Food for thought: key challenges for our industry

Australia is well into deficit when it comes to its food processing trade.

The Australian Food and Grocery Council's annual State of The Industry report (using ABS figures and KPMG's research) released in September showed we imported a net $2.8 billion worth of food and beverage, grocery and fresh produce.

More worryingly, total industry output dipped 4.5 percent for 2010-11 and its number of employees went down by 2.2 percent.

"The sector's growth, competitiveness and ability to create jobs are under threat," Gary Dawson, the AFGC CEO, said when the report was released.

"The findings of State of the Industry 2012 serve as a warning to policy makers at all levels of government that the Australian food and grocery manufacturing sector – Australia's largest manufacturing sector – is facing an environment where input costs are rising on everything from commodities to labour to energy, and retail price deflation continues to cut margins, placing the sector under increasing pressure".

Why are things in such an apparently bad way?

The high dollar – as has been the case with almost every segment of manufacturing – has presented problems. Terry Davis, the CEO of Coca-Cola Amatil – the parent company of SPC Ardmona, Australia's biggest fruit and vegetable processor – has said that supermarket private labels, the high dollar and taxes were driving many in the industry out of business.

"We all know high labour costs are an issue," he told a Rabobank agribusiness event, while pointing out the payroll taxes were a massive pain. "Tell me how a tax on employment fosters sustainability?"

Dan Tehan MP, a federal Liberal backbencher, is another outspoken critic of taxes on food manufacturers.

Tehan, the member for Wannon and a former adviser to federal Nationals leader Mark Vaile, believes that the carbon tax risks sending industries such as diary overseas.

"In recent government policy, obviously the carbon tax harms our international competitiveness and the government has hung the food manufacturing sector out to dry," Tehan told Food magazine. He compares it unfavourably to the EU's treatment of its food processors.

"The European Union not only gives its agricultural slash food processing sector subsidies, it also allocates them with free permits under their carbon tax."

Tehan also believes that the National Food Plan, which is in the green paper stage and ended its consultation period on September 30, will do nothing to address the problems food manufacturing faces.

"We've seen job losses in this area and yet government hasn't done anything to help what is key part of the whole food chain, where you value add, add additional income and employ people.

"At this stage it just seems to be a lot of motherhood statements. And one would hope that it would address the tough issues that need to be addressed if we are to ensure the long-term future of food manufacturing in Australia."

The food manufacturing industry's malaise isn't exactly news. The AFGC and consultants AT Kearney released 2020: Industry at a Crossroads report a year ago, predicting 130,000 jobs in the sector would disappear by 2020 if nothing was done, and that 55 per cent of manufacturers were pessimistic about the future.

The SPC Mooroopna plant's closure last year made big news. The beginning of the year saw Heinz stop tomato sauce production, closing its Girgarre factory, which also had people talking about the decline of local food processing. As did the announcement that Kerry Ingredients would close its Altona factory.

What's behind the industry's woes? Of course, exchange rates hurt. Others have pointed to the rise of private label brands in supermarkets.

In-house supermarket products have been around for three decades or more, but has only recently become so popular. IBIS World research published this year suggested a quarter of groceries were private labels.

Critics, such as the AFGC, say that private labels are getting in the way of Australian products getting to consumers, robbing Australian makers of shelf space, being increasingly produced offshore, and forcing them to whittle their margins away to compete on price.

"The Australian food processing sector is being destroyed," said David McKinna, a food industry consultant and principal of McKinna et al.

"Australia is going the same way as the UK and US where private labels are up to 70 per cent of the supermarket range."

For all the pessimism, are there many opportunities for Australian food and beverage manufacturers?

Certainly, with the Asian Century singled out as a big potential boost for future sales. Wine exporters are seeing excellent improvements in sales to China, the fastest growing market for Australian wine. The growing Asian middle class was singled out as a huge opportunity for Australian processed food in the recent Prime Minister's manufacturing task force report, describing it as "one of the few areas of manufacturing where high distance costs are outweighed by other factors, in this case Australia's natural resource advantage."

The task force report recommended initiatives like a Food Industry Innovation Hub to best identify what the market's marketing and taste needs might be.

"Food is singled out, it's something that's a comparative advantage in Australia," Professor Roy Green, a member of the task force, told Food magazine. "And food manufacturing is an important value adding element of food production."

Our biggest manufacturing segment has a huge potential to do well, despite the current difficulties around cheap imports, input costs and taxes, and the purchasing habits of supermarkets.

"If we can't do that, well, what can we do? That's a kind of basic product that we really have to be successful in," said Green.


 

US food safety delay, China’s liquor scandal: Global News Bites

A new weekly segment, Global News Bites keeps you up-to-date on what's happening around the world in food and beverage manufacturing.

Food Safety Modernization Act Could Finally Be Implemented With Election Over
Usually, when President Barack Obama has been criticized for moving too cautiously on a given issue, he’s been able to blame a divided, obstinate Congress for slowing him down. But when it comes to food safety reform, he may not be able to pass the buck quite so easily — because Congress already gave him the go-ahead to act. Obama signed the landmark Food Safety Modernization Act (FSMA) into law in January 2011. The act, which was sponsored by Democratic Rep. Betty Sutton of Ohio and passed with modest Republican support, promised the biggest overhaul of the country’s food safety regulations in decades. It was supposed to shift the country’s legal regime on food safety away from criminal punishment and toward prevention, largely by instituting four sets of rules about how the food industry, both here and abroad, would have to ensure its products are safe.

The four regulations would impose stronger controls on imported foods, mandate comprehensive systems for preventing produce contamination, and require more frequent inspections and rigorous controls of facilities that produce packaged foods and animal feed. "This law was the first modernization of food safety laws in about 70 years,” said Caroline Smith DeWaal, a food safety expert with the Center for Science in the Public Interest. “It impacts 80 percent of the foods that consumers purchase — essentially all foods except those containing meat or poultry are covered under this act.” Yet, nearly two years after its passage, none of these four major regulations have even been released in provisional form — despite the fact that FSMA set Jan. 4, 2012 as the deadline for that release. According to some, the delay is the product of politically motivated intransigence in the White House.
https://blog.usfoodsafety.com/2012/11/20/food-safety-modernization-act-could-finally-be-implemented-with-election-over/

Liquor scandal prompts food safety efforts
China's national quality watchdog has urged a massive overhaul on producers of spirits nationwide after confirming that some liquor products contained excessive levels of a plasticizer. The latest scandal was first exposed in a research report from a website on Monday, renewing public concern about food safety. A probe into the distilled spirits market has found trace amounts of DEHP, mainly DBP, in liquor products. Most experts believe liquor producers do not deliberately add plasticizers to their products, which may well be tainted via plastic containers or tubes in their storage or transport … The liquor scandal will deal a blow to the competitive industry. Sales of some liquor products have dropped in the wake of the scandal, which has not yet fully shown its scope. In fact, the China Alcoholic Drinks Association knew that liquor products contained plasticizers in June last year and urged liquor companies to trace the sources of plasticizers. Later, it asked liquor companies to ban the use of plastic products in production, storage and transport. Shortly after plasticizers were detected in hundreds of local products in Taiwan in May 2011, the Chinese mainland authorities were alerted to the contamination.

In June 2011, the national food safety committee issued a notice on strengthening the quality safety of liquor products. This was the latest in a string of food contamination scandals, which has included melamine-tainted milk, pork containing the illegal additive clenbuterol and pharmaceutical capsules with excessive levels of chromium, over the past five years … Official data show that the law enforcement dealt with more than 180,000 food and medicine safety cases and penalized nearly 40,000 people in such cases between November 2007 and February 2012.
https://www.chinadaily.com.cn/business/2012-11/23/content_15953765.htm

Canada’s organic food certification system ‘little more than an extortion racket,’ report says
Annual organic agricultural sales in Canada exceed $2.6-billion, by recent estimates, with supermarket chains joining alternative stores in stocking an ever-widening array of organic-labelled products. As the popularity of organic food explodes in Canada, it has drawn new scrutiny that raises questions over its authenticity, meaning and value. It is the authenticity of organic food labelling that forms the core of an excoriating report this month from the Frontier Centre for Public Policy. Canada’s legislated organic certification process is an invitation for fraud and abuse, the report argues, with consumers paying an often hefty premium for a designation that requires no proof. In response to the organic industry’s growth, Canada enacted a labelling requirement: Since 2009, products making an organic claim must be certified by an agency accredited by the Canada Food Inspection Agency (CFIA). Not included in that process, however, is mandatory laboratory testing of products that could ensure organic-labelled food is actually farmed without pesticides, leaving the organics industry in the hands of the honour system. “It amounts to little more than an extortion racket, one that the greediest of mafiosi would envy,” write Mischa Popoff and Patrick Moore in their report released this month by the Winnipeg-based, free-market-friendly think-tank.
https://news.nationalpost.com/2012/11/24/canadas-organic-food-certification-system-little-more-than-an-extortion-racket-report-says/

Around 47% of US on food stamps
An analysis by Breitbart News has found that the number of individuals on food stamps now exceeds the combined populations of 24 states and the District of Columbia. In November, the U.S. Department of Agriculture reported that a record 47,102,780 individuals receive food stamps. According to US. Census Bureau data, that figure exceeds the combined populations of: Alaska, Arkansas, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont, West Virginia, and Wyoming. Since January 2009, the number of individuals on food stamps has skyrocketed from 31.9 million to the current record high 47.1 million. By comparison, in 1969 just 2.8 million Americans received food stamps.
https://www.humanevents.com/2012/11/24/poverty-nation-more-people-on-food-stamps-than-population-of-24-states/

Canada meat plant operations halted on food safety concerns
Canadian food inspectors on Friday said they have suspended operations at a meat-processing plant in Edmonton, Alberta, for failing to properly track its deliveries after detecting the Listeria bacteria on an employee. The incident comes just a month after a major health scare in Canada over tainted beef at another meat plant in the province. Capital Packers Inc detected the bacteria Listeria monocytogenes – which can cause fever, nausea and even meningitis in infected people – on a worker's sleeve and on Monday notified the Canadian Food Inspection Agency (CFIA). While such a finding is routine and there is no evidence that any food was contaminated, the CFIA suspended the company's license as a precautionary measure after finding it was unable to properly track the whereabouts of its products. "The company's ability to understand the distribution of their products is in question and is an element of concern for us, hence the license suspension," Paul Mayers, associate vice-president of programs at the CFIA, told reporters on a teleconference. Initially, the company told the CFIA that the potentially affected products were under its control. The CFIA's own investigation determined that they may in fact have been delivered to several provinces, Mayars said. In September, the XL Foods meat plant in Alberta was shut down for about a month after it produced millions of pounds of beef tainted with the E. coli bacteria that sickened at least 16 people in Canada. Capital Packers makes bacon, sausages, fresh meats and other products and sells them in Western Canada and the Northwest Territories, according to its Web site. The company has voluntary recalled ham sausages under the brand names Capital and Compliments.
https://www.reuters.com/article/2012/11/23/canada-meat-listeria-idUSL1E8MN5RY20121123

Farmers locked in food production vs. pollution trade-off
Agriculture remains a major threat to water quality in Europe, according to the latest report by the European Union’s environmental agency. But farmers and EU policymakers are also quick to highlight the trade-off between conservation objectives and pressure to increase food production. At a time when other sources of pollution have cleaned up their act, the European Union’s environmental watchdog reports that intensive farming practices are contributing to “significant loads of pollutants” in surface water. The European Environment Agency, in a new assessment, reports that 48% of streams and lakes in the EU will fail to meet good ecological status by 2015 as required by the 2000 Water Framework Directive. Excessive nutrients from fertilisers are a leading problem, the EEA report says, with one consequence being the growth algae that chokes off oxygen to fish and plant life in lakes, streams and bays. “Agricultural production is becoming increasingly intensive, with high input of fertilisers and pesticides, in turn resulting in significant loads of pollutants to the water environment through diffuse pollution,” the EEA says in a new report on Europe’s water status. The European Commission’s Water Blueprint, released a day later on 15 November, calls for better enforcement at the national level of EU laws designed to reduce pollution “from nutrients and/or other chemicals from agriculture, households and industry.” But the fight against pollution is destined to run head-on with concern about food security. There is growing pressure, in Europe and internationally, for farmers to be more productive to address tighter food supplies, rising prices and a population forecast of 9 billion – from 7 billion today – by mid-century.
https://www.euractiv.com/specialreport-agriculture/farmers-locked-food-production-v-news-516196

Sky Greens vertical green produce takes off
Singapore’s food producers may soon be locally growing a lot more fresh produce due to an innovative new vertical farm system created by Singaporean company, Sky Greens. Until now, food producers on the city-state island hub of South East Asia, have struggled for room to produce fresh fruit and vegetables in the densely populated city, opting for imports. In fact, only 7 per cent of Singapore’s fresh food is grown locally, but the new vertical farming techniques expected to bring this number to ten per cent. The Sky Greens vertical farm is a 3.2 acre urban farm that uses minimal land and resources, offering a sustainable approach to growing produce in heavily populated cities.  The A-Go-Grow vertical farm systems are protected by outdoor green houses, with the advantage of producing tropical leafy vegetables year-round. Currently the vertical farming systems can grow Chinese cabbage, spinach, lettuce and bayam. As the farm expands, Sky Greens have said that they plan to grow a diverse range of vegetables. Sky Greens have said that they would like to turn their 120 A-Go-Grow vertical farms into 300, with the support of investors. If Sky Greens are successful in creating 300 vertical farms, daily vegetable supply is expected to go from 0.5 tonnes to 2 tonnes over the next year. As well as the economic benefits of continuous production and higher yields, Sky Greens say that the vertical farming system also offers many environmental benefits. The A-Go-Gro systems use low carbon, hydraulic green technology and thus have reported very low energy costs. Similarly, Sky Greens say the vertical farming systems also offer low water costs as the vertical crops are irrigated through an “innovative flood method” that utilises recycled water.
https://www.ausfoodnews.com.au/2012/11/12/sky-greens-vertical-green-produce-takes-off.html

Forget the vodka, make mine a malt, Vladimir
It's as Russian as Tolstoy's Anna Karenina and the Siberian steppe but vodka has a new challenger as the world's fourth-heaviest drinking nation's spirit of choice. This month, Beam, which owns Jim Beam and Maker's Mark, has become the latest distiller to announce that it hopes to double its whisky sales there. Beam has been a little slow off the mark though; single malts Glenfiddich and Glenivet, and blends such as Johnny Walker Black Label are already among the country's most popular drinks. Last year whisky imports grew by a staggering 48 per cent. The Western drinks cabinet favourite's new-found popularity partly stems from its novelty to Russian drinkers. A state monoply had restricted its availability since the days of the Tsar (that didn't stop KGB henchman sipping imported Ballantine's in the Soviet era) and it was only when Boris Yeltsin lifted the monopoly in 1992 that the drink took off. The average Russian drinks 15 litres of spirits a year, with vodka obviously being the most popular choice, but that hasn't stopped President Putin slapping a 30 per cent tax hike on strong liquor as part of tough crackdown on booze.
https://www.independent.co.uk/life-style/food-and-drink/features/forget-the-vodka-make-mine-a-malt-vladimir-8349051.html

World’s first caviar vending machine opens in US
Need a caviar fix at 2 am? Billed as a world first, a caviar vending machine has opened in California for the deep-pocketed who prefer to indulge their snack cravings with caviar and blinis rather than candy bars and chips. Beverly Hills Caviar has set up the luxury snack food vending machine at the Burbank Town Centre Mall, which also dispenses all the accoutrements one needs for a gold-gilded, midnight snack. Think caviar, truffles, escargot, blinis, bottarga (fish egg sacks), oils, Mother of Pearl plates and spoons, gift boxes and gourmet salts. Beverly Hills is also home to another innovative, automated food delivery system. Earlier this year, a 24-hour ATM machine that dispenses cupcakes sent foodies on a sugar high.
https://www.themalaysianinsider.com/food/article_food/worlds-first-caviar-vending-machine-opens-in-us

 

Trademark loophole leads to misleading health claims: Choice

Food manufacturers are able to market their products as being fresh, healthy or natural when this may not be the case, a Choice study has found.

The consumer group reviewed 200 food products with natural or healthy sounding product names and found that almost half (93) were high in either total fat, saturated fat, sugars or sodium.

Choice spokesperson, Ingrid Just, said "Manufacturers are trademarking healthy words such as ‘natural’, ‘healthy’ and ‘fresh’ to give the impression that a product is healthier than it seems. Other product names suggest eco-friendliness as consumers are often willing to pay premium for perceived environmental benefits."

Such products include:

  • Five All Natural Bakery Bars – nutritional information indicates they are high in saturated fat and sugar
  • Natural Cordial Company’s lime cordial – contains a sulphite preservative
  • Nice & Natural Nut and Yoghurt Muesli Bars – contain a yoghurt-flavoured compound and the popular soy-based emulsifier lecithin
  • Mother Earth Baked Oaty Slices – high in saturated fat
  • A number of Back to Nature and Goodness Superfoods Cereals – high in sugar.

Just said that while food labelling laws prohibit the use of the word 'health' on products and other claims that might mislead consumers, manufacturers can sidestep this by using such words in trademarks.

Trademark law prohibits the registration of a trademark likely to deceive or cause confusion, but nutritional analysis is not part of the approval of new trade marks by IP Australia. However, Food Standards Australia New Zealand (FSANZ) is in the process of developing a standard for health claims that would only allow these claims to be made on food products that meet agreed nutritional criteria and are supported by robust scientific evidence.

"Despite the efforts of food labelling regulators to stamp out dodgy health claims, the trademark loophole will remain open to food manufacturers," said Just.

 

Robern Menz goes green with $1.1m upgrade

Confectioner Robern Menz is using what's close to a $500,000 government grant to embrace green technologies at its production facility in Glynde, Adelaide.

The South Australian company will be upgrading its chocolate making department when it rolls out a $1.1m upgrade, part of which is thanks to a $499,770 grant awarded by the AusIndustry – Clean Technology Food and Foundries Investment program.

The upgrade will involve replacing four "power hungry" chocolate refiners with two energy efficient machines, which will increase Robern Menz's chocolate-making capacity by 56 percent and reduce carbon emissions by 2,275 tonnes over the next five years.

Robern Menz CEO, Phil Sims, told Food magazine, "It's all about removing inefficient energy and inefficient chocolate-making equipment which we’ve got here … So it's a matter of pulling out that equipment, mothballing it, and replacing it with far more energy efficient, state of the art technology."

A manually-operated fire tube boiler and small electric boiler will also be replaced with an unattended water tube boiler which will increase Robern Menz's steam generation capacity by 50 percent and reduce greenhouse gas emissions by 285 tonnes over the next five years.

Overall, it's expected that the new refiners and boilers will see a drop in carbon emmissions of 49 percent, as well as an energy cost saving of $185,000 per year.

These product upgrades will be the second phase in Robern Menz's efforts to go green, with the company last year overhauling its refrigeration plant and warehousing infrastructure.

"We invested a similar amount, so a bit over $1m in totally re-refrigerating our factory. We removed about 80 old refrigeration units and replaced them with a highly energy efficient glycol system which has a number of benefits, not just environmentally but it also assisted productivity because [now] we're able to keep our factory at a more consistent temperature, which is very important when you're a chocolate manufacturer," said Sims.

Robern Menz is expecting the latest upgrade to be completed in approximately 18 months time.

 

Retail conditions soft, says AFGC CHEP Retail Index

The AFGC CHEP retail index predicts growth to be 2.9 per cent, year-on-year, for the December quarter, below both the 10-year average and the September quarter result.

The index, released today and using comment from the Australian Food and Grocery Council and Deloitte Analytics research based on CHEP Australia pallet movements, suggests that conditions are currently sluggish.

The Council’s chief executive, Gary Dawson, suggests another rate cut by the Reserve Bank would help consumers to open their wallets.

“We’re hoping that another cut in interest rates will send the right signals to households so they embrace this summer season with more optimism,” said Dawson.

“Food manufacturers are facing an environment where sluggish retail conditions, rising input costs on everything from commodities to labour to energy and retail price deflation continues to cut margins, placing the sector under increasing pressure.

The Index is described by the AFGC as an “accurate forward indicator of retail trade sales published ahead of official Australian Bureau of Statistics (ABS) historical data.”

AFGC report confirms decrease in food manufacturing

The Australian Food and Grocery Council’s (AFGC) annual State of The Industry report has shown a decrease in the food manufacturing industry's output.

The fourth AFGC/KPMG report showed that overall output was down 4.5 per cent for 2010-11, as well as a decrease in employment of 2.2 per cent for the sector in the financial year 2011-12.

Factors putting pressure on food manufacturing such as the squeeze on margins by the supermarket duopoly of Coles and Woolworths, the high dollar, and high input costs were in the news last month, with Terry Davis, the CEO of SPC Ardmona, speaking of the need for changes to payroll tax and taxation depreciation allowances.

Gary Dawson, the council's CEO, said the report highlighted a difficult environment. According to the research, based on ABS data, there were 335 fewer businesses operating in the industry in 2011-12 compared to the previous year.

“The sector’s growth, competitiveness and ability to create jobs are under threat,” Dawson said.

“The findings of State of the Industry 2012 serve as a warning to policy makers at all levels of government that the Australian food and grocery manufacturing sector – Australia’s largest manufacturing sector – is facing an environment where input costs are rising on everything from commodities to labour to energy, and retail price deflation continues to cut margins, placing the sector under increasing pressure.”

The AFGC has used the report’s release to call for reform in areas such as the mandatory reporting system, streamlining energy efficiency and water use reporting requirements and “clarification that standards and labelling relating to food composition and safety are administered by Food Standards Australia New Zealand and all other consumer related labelling requirements should be in consumer law.”

Troubled food group saved

PFD Food Services has bought troubled company Australian Convenience Foods Group (ACF) after the ready-to-eat food manufacturer went in to voluntary administration.

PFD’s chief executive Kerry Smith said the intention is to expand ACF’s business of supplying sandwiches and microwavable products for service stations and convenience stores across Australia, ninemsn reported.

“We see there are some synergies between ACF and PFD”, Smith told AAP on Tuesday.

"Our strategy when we acquire a business is to grow it.

"We have a customer base that can use products produced by ACF."

The purchase comes as good news to the 370 employees of ACF with little to no job losses suspected to come from the move.

As Food Magazine reported in early September, the ACF had been running at a loss for the last few years prior. However, Smith was optimistic about the merger.

"It's not going to happen overnight (but) we believe we can get it to an improved profitability reasonably quickly," Ms Smith said.

PFD will assume control of ACF's seven fresh and frozen food operation sites in Victoria, NSW, Western Australia, South Australia and Queensland