The Australian Food and Grocery Council has applauded the Australian Government’s focus on creating jobs and supporting skills development to power the nation’s economic recovery in the 2021-2022 Federal Budget.
This year’s federal budget put Australia’s food and beverage manufacturers on the front line in the national effort to start repairing the economic damage wrought by the COVID-19 pandemic.
The food and beverage sector is one of the six National Manufacturing Priorities named in the October 6 budget as part of the federal government’s Modern Manufacturing Strategy – a plan to kick-start investment and economic growth by focusing on industries that are natural strengths for the country.
In his October 1 National Press Club address ahead of the budget, Prime Minister Scott Morrison said one of the key factors in making manufacturing more competitive was that a medium-sized economy such as Australia’s should not “try to do everything” and instead build scale in areas of competitive strength.
Hence food and beverage manufacturing was named alongside resources technology and critical minerals processing, medical products, clean energy and recycling, defence and space as the industries that hold the most promise of future prosperity for the nation.
The prime minister observed that food and beverage manufacturing is “one of the fastest growing parts of our manufacturing sector in recent years and the largest employer in our manufacturing sector”.
Indeed, the food and beverage manufacturing sector directly employs 247,000 people in Australia, with many of those jobs in regional and rural areas.
With the plan unveiled, work is now underway on putting it into action, with the first step being the assembling of industry-led teams to work with government on designing the road maps for each of the priority sectors.
The road maps are to be delivered in the first half of 2021 and the Australian Food and Grocery Council (AFGC) is working with government on this process.
The road maps will set goals for the next two, five and 10 years, as well as identify the roadblocks to growth and priorities for action and investment.
AFGC CEO, Tanya Barden, said the strategy will deliver confidence and encourage urgently needed investment by food and beverage manufacturers in Australia.
“We are keen to create a roadmap for the future of the sector, working with the government to ensure that investment hits where it is needed, and roadblocks are removed,” Barden said.
“The government’s manufacturing strategy makes the most of the food and beverage sector’s natural competitiveness, which arises from being able to source quality agricultural inputs and process them to global best safety and quality standards.
Barden said the naming of food and beverage as a national manufacturing priority area is a recognition of the untapped potential in the sector.
“What this investment by the government demonstrates is that they know that our sector is one of huge potential to scale up, particularly in export markets, which account for one third of the sector’s revenues,” she said.
While the Modern Manufacturing Strategy opens up the potential for expansion, it also offers an opportunity to ensure the continued resilience and agility of businesses working in crucially important areas.
Barden said that the government had recognised the role played by food and beverage manufacturers in keeping supermarket shelves stocked and supply chains moving during the pandemic.
“I am very pleased to hear the government specifically call out that the strategy was designed to back Australian manufacturers to become more competitive, resilient and able to scale,” she said.
“To achieve this requires the right policy settings to drive a step-change in capital investment, which has been stagnant for a number of years because of a tough domestic trading environment and rising input and regulatory costs.”
Barden said capital investment in the Australian food sector went backwards in the most
recent period for which data is available – declining eight percent in 2018/19 and remaining below pre-GFC levels.
The Modern Manufacturing Strategy is worth almost $1.5 billion and comprises three main elements:
• a $1.3 bn Modern Manufacturing Initiative;
• a $107.2m Supply Chain Resilience Initiative; and
• and a $52.8m Manufacturing Modernisation Fund round two.
The Modern Manufacturing Initiative is the centrepiece of the strategy, with its main focus being to build scale in Australian manufacturing. The Government will work in partnership with businesses, and provide grants on a co-investment basis, to stimulate private sources of capital.
As outlined by the Department of Industry, Science, Energy and Resources, the Modern Manufacturing Initiative is split into three streams:
• A Manufacturing Collaboration Stream will provide funding for large projects that support business-to-business and business-to-research collaboration, to build economies of scale.
• A Manufacturing Translation Stream will help manufacturers turn ideas into commercial outcomes and invest in non-
• A Manufacturing Integration Stream will help manufacturers integrate into local and international supply chains and markets.
The investment will only be targeted at projects within the six National Manufacturing Priorities.
The $107.2m Supply Chain Resilience Initiative is about building a comprehensive understanding of Australia’s critical goods and services, supply chain vulnerabilities and what the potential options are for seeking to address them.
The government will work with industry to identify critical products, and map capabilities and vulnerabilities for normal times and periods of surge. This will build on the close partnership on supply chains developed throughout the COVID-19 pandemic.
Early on, the focus of the initiative will be on medicines and medical equipment, followed by products such as food, chemicals and plastics.
Funding will be available for businesses to establish or scale a capability that addresses a supply chain vulnerability identified in a Sovereign Manufacturing Capability Plan and must result in a measurable strengthening of the supply chain.
Businesses that align with the National Manufacturing Priorities – such as food and beverage manufacturers – will also be able to apply for grants under a second round of the Manufacturing Modernisation Fund. The second round has $52.8m in funding. It will be aimed at fast-tracking capital investment in technology upgrades to help transform businesses, and enable up to 150 additional local businesses to invest in shovel-ready projects.
Businesses can apply for grants of between $100,000 and $1 m. There is a co-funding requirement for businesses, with industry expected to match Government funding on a three-to-one funding basis.
Australia’s food and grocery manufacturers, represented by peak body the Australian Food and Grocery Council (AFGC), will develop Australia’s largest industry-led plastic recycling scheme, which aims to collect and recycle nearly 190,000 tonnes of plastic packaging per annum by 2025.
The Australian Government has announced the AFGC will develop the National Plastics Recycling Scheme (NPRS), supported by funding from the Government’s National Product Stewardship Investment Fund (PSIF).
The scheme will initially focus on increasing the diversion of soft plastics such as bread, cereal and frozen vegetable bags, confectionery wrappers and toilet paper wrap from landfill and it will move on to support the increased recycling of other plastics that are currently difficult to collect and/ or recycle. As an industry-led and funded scheme, the NPRS will coordinate and focus the efforts of well-known food and grocery brands to increase the recycling and reuse of plastic packaging.
This will build on existing soft plastics recycling initiatives including the industry funded REDcycle program and the soft plastic kerbside collection trial run by Nestlé, as well as projects and research by the Australian Packaging Covenant Organisation.
Read More: Nestlé and IQ renew soft plastic recycling trial
“Over many years, brand owners have invested in packaging innovations that reduce food waste and have moved to using lighter-weight plastics that have a lower carbon footprint. Continuing the focus on packaging sustainability, the NPRS will increase the recycling rates of identified plastics and reduce the amount of virgin plastic used in packaging, helping to meet Australia’s National Packaging Targets,” AFGC CEO Tanya Barden said.
The National Packaging Targets include a goal of recycling or composting 70 percent plastic packaging and incorporating an average of 50 percent recycled content across all packaging by 2025.
“We commend the Australian Government’s leadership on waste reduction and recycling matters, including their support for the NPRS.
“We’re excited about developing a circular economy in collaboration with our members, who comprise nearly 80 percent of packaged food and grocery sales, as well as governments, retailers, plastics and packaging companies, and the resource recovery industry,” said Barden
The Australian Food and Grocery Council has welcomed the first round of the Australian Research Council Industrial Transformation Research Program, saying it will boost innovation and productivity capability in the food sector.
The Australian Research Council Industrial Transformation Research Program offers funding schemes to both university-based researchers and industries, encouraging R&D projects that could help solve the big problems facing industries today.
The program will deliver more than $23m to drive innovation and productivity in the food industry.
AFGC CEO, Gary Dawson, said "Innovation is of critical importance to Australia’s $110b food and grocery manufacturing industry. This important investment will be a significant boost to Australia’s potential to become a food manufacturing hub for the Asian Century.
"The AFGC has long supported enhanced collaboration between the food industry, research agencies and both large and small companies in the food manufacturing sector to unlock the innovative capacity of Australia’s advanced food manufacturing sector," he said.
Dawson congratulated food companies Kraft Foods Australia, The Smith’s Snackfood Company Limited and Simplot Australia for being part of successful applications.
"The preparedness of globally significant companies to make major co-investments in establishing research hubs and training centres signals confidence in the strength of the Australian food manufacturing sector," he said.
Dawson also used the opportunity to share his excitement on a similar project, supported by the AFGC and aimed at combatting international competition.
"We are also pleased that the University of Queensland, with the support of the AFGC and member companies Simplot Australia, SunRice, Goodman Fielder, Pepsico ANZ and Campbell-Arnott's can begin work on its $2.7m project that aims to help food processing and manufacturing companies meet the increasing threats of international competition. This training centre project further underlines the collaborative working partnership between our two organisations," he said.
"Innovation is at the heart of the industry's vision for a competitive future and it maintains a huge potential for growth into Asia. The Industrial Transformation Research Program will greatly benefit the food processing industry to able to compete on a global stage and maintain its strong domestic operational presence."
Following the release of the Competitiveness and Sustainable Growth Report, The Australian Food and Grocery Council (AFCG) says that food manufacturers are “being squeezed” by increasingly high manufacturing costs and dominant retailers.
Conducted by KPMG on behalf of the AFGC, the Competitiveness and Sustainable Growth Report provides a detailed analysis of real financial data from food and grocery suppliers over the last four years (2010-13).
CEO of the AFGC, Gary Dawson said that the report’s findings indicate that Australia now has the highest manufacturing costs in the world and that the nation’s retailers are extracting greater payments from suppliers to fund promotions.
"This report demonstrates how tough the market conditions have become for food and grocery suppliers, squeezed between the unstoppable force of dominant retailers and the immovable object of high labour, utility and regulatory costs,” said Dawson.
"A key finding is that one dollar in every four earned by suppliers is being returned to retailers to fund discounts, rebates and promotions."
Dawson says that the rapid growth in payments extracted by retailers represents a direct profit shift from suppliers to retailers.
"The two major retailers extract an additional 5% more from suppliers than other retailers, reflecting their market power. This 'trade spend' has been growing at four percent per annum, while volume has been flat and profitability declining sharply,” he says.
"This level of funding flowing back to the major retailers is simply unsustainable, with a direct impact already on marketing, R&D and innovation spending.”
Other key findings in the report include:
- Australia has the highest manufacturing costs in the world, with labour, utilities and regulatory costs all among the highest globally;
- A strong focus on cost containment by suppliers has brought some reductions in supply chain costs through initiatives such as automation to boost efficiency and productivity;
- Capital investment is growing, which is a positive sign for the future, although much of this investment has been focused on ‘staying in business’;
- Profitability of Australian suppliers is now well below international peers, and falling further behind, raising questions about the willingness of major companies to make major investments to upgrade Australian facilities;
- Despite growing demand for premium food in Australia's key export markets, we are losing market share in China, Indonesia, Thailand, Malaysia and Japan.
Dawson says that the key challenge for the Australian food and grocery industry is to improve competitiveness in order to secure growth opportunities both domestically, and in international markets – especially if the industry wants to become Asia’s ‘food bowl’.
Dawson also added that the report underlines the importance of levelling up the playing field between retailers and suppliers, stating that the sooner the draft Food and Grocery Industry Code of Conduct moves through the current regulatory review process, the better off manufacturers and suppliers will be.
“The Code will provide greater contractual certainty and transparency. In addition, the ‘root and branch’ review of Competition Policy provides a welcome opportunity to examine and address the current market imbalances,” says Dawson.
“Without a viable domestic food processing sector Australia will not fully capitalise on the opportunities of the Asian ‘dining boom’.”
The release of the 2014 Federal Budget has sparked debate about which industries are this year’s winners and which are the losers, but it’s not necessarily that simple.
The Australian Food and Grocery Council (AFGC) CEO, Gary Dawson, said the government is facing an enormous task to return a surplus without harming consumer confidence while also stimulating growth.
“Massive budget deficits create a climate of uncertainty for business which undermines confidence and investment, essential to underpin jobs and growth. This Budget’s concerted effort to rein in spending and streamline services sends positive signals to business of the government’s fiscally responsible approach to public finances,” Dawson said. “The $11.6 billion Infrastructure Growth Package will be a significant boost in stimulating growth and confidence [in the] food and grocery and agribusiness sectors.
“For the food and grocery and agri-food sectors, which are spread across the length and breadth of the continent, this massive boost in infrastructure planning and delivery is essential in developing supply chain solutions that create world leading, efficient channels to market,” Dawson said.
The AFGC is also in support of the health reforms brought in by the Budget, which will see a $20 billion Medical Research Future Fund, which the government said will be the biggest in the world.
“The Medical Research Future Fund is a bold initiative that will deliver world class research into key National Health Priorities,” Dawson said. “The decision to incorporate the National Preventive Health Agency into the Department of Health and cease the National Partnership Agreement on Preventive Health will reduce complexity and overlapping jurisdictions.
“This represents a step away from prescriptive policy intervention with a renewed emphasis on greater collaboration between government, industry and other stakeholders.
“Food manufacturers have for some time engaged with retailers, stakeholders, and state and federal government to address lifestyle-related non-communicable diseases.”
But not everyone is satisfied with the Budget.
Tony Pititto, national head of food and beverage at Grant Thornton said the government’s reduction of the research and development rate by 1.5 percent will stifle product innovation.
“According to our recent study, Australian food and beverage companies currently spend only one percent of turnover on R&D for product innovation, which is significantly below their US counterparts who spend closer to two percent. New reforms will see an even further reduction in spend in Australia,” Pititto said.
“Australian food and beverage companies are becoming more challenged with private labels increasingly moving onto supermarket shelves. The development of new products is one way companies can reduce reliance on private labels by opening up new opportunities for their products, either through existing channels or new channels such as export markets.
“The change is likely to lead to less innovation in an industry which must innovate to combat the challenges of the duopoly supermarket position in Australia and must look at product innovation for export markets and new distribution channels,” Pititto said.
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The Australian Food and Grocery Council has urged the government to continue securing free trade agreements in its submission to the federal review of agribusiness policy.
The Council’s submission said the sector craved a “comprehensive and commercially meaningful” free trade agreement with China, followed by negotiations with Indonesia and India on a similar compact, The Australian reports.
“The government needs to continue securing free-trade agreements that deliver real commercial outcomes, particularly for sectors such as dairy and extending to packaged foods,” the submission said.
“The significant global opportunities for the Australian agrifood sector are in stark contrast to the challenges faced. We seem to have a great capacity for self-inflicted damage…think live cattle export bans, carbon tax and now a doubling or tripling of gas prices on the east coast as examples of how we have managed to sabotage our competitiveness.’’
The AFGC highlights how Australia’s share of global food exports to its key markets slipped from 11 percent in 2006 to 6.5 percent last year. Australia has seen a drop in the World Economic Forum’s ranking of global competitiveness, from 16 to 21.
The AFGC urged the government to address the concern that offshore capital is not welcome in the sector. Concerns were heightened after the government vetoed US-owned Archer Daniels Midland’s $3.4 billion offer for GrainCorp, but the Foreign Investment Review Board approved Canadian dairy giant Saputo’s $500 million takeover of Warrnambool Cheese & Butter.
Goodman Fielder recently refused a $1.27 billion takeover bid from Singapore’s Wilmar, saying that the offer is too low, but that it would continue to assess other opportunities and that it has appointed financial and legal advisers.
The 13th Australian Food and Grocery Council (AFGC) CHEP Retail Index shows year-on-year growth in retail sales continued to lift in the March quarter.
The index, released today, showed a 5.8 percent rise in March 2014 compared to March 2013, with a turnover of $23.01 billion.
Its expected growth in the index will increase by 6.6 percent for the 12 months leading up to May 2014, with a turnover of $23.62 billion.
Australian Food & Grocery Council CEO Gary Dawson said “It’s encouraging that retail performance has improved across all sectors since mid-2013. Retail sales growth is now at its strongest for more than four years.”
The latest retail data from the Australian Bureau of Statistics (ABS) has confirmed that retail sales picked up strongly late last year with retailers benefiting from an extended period of low interest rates.
ABS figures show a steady increase, with a 0.7 percent estimate for Australian turnover increase each month from December through to February.
CHEP Australia & New Zealand President, Phillip Austin, said “The continued strength in retailer sales over the past two quarterly results suggests a more stable and certain view of economic conditions. Expectations for the next quarter indicate resilience in Australian retail supply chains and sales results.”
See below: Year on Year Growth chart from the AFGC CHEP Retail index.
In a move to encourage more manufacturers to stay within the gluten free market, the Australian Food and Grocery Council is looking to have the definition of gluten-free modified to include 'safe' trace levels of gluten in manufactured products.
The move to loosen the definition has been backed by Coeliac Australia, who have raised concerns that the current strict gluten-free standard is forcing manufacturers out of the market.
"Our concern is that as the sensitivity of the test improves it will impact on the ability of manufacturers to confidently label their products as gluten free,'' Penny Dellsperger of Coeliac Australia told SMH. ''We might lose the term gluten free all together."
As present, Food Standards Australia and New Zealand states that in order to make a gluten-free claim, a product must have no detectable gluten, and that a product can make a low gluten claim only if it has less than 20mg gluten per 100g of food.
An AFGC spokesperson said that Coeliac Australia had been in contact with them regarding a possible application to FSANZ to modify in the definition.
“We are working very closely with coeliac Australia to consider an application to ensuring safe levels in claiming gluten free,” the spokesperson told Food Magazine.
The AFGC echoed Coeliac Australia’s concerns, stating that as manufacturing equipment becomes more sophisticated and can detect trace levels of gluten that was not previously possible to detect with older technology, it is becoming increasingly more costly for food manufacturers to stay within the gluten-free market.
The Australian Dairy Industry Council has criticised the proposed Australia-Japan free trade agreement, stating the agreement has fallen well below industry expectations.
ADIC deputy chairman, Robert Poole said that the agreement (which was announced by prime minister Tony Abbott last night) provided ‘no meaningful benefit’ to the Australian dairy industry.
“We are extremely disappointed with the deal announced this evening by the Prime Minister,” said Poole .
“We were hopeful Government had heeded the industry’s message in regards to freeing up market access in Japan, however it now appears our words fell upon deaf ears."
According to the ADIC, the industry would only stand to gain $4.7m in the first year of the deal’s implementation, which would then rise to an estimated $11.6m by 2031, The Weekly Times reports.
“There has been no movement in this agreement on fresh cheese – the number one objective for Australian dairy, with tariffs to remain at 29.8 per cent. A successful outcome on this tariff line would have delivered approximately $60 million in tariff savings – instead we have received nothing and the tariff stays in place.
“While Most Favoured Nation status has been put in place for cheese in Trans Pacific Partnership agreements, the exclusion of all other product lines leaves us vulnerable to one of our competitors reaching a more wide-ranging deal with Japan, that could leave the Australian dairy industry worse off.
“This has been an agreement over six years in the making and sadly from the dairy industry’s perspective, will end up providing no meaningful benefit."
In contrast to the dairy industry, both the Australian beef industry and the Australian Food and Grocery Council (AFGC) have welcomed the deal, with AFGC CEO, Gary Dawson stating that the agreement will provide a valuable boost for Australia’s food and grocery exports.
"Australia is the first developed nation to secure an FTA with Japan so instead of playing catch-up with our competitors we are leading the way," said Dawson.
"It has been a difficult negotiation because of Japan's resistance to opening its market in key agricultural products. Any gain in these sensitive areas is hard fought."
Dawson acknowledged that not every Australian commodity (ie dairy) has achieved what they had hoped to achieve from the negations.
"No party ever gets everything they want from trade negotiations and this FTA is no different, with modest gains for some of Australia's key commodities,” he said.
"However, failure to finalise a deal would mean Australia faced losing market share to competitor countries in a key market.
“Japan is Australia’s third largest investor, with an investor stock of $126.4 billion, and recently this investment has extended to sectors including food and agribusiness. Australia’s global competitiveness will be greatly enhanced if this FTA leads to an acceleration of investment in strategic sectors such as food and agribusiness."
The National Farmers Federation (NFF) is standing firm on its position to support a mandatory code of conduct following an invitation from Coles, Woolworths and the Australian Food and Grocery Council to re-join negotiations on their preferred voluntary model.
The NFF left negotiations with the both the supermarket giants and the AFGC in March last year, sighting a loss of confidence in the proposed voluntary code. NFF president at the time, Jock Laurie said that the federation “lacked confidence that the voluntary code could deliver the strong outcomes that farmers expect.”
Current NFF president, Brent Finlay said told The Weekly Times Now that group is continuing to back a mandatory code as they believe that it will give producers the “protection they need.”
“We talk to Coles and Woolworths and we will continue to do so respectfully, but our position hasn’t changed and our member groups haven’t formed a view of getting back into serious talks with them,” said Finlay.
It has been reported that the major supermarket players, Aldi and Costco have also been approached to sign the voluntary code of conduct.
The code, which has been in negotiations for almost two years, was designed to ensure that retailers did not misuse their market power.
CEO of the AFGC, Gary Dawson, says that a voluntary code would be just as effective as a mandatory code in ensuring the participation of the supermarket giants, especially considering failure to sign up to the code could result in poor supplier relationships.
“It’s in the interests of consumers, suppliers and retailers to have an efficient and viable supply chain in Australia. We want to get on with the job of building a competitive sector, both domestically and internationally, and will continue to pursue mechanisms for improving relationships across the supply chain,” Dawson told Food Magazine.
"The AFGC remains committed to the process which began last year to work with government, the ACCC, other industry bodies and the major retailers to develop a voluntary industry code which is enforceable by the ACCC.
“Whether an industry code is mandatory or voluntary, the key issue is that it must be effective without simply adding unnecessary compliance costs on suppliers.”
Peak industry group for the grocery sector, the Australian Food and Grocery Council (AFGC) has welcomed an announcement from the minister for small business, Bruce Billson, on the government’s review of competition law.
The ‘root and branch’ review panel will be chaired by Professor Ian Harper, and comprising Peter Anderson, Su McCluskey and Michael O’Bryan SC, all of which have extensive industry experience and expertise.
The AFGC’s CEO, Gary Dawson said that the competition review represented one of the most significant reviews in a generation in terms of its potential impact of the Australian food and grocery sector.
“The food and grocery sector is an extremely competitive, dynamic and critical sector… It is also a sector where issues have arisen in relation to market power imbalance, vertical integration and excessive regulation, all of which are within the ambit of the ‘root and branch’ review," said Dawson.
“Competition policy remains a crucial element of the regulatory setting across the supply chain and greatly impacts decisions on investment and employment that shape the direction of food and grocery manufacturing sector.”
Dawson says that the Food and Grocery Industry Code of Conduct – which was developed and agreed to by the AFGC, Coles and Woolworths late last year – is consistent with the direction of the ‘root and branch’ review.
“(The code) was aimed at improving the operation of our competitive market by increasing transparency and certainty for supermarket suppliers, and explicitly prohibiting a number of anti-competitive behaviours,” said Dawson.
“The Code… will be progressed in tandem through the government’s regulatory review process this year with a view to it being tabled as a prescribed code under the Competition and Consumer Act.
“The Food and Grocery Code establishes a clear set of principles relating to key aspects of trading relationships between retailers and suppliers and will provide greater certainty and clarity about dealings in the industry without adding complexity or cost in a fast moving consumer goods sector.
“We look forward to seeing both the industry code of conduct and the outcomes of the competition law review work together to strengthen the food and grocery sector.”
The Australian Food and Grocery Council (AFGC) has put its support behind The Omnibus Repeal Day (Autumn 2014) Bill, which it says will reduce regulatory burdens on businesses.
The Bill which was introduced to parliament on Wednesday is part of the government’s regulatory reform plan designed to cut bureaucratic compliance costs for businesses and households.
“The Omnibus Repeal Day Bill to be introduced into the Parliament today (Wednesday) marks the start of the Government’s regulatory reform that will boost the competitiveness of Australian business including the $111 billion food and grocery manufacturing sector,” AFGC CEO Gary Dawson said.
“If we are serious about growth, we need to be serious about regulatory reform as excessive red tape has been a major barrier to business growth, investment and employment.”
Dawson says that current regulation of the sector is ‘inefficient and heavy handed’, a view that was supported in the findings of the Reforming Regulation of the Australian Food and Grocery Sector Report which was released by the AFGC last year and by commissioned from Deloitte Access Economics.
“(The report) concluded that the current regulation of food and grocery falls well short of best practice and may indeed be one of the poorest examples of industry regulation in Australia,” said Dawson.
“There is real urgency in driving regulation reform for the food and grocery manufacturing sector while maintaining Australia’s strong public health and safety standards.”
Dawson says that the economic benefit of removing red tape within the sector will help drive innovation and save jobs.
“Deloitte quantified the economic benefit of removing $100m of regulatory costs to be around $250m in additional GDP and more than 200 additional jobs for the food and grocery sector,” said Dawson.
“The food and grocery sector, Australia’s largest manufacturing sector, is very supportive of the government’s efforts to roll back of costly unnecessary red tape. We welcome the emphasis on bringing back an evidence based approach to regulations that reflect regulatory best practice.”
Peak industry body, the Australian Food and Grocery Council (AFGC) has told the Federal Government that restrictions on coal-seam gas developments in NSW and Victoria could cost the food industry $170m per year in increased gas prices.
The AFGC say that a gas spike in the next two years could also see jobs sent offshore and profits cut by 4.33 percent within the sector – potentially having the same impact on the industry as the carbon tax, The Australian reports.
The price increase will allegedly be caused by the opening up of the east coast gas market for export at the same time as restrictions on new coal-seam gas developments constrain growth.
The AFGC say that price for wholesale gas could double, causing major strain on the manufacturing sector which has faced several challenges over the past few years including the near closure of fruit and vegetable processors, SPC Ardmona and Simplot.
The lobby group wants the federal government to "encourage states to develop a nationally consistent approach to unconventional gas supplies".
"These challenges include limited ability to pass through higher costs, retail price deflation, a major shift of profit from suppliers to retailers, loss of flexibility in labour markets and high regulatory costs," the AFGC told The Australian.
The AFGC made a submission to the Eastern Australian Domestic Gas Market Study which is currently being conducted by the Department of Industry, stating that the increase in gas prices will impact negatively on multimillion dollar energy efficiency projects.
"This includes investment in low-emissions technologies such as gas-fired boilers, co-generation and tri-generation plants. With gas prices forecast to double, these new installations are likely to become less economically viable.
"Perversely, high gas prices are likely to drive an increase in emissions, as manufacturers switch to lower-cost but more emissions-intensive fuel sources."
Peak lobby group, the Australian Food and Grocery Council (AFGC) has welcomed the release of the Victorian Government’s Food to Asia Action Plan.
The plan focuses on improved market access, efficient supply chains, support for R&D and innovation, a reduction in regulatory costs and increased capital investment.
The AFCG says that the plan is a positive step towards enhancing competitiveness and growth within the domestic food processing sector.
“Food production and processing is one of the great strengths of the Victorian economy,” said AFGC CEO Gary Dawson. “Processed food and grocery products generate over $6 billion in exports from Victoria and the industry directly employs almost 100,000 Victorians, with around half in regional and rural parts of the state.”
Dawson congratulated Victorian Premier, Dr Denis Napthine on developing the plan, stating that the package will help the state ‘play to its competitive strengths’ in the international marketplace and will as reduce ‘regulatory burdens’.
“Improved market access into high value Asian markets is vital for the future of Australia's food and grocery sector. The Action Plan’s focus on reducing tariff and technical barriers to trade, in concert with concluding Free Trade Agreements will provide benefits that will flow to a broad range of Australian food and grocery manufacturing companies, large and small,” said Dawson.
“Excessive regulation acts as a hand brake on the competitiveness of Australian food and beverage producers and processors. The Victorian Government’s commitment to regulatory reform is an acknowledgment that the regulation burden directly discourages innovation in food products, increases costs and ultimately impacts on exporters’ ability to compete on a global stage.”
Dawson’s comments come just after the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) announced that agricultural exports to China have doubled in five years to represent $7.3b in 2013.
Dr Steve Hambleton, president of the Australian Medical Association (AMA) has accused the Australian food industry of ‘undermining’ the Health Star Rating System.
Hambleton said that the AMA was particularly concerned that the Australian Food and Grocery Council (AFGC) had been in touch with assistant health minister Fiona Nash’s office on the day that the Health Star Rating website was pulled.
“Even though they worked closely with the public health sector on the development of the new system, the Australian Food and Grocery Council (AFGC) has lobbied against the consumer-friendly food labels since they were agreed by the Federal and State governments last year,” said Hambleton.
Hambleton says that the Health Star website was an important and necessary tool that was intended to inform consumers on how the system worked before it was rolled out nationally.
The website was pulled down only eight hours after it was officially launched. Health department officials initially claimed that the website was a ‘draft’ and that it was ‘made live inadvertently’, however it was later revealed that Nash's chief of staff Alistair Furnival – who is a co-owner of his wife’s lobbying firm Australian Public Affairs – ordered health officials to pull the site down.
“The system’s website was to be a major part of the public education campaign to make people aware of the new system and how it works,’ said Hambleton. “It is important that consumers are fully across the system before the new labels appear on supermarket shelves.
“It is time that the food industry and its peak Council did the right thing and put their full support behind a bold initiative that will help people make healthier food choices and take some pressure off the health Budget,” he said.
Australia’s peak body for food manufacturers, the Australian Food and Grocery Council has said that it contacted assistant health minister, Fiona Nash’s office on the day that the health star rating website was taken offline.
The AFGC’s CEO, Gary Dawson says that he contacted Nash’s office to express his concern that the health star rating website was ‘premature’, but stated that he did not ask for the website to be taken down.
"On the day, yes, we expressed a view that we thought it was premature," Dawson told ABC News.
Health department officials initially claimed that the website was a ‘draft’ and that it was ‘made live inadvertently’, however it was later revealed that Nash’s chief of staff, Alastair Furnival – who is a co-owner of his wife’s lobbying firm Australian Public Affairs – ordered health officials to pull the site down.
The move attracted widespread criticism from labor senators including Penny Wong, and health advocates, many of which sight Furnival’s involvement in lobbying firms as a significant conflict of interest.
Labor senators also accused Nash of misleading the senate as she initially claimed that Furnival had no links to the APA, only to say that he was a shareholder hours later.
Nash rejected the conflict of interest claims, stating that Furnival had given ‘a series of undertakings’ to ensure a strict separation between the department and his involvement with APA.
Prime Minister Tony Abbott stood by Nash stating that "all the decisions that Senator Nash has made are eminently justifiable and I support them".
Supermarket giant Coles has taken its Down Down discounted range a step further, offering up to 34 percent off the original price on a number of popular brands as part of its Deeper Down Down offering.
Coles will also add 50 new products to the Down Down range.
John Durkan, Coles chief operating officer, said “Together with some of Australia’s favourite brands, we are offering our customers Deeper Down Down prices. This means pantry staples that are already on Down Down will have their price reduced even further – with discounts up to 34 percent on brands including Nescafe, Lipton and Sanitarium.”
While the Down Down campaign reduces prices for a minimum of six months, many products have been held at the lower price point for over two years.
Fiftty new items will be added to the existing 1,400 products currently in the Down Down range, including Golden Circle Fruit Juice 2L (was $3.59 now $2.70) and Huggies Bulk Nappies 30-54pk (was $19.98 now $17.00).
The Deeper Down Down campaign commences today (26 February).
While advertising campaigns from both Coles and its key rival, Woolworths, have focused on reduced prices in recent years, research conducted by Roy Morgan in mid-2013 questioned the effectiveness of such campaigns with that less than half (45 percent) of Coles customers believing it offers low prices.
From 2009 to the start of 2012, one in two Coles customers believed that the supermarket had low prices, while rival Woolworths, which offers its down Every Day Value prices, came in lower with just over 40 percent.
Last year’s research however states that the two supermarket giants are almost on par, with Woolworths only two percentage points behind Coles.
Norman Morris, Roy Morgan’s Industry Communications Director, said “Perhaps the effectiveness of the ‘Down Down’ campaign has come to an end, with consumers tuning out the message after years of exposure: the latest March 2013 results reveal there is once again only a small gap between Coles and Woolworths customers, primarily due to a decline shown by Coles rather than any ground made by Woolworths.”
The food industry has criticised Coles’ and Woolworths’ discounting, with the Australian Food and Grocery Council claiming Coles favours its own private label products in its Down Down range. Coles retaliated, arguing that branded products make up 75 percent of all products in-store.
The Australian Food and Grocery Council (AFGC) has announced its support of a $100 million co-investment from Coca-Cola Amatil and the Victorian to fruit processor SPC Ardmona, but says the investment needs to be followed by regulatory reform.
On 13 February, Coca-Cola Amatil (CCA) confirmed it will invest $78 million into SPC Ardmona and welcomed the decision by the Victorian government to invest $22 million over three years.
This followed the federal government’s rejection of SPCA’s plea for a $25m co-investment as part of a restructure plan to keep the company afloat.
AFGC CEO Gary Dawson said the SPCA situation should be a wakeup call to governments considering new regulatory cost imposts.
“From a broader industry perspective the challenge remains to get the settings right to kick-start the massive investment and re-investment needed if we are to capitalise on the unprecedented food export opportunities into Asia. The imperative is growth and the investment needed to drive productivity and competitiveness gains,” he said.
Dawson said food manufacturing should be seen as an industry which can deliver comparative advantage for Australia moving forward, delivering jobs and growth, and shouldn’t be burdened by additional regulatory costs.
“Any additional regulation that adds costs for business or consumers runs the risk of impeding vital investment and job creation.
"We call on all governments in Australia to reject any new regulation that adds costs to the manufacturing industry and to move quickly to remove existing unnecessary regulatory costs,” he said.
Only eight hours after its official launch last Wednesday, the government’s long-awaited Health Star Rating website was pulled down, allegedly due to the intervention of a senior minister.
Assistant Health Minister, Fiona Nash and her chief of staff, former spokesperson for Kraft/Cadbury, Alastair Furnival are reported to have personally intervened by taking the site down only hours after its launch, SMH reports.
The website was developed to support the launch of the new health star front-of-pack labelling system for food and beverages, a system which has attracted criticism from industry bodies, including the Australian Food and Grocery Council (AFGC) and major food manufacturers.
According to the SMH, the website had received all the appropriate governmental approvals to go live, however a Health Department spokesperson said that the site was a ‘draft’, and made live in “an inadvertent error”.
Public health groups have rejected claims that the site was a ‘draft’ and have fuelled speculation that the website was pulled down due to industry influence.
''I looked at it very carefully, and there was nothing that struck me about it as being a draft,'' Public Health Association head, Michael Moore told SMH. ''It just doesn't make sense.'
Further explanation was given on Friday afternoon with a spokesperson for the Health Department stating that the website was taken down due to possible ‘confusion’ that the public may experience, as the labelling is not as yet appearing on products. The spokesperson also stated that the system was still to undergo a comprehensive cost-benefit analysis to ensure that associated industry impacts were considered.
"A website at this stage would be premature given that the cost-benefit analysis has not been done. It is prudent to wait for the finalisation of the cost-benefit analysis to fully inform decision making on this process," the spokesperson told ABC News.
The AFGC have supported Senator Nash’s decision to implement a broader cost-benefit analysis, stating that the scheme has not yet been ‘fully assessed’.
"Once the cost-benefit analysis has been completed, companies can make a proper assessment of the proposed scheme," an AFGC spokesperson told ABC News.
The Health Star Rating system received support from public health and consumer advocacy groups including Choice, who last year claimed that the system was under threat due to pressure from the food industry.
“We spent two years negotiating this new system with the food industry, represented by the Australian Food and Grocery Council . The new system incorporates a number of concessions sought by the AFGC but now it has turned around and launched a fierce campaign against the very system it helped to develop,” said Choice CEO, Alan Kirkland in a statement.
Labor health spokesperson, Catherine King said that any evidence of outside pressure to pull down the website would be concerning.
''I would be concerned, given the extensive work that has been done on the health star rating system … if there were any other influences involved.”