0.6 percent over the five years through 2017-18 to a total of $1.12 billion. The forecast growth rate is based on observed trends such as increasing technological advancement, higher automation, downstream price increases, economic recovery over the next five years, introduction of new products and consolidation required in the industry to make new technological investments economically viable.
Capital investment in the food, beverage and tobacco product manufacturing industry flat lined at $3.1 billion in 2012-13 increasing only by 0.3 percent from 2011-12.
In 2011-12 the total amount spent in the food and beverage sector on research and experimental development was $541.8 million, an increase of 5.4 percent. The sub-sector with the largest expenditure on R&D was the dairy product manufacturing sector ($109.3 million), followed by meat and meat product manufacturing with $95.9 million. Significant growth was recorded in the sugar and confectionery manufacturing segment where estimated R&D expenditure rose by 56.1 percent from $26.7 million to $41.6 million, while most other segments recorded a decline over the same period.