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With the high Australian dollar, the threat of off-shoring, and the looming carbon tax, local manufacturers of food and domestic products are taking steps to ensure they stay viable and competitive.
Trade in processed foods has grown considerably over the last decade, according to the Federal Government’s Australian Trade Commission.
The sector also accounts for around 18 per cent of employment in the manufacturing sector.
However, with increasing global competition, and particularly the strong Australian dollar, many food manufacturers have chosen to manufacture goods off-shore where labour and production costs are low.
To stay competitive, the industry has had to respond quickly to consumer demands and trends, which of late has been for more convenient, healthier, fresher, less processed foods, with minimal storage time.
By developing new food processing, separation and packaging technologies, Australia has been fighting to stay at the forefront of the food industry worldwide, in the face of tough challenges.
Bikkie giant vows stay Australian made
Earlier this year biscuit giant Campbell Arnott’s announced plans to invest $67 million in upgrading its Virginia bakery in Queensland.
The move brings the company’s total investment in the site to more than $100 million over the past two years.
The Virginia bakery currently produces more than 40 per cent of all Arnott’s biscuits found in Australian homes, including Shapes, Cruskits, Monte Carlo, Scotch Finger, Shortbread Cream and Family Assorted.
The investment aims to ensure the firm’s Queensland manufacturing site stays competitive in future years.
Campbell Arnott’s also says the move also signals the company’s ongoing commitment to manufacturing in Australia.
The company will allocate around one third of the total investment to installing a new biscuit production line that will be operational by 2012.
Under the plan, the remainder of the $67 million investment will be used to automate sections of some existing lines, which will improve efficiencies, enhance product quality and introduce safer handling procedures on site.
Campbell Arnott’s vice president supply chain Asia Pacific, Craig Funnel, says the company’s Virginia bakery sources around 25,000 tonnes of flour and 10,000 tonnes of sugar from Queensland producers.
The biscuit giant also sources around 125 million biscuit trays and cartons from Queensland-based companies.
“The flow-on benefits to the State of an investment of this magnitude are significant,” Funnell said.
The company confirmed that while the decision had no immediate impact on the 900 full-time workers employed at Virginia, there will be a reduction in the number of roles on site.
In a year’s time, as the automation component becomes operational, there will be a direct impact on around 140 full-time and 50 casual roles over the period December 2012 to June 2013, Funnell said.
Funnell acknowledged that potential redundancies made automation a difficult decision to make, but stood by the move.
“Around 99 per cent of all Arnott’s biscuits we sell in Australia are made in Australia.
"To keep it that way, we have to continue to find ways to compete more effectively in the marketplace, especially against cheaper imported products.”
Industry and government initiatives
The Australian Trade Commission stresses that industry and government have been working collaboratively to provide solutions that compete more effectively with overseas producers.
Opportunities for Australian processed foods exist in every market – with Japan the number one market, followed by the USA, Korea, Indonesia and New Zealand.
To ensure the industry’s export success in future, Australia has a few key attributes on its side.
The nation’s sustainable safety credentials, as well as its disease-free status, are backed by a strong regulatory framework as well as innovations in traceability, quality assurance and supply chains.
Australia has research and development (R&D) capabilities in food processing including at Food Science Australia (FSA), the dairy industry through the Dairy Cooperative Research Centre, and the wine industry through the Australian Wine Research Institute (AWRI).
These capabilities are reinforced by successful spin-offs from universities.
R&D in food processing is also being conducted by companies and through private research organisations.
Companies providing value-added products in food processing are supported by Australia’s export focused, agricultural industry.
The wine sector has demonstrated both strong leadership with its 2020 strategy and an ability to take up new technology.
The sugar industry, with its Cooperative Research Centre for Sugar Innovation through Biotechnology, is developing new health foods, including the use of fibres from bagasse.
In the dairy industry, value-adding initiatives include the extraction and purification of proteins, peptides and colostrum from milk.
NZ milk maker chooses Sydney
Earlier this year, New Zealand’s A2 Corporation chose Sydney to expand its milk processing operations.
In July the company began construction on a A$7.5 million processing plant in south-western Sydney. The plant is expected to be operational by January 2012.
The plant will initially be geared to process up to 10 million litres of milk per year.
The company says the move is part of a growth strategy that has seen it transform its intellectual property into a commercially viable fast-moving consumer goods (FMCG) business.
“Our a2 Milk business in Australia continues to grow rapidly and the development of our own processing facility will allow for the continued expansion of the business. Sales growth has exceeded expectations in the six months to 30 June 2011,” A2’s Chairman Cliff Cook says.
Food packaging initiatives
The role of packaging in keeping the food supply safe will always remain an essential part of the industry.
Packaging maintains the quality of food after processing is completed, enabling it to be sent long distances from its point of origin.
The design and construction of packaging also influences shelf life as well as aesthetic appeal.
Traditional materials used in packaging include glass, metals, plastics, paper and paperboards.
A wider variety of plastics are now available both in rigid and flexible forms and today’s food packaging often combines several materials.
In balancing today’s heightened social and environmental consciousness and stricter regulations on pollutants and disposal of solid waste, many companies are turning towards more biodegradable packaging options that have less environmental impact, the Australian Trade Commission notes.
Domestic brands urge consumers to buy local
As small Australian manufacturers come under increasing pressure to maintain their presence in supermarkets, and local brands are pushing sustainability as a point of difference.
Queensland manufacturer of green household products – Orange Power and Actizyme – Aware Environmental, says with supermarket shelves increasingly loaded with products made overseas, consumers should question the quality of their purchases.
The company’s managing director, Andrew Chaney, said Australian-made environmentally-friendly products present that point of difference to consumers.
“We have Australian-made eco-responsible products that have no associated ‘carbon miles’ and questionable raw materials,” Chaney said. The company recently eliminated plan oil ingredients from its products to prove its reputation as a ‘green’ brand, he added.
But Chaney laments, “Unless consumers continue to support us and purchase Australian made products the shelves will eventually fill with private label offers and be dominated by one or two multinational brands.”