Trends and challenges facing Australia's food processing sector

Gary Dawson

CEO, Australian Food and Grocery Council

The Australian Grains Industry Conference – 31 July 2013

33.3%

66.7%

Were you able to pass through any of the increase in costs from the carbon tax to

your customers?

AFGC Carbon Tax Survey July 2013

NO

YES

Food & Beverage manufacturing sector - Turnover

Meat, meat product mfg

Dairy product mfg

Sugar and confectionary mfg

Bakery product mfg

Other food product mfg

Fruit & Vegetable processing

- $87.4bn (2010-11), down 5%

Food & Beverage manufacturing sector - Employment

Meat, meat product mfg

Dairy product mfg

Bakery product mfg

Beverage mfg

- 222,300 directly employed (2011-12), down 2.5%

Source: Competitive Alternatives / KPMG’s Guide to International Business Location Costs, KPMG (2008, 2010, 2012)

Consumer Price Index for Food

Source: AFGC, State of the Industry 2011-12

Source: AIG Performance of Manufacturing Index, April 2013

-

5,000

10,000

15,000

20,000

25,000

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

$ m

illi

on

s

Trade Surplus Exports Imports

Imports and Exports of Substantially and Elaborately Transformed Food Products ($ 2011-2012)

- Surplus of $6.8bn in 2011-12

Key cost categories as a proportion of gross sales FY09-12

Source: AFGC / KPMG Competitiveness and Sustainable Growth Report 2013

CAGRFY09-12

(6.0)%

0.2%

(1.6)%

6.4%19.5% 20.8% 22.2% 23.4%

50.6% 48.4% 48.4% 47.9%

23.0% 22.8% 22.4% 23.1%

6.9% 8.0% 6.9% 5.7%

0%

20%

40%

60%

80%

100%

FY09 FY10 FY11 FY12

%

Trade discounts and promotional allowance Cost of Goods Sold Operating Costs EBIT

Capital expenditure split by purpose and Depreciation FY09-12

Source: AFGC / KPMG Competitiveness and Sustainable Growth Report 2013

187.3 240.5 230.3 213.9

122.9

115.4

204.9 239.9

351.7

399.2 464.3 467.2

346.3

388.9 384.5 383.6

-

50

100

150

200

250

300

350

400

450

500

FY09 FY10 FY11 FY12

$ m

illio

n

Stay in Business Cost Savings / Profit Generation / Expansion IT Depreciation

CAGRFY09-12

— 3.5%

(31.4)%

25.0%

4.5%

9.9%

Keys to competitiveness Play to our comparative advantage

Improve productivity

Brand building

Removing trade barriers

Confidence & incentives to invest

Regulatory relief

Agribusiness challenges Large scale, rural/ regional location

Trade-reliant

AFGC Agribusiness Forum Improve cost-competitiveness

− energy, infrastructure, tax

− foreign investment

Increase exports

− increase market access

− remove trade barriers

− Brand Australia

Source: ABARES, Food Demand to 2050: Opportunities for Australian agriculture

70% increase in global food demand by 2050

Representing Australia’s Food,

Beverage And Grocery

Manufacturing Industry