On 24 March
2011, the Senate established the Select Committee on Australia's Food
Processing Sector to investigate possible policy responses to the challenges
and pressures within the broader economy that threaten the ongoing viability
and competitiveness of food processing in Australia. The committee was also
tasked with examining certain broader areas of government policy, to assess the
appropriateness of the overall regulatory environment in which Australia's food
processing industry operates. The committee was asked to report to the Senate
30 June 2012, which was subsequently extended to 16 August 2012.
of the inquiry
about the committee's terms of reference was advertised widely and on the
committee's website, with submissions called for by 3 October 2011.
However, submissions have been accepted by the committee throughout the term of
the inquiry. The committee also wrote to relevant organisations and individuals
to notify them of the inquiry and invite submissions. The committee received 70 submissions.
A list of the submissions authorised for publication by the committee is
provided at Appendix 1.
hearings were held in Canberra on 13 December 2011, on
11 May 2012 and on 15 May 2012, in Sydney on 10 February 2012, in Shepparton,
Victoria on 8 and 9 March 2012, in Devonport, Tasmania on 12 April 2012,
in Adelaide on 17 April 2012 and in Perth on 18 April 2012. A list of
stakeholders who gave evidence to the committee at these public hearings is
provided at Appendix 2.
also conducted a number of site visits to gain insight into the complexities of
running a successful food processing business. The following sites were visited
by the committee:
Arnott's factory, near Shepparton, Victoria;
- SPC Ardmona
factory, Shepparton, Victoria;
factories, Quoiba and Ulverstone, Tasmania;
Smallgoods, Adelaide, South Australia;
- Gawler River
Cattle Company, Adelaide South Australia;
Brewery, Adelaide, South Australia;
Octopus Company, Western Australia;
- Geraldton Fishermen's
Co‐operative, Western Australia;
- Kailis Bros,
Canning Vale, Western Australia;
- Anchor Foods,
Fremantle, Western Australia;
- Canon Foods,
Canning Vale, Western Australia; and
- Mrs Mac's,
Morley, Western Australia.
particularly appreciates the time and hospitality afforded to it by these
thanks all those who contributed to the inquiry by making submissions,
providing additional information or appearing before it to give evidence.
this report to the Hansard for public hearings are to the official Hansard
Overview of Australia's
food processing sector
food processing sector is part of the nation's broader food industry, and is a
key component of Australia's food supply chain. The food industry comprises
farm and fisheries production, food and beverage processing, food and liquor
retailing within Australia, food exports and food imports. An analysis of
Australia's food processing sector requires consideration of the health of the
entire food supply chain; from the cost of primary inputs, the price of imports
and access to global markets, to the competitiveness of the retail sector as
the point of supply for Australian families.
by the Department of Agriculture, Fisheries and Forestry demonstrates the
industry's substantial contribution to Australia's economy. In
2010–11, the value of Australia's farm and fisheries food production came to $40.7
billion, while food and liquor retailing turnover comprised of over 50 per cent
of Australia's total retailing generating over $130 billion for the
Australian economy. The value added food, beverage and tobacco processing
sectors contributed 1.8 per cent total share of Australia's Gross
These statistics alone demonstrate the need to ensure that Australia's food
processing sector remains viable, profitable and internationally competitive.
The economic significance
of Australia's broader food industry was emphasised by submitters to the
inquiry. Positioning the food manufacturing sector within Australia's other
manufacturing industries, the Australian Food and Grocery Council highlighted
the sector's scale:
28 per cent of total manufacturing turnover, the sector is comparable in size
to the Australian mining sector and is more than four times larger than the
automotive sector... The growing and sustainable industry is made up of 38,000
the Australian Made Australian Grown Campaign highlighted the sector's
contribution to job growth:
manufacturing sector is fundamentally important to the Australian economy,
especially in terms of jobs, skills and training opportunities, exports and
innovation. It is also critical to the fabric of Australian society because of
the multiplier effect of the opportunities it creates and its strategic
importance to Australia’s economic and national security. The food processing
sector is a major part of that, with particular importance as a regional employer
and for food security reasons.
estimated that, combined, the sectors forming Australia's food supply chain
provide in excess of 939 000 jobs.
Statistics provided by the National Farmers Federation indicate that
approximately one-third of the employment opportunities generated are in rural
and regional areas, with the agricultural sector employing 317 700.
The correlation between a vibrant food industry and employment opportunities in
rural and regional areas was a theme in evidence before the enquiry. Lion stated
processing industry is a significant contributor to the local economy,
currently employing around 300,000 people, half of them in rural and regional
areas, and paying about $14 billion in wages. The focus of this inquiry should
be on how we grow this local industry to capitalise on emerging global trends.
Similarly, representatives of Greater Shepparton City Council
highlighted the importance of the industry to regional communities:
Greater Shepparton's major employment sector is retail, our economy is most
definitely underpinned both by agricultural production and by manufacturing
based around that production. When we talk about the importance of food
manufacturing to our region we acknowledge that it flows on not only to the
grower sector but also to the transport sector and into the retail sector,
because the basis of all our employment is underpinned by agricultural
production and manufacturing based around it.
it is not just a discussion around food manufacturing; it is about the
viability of our entire economy, because we are still very much underpinned by
that layer of agriculture.
Challenges for the food
has gathered considerable evidence from a range of stakeholders on the
competitiveness and future viability of Australia's food processing sector. The
evidence revealed strong concerns regarding the health of Australia's food
processing industry and, more broadly, all sectors on Australia's food supply
chain. An undercurrent of pessimism is reflected in submissions from
participants in sectors across Australia's food supply chain. Summerfruit Australia
advised that 'there is very little that is positive in the food production and
food processing sector'.
The bakery Mrs Mac's stated:
global competitiveness of the Australian Food Processing Sector is diminishing [...]
Unless this situation changes, then with the exception of niche products, or some
radical innovation to processing techniques developed in Australia, there is
not a bright future for Australian food processing and manufacturing companies.
The views of
Food South Australia Inc. were indicative of the warnings given by many
submitters that without efforts to address various competitive disadvantages
faced by the Australian sector relative to its foreign competitors, the food
processing sector will struggle:
be a very precarious situation if the food industry is truly on its knees, with
old infrastructure, low margins and a flood of imported product, where
companies stop investing. As we have seen in some recent examples, when there
is a choice of which factory to close, Australia often comes up first. It will
be impossible to get back what we lose.
As will be
explored in subsequent chapters, the inquiry found that the challenges facing
Australia's food processing sector, and all sectors across Australia's food
supply chain, are multifaceted. Internal pressures affecting the sector
identified included skilled labour shortages,
increasing costs of electricity and water,
and the complexity of cross–jurisdictional regulations.
were submitted as presenting together additional challenges for the sector. The
introduction of a carbon tax is widely expected to affect the industry,
although witnesses were not able to quantify the degree of the likely impact
prior to its commencement on 1 July 2012:
- It will
impose $23 a tonne on all emissions of carbon from the largest
500 businesses. The price on carbon will add to electricity and gas
prices. The food-processing industry obviously uses electricity and gas in its
production processes, so that will increase their costs.
- We are in a
situation where we are having to face increased costs that will be coming
forward from 1 July with the carbon tax and we are working with the federal
government to look at mitigation plans around that. In the case of our
business, we have five facilities in Australia which are over the 25,000 tonnes
and will be directly impacted upon by the tax from 1 July. I understand
from talking to the federal government that there are possibly 11 to 14,
maximum, meat-processing facilities which are over that 25,000‑tonne
- What does a
carbon tax means for me as a business. If I don’t know the answers—and
generally I don’t—what do I need to do to be ready? Usually it is about data
capture and often it is about utilising the skills of your workforce better.
The engineer is already collecting all the energy bills. What he is not doing
is understanding how he can manipulate that data and change the way he
contracts with the energy provider to reduce the energy bill or, at the most
fundamental level, talking to the workforce and offering a bit of encouragement
and TLC to get them to feel that they are part of the solution.
- The meat
industry is concerned at how the implementation of the carbon tax in Australia
will change our competitiveness and productivity in an international
environment, as our major competitors are not similarly impacted. While many
large export meatworks are over the 25,000 tonne carbon emission threshold for
direct payment, they do not emit enough carbon to attract the significant
financial support that the steel and concrete industries and similar
large-scale manufacturing industries have access to.
between 15 and 25 meat processing plants in Australia are likely to exceed the
25,000 tonne carbon threshold. 
has also experienced volatile environmental conditions, reportedly affecting
the viability of food producers and processors. Mr Roger Lenne, a
representative of Fruit Growers Victoria Ltd, commented that one of the effects
of the drought experienced during the early to mid-2000s was that it 'robbed
the industry of capital', constraining innovation and expansion:
an injection of cash into the canning and fruit growing industry when the two
canneries merged and Coca-Cola took them over. Every single bit of that cash
from our property went into buying water through the drought. The pressure on
prices last year and this year have reduced our cash flow by just under $1
million from 12 months ago up to this point. Where do you think that has come
from? The bank. When my son says, 'Perhaps we should do this,' I say, 'That'll
be about a million dollars in investment. Where will we get that from?' That
money is gone. The drought has taken it. That is why I am so depressed about
were echoed by the Chief Executive Officer of the Greater Shepparton City
downward spiral cannot continue, or our region and our rural areas will no
longer be viable alternatives to invest in and viable alternatives to our major
cities as living areas. We believe that will impede Australia's sustainable
growth. Our producers, manufacturers and community have dealt with, in the last
10 years, long-term drought and now floods. We also have the Basin Plan and its
uncertainty at the current time, and now carbon pricing will start on 1 July.
They are very weary. They are uncertain of their future. Without government
support and intervention, this downward trend is likely to continue.
disadvantages were also viewed relative to Australia's foreign competitors. For
example, Mrs Mac's stated:
has enabled many countries to land similar processed foods into Australia at
cheaper prices. While there are probably other factors involved, it is due in
part to these countries having one or more of the following conditions that
lower their costs of processing compared to Australian conditions:
- Cheaper labour,
energy and associated on costs e.g worker safety, workers compensation and
High populations in
these countries assisting in generating better manufacturing economies of scale
than the Australian population number can attain at a purely local level.
- Lower standards of
processing (building codes, food standards, not being signatories to
Lower cost of many
competitiveness of Australian processed foods at a global level is currently
being further eroded by the strong Australian Dollar and a lack of any
willingness by governments and retailers to consider applying a level
manufacturing playing field by requiring foreign manufacturers that export food
products in to Australia to meet the same processing standards and hence
consequential costs that are imposed by government regulation here in Australia
across all tiers of government.
concerns, particularly regarding the strength of the Australian dollar, were
shared by other industry participants.
Treasury attributed some of the challenges facing Australia's food processing
sector to 'the continuing strength of Australia's terms of trade and the high
level of activity in the mining and energy sector'. These developments:
contributed to a strong exchange rate and upward pressure on certain input
costs. Those two factors have reduced the competitiveness of some trade exposed
sectors, including the food processing sector.
Australian Meat Industry Council also listed various challenges to the
international competitiveness of its export-oriented industry. These include the
continual need to invest in research and development and to widen access to
The Australian Food and Grocery Council reported that the impact of the
external challenges currently facing Australia's food processing sector can be
seen through recent market performance, which has been characterised by flat
industry turnover growth and an increase in imports due to the high Australian
Opportunities for the
food processing sector
The inquiry has
taken place at a time when the importance and role a vibrant food processing
sector will play in the coming years is becoming increasingly apparent:
a lot of public debate about the future of local manufacturing and industries
in various sectors. But I suggest that the food processing sector is unique.
The food processing sector is intrinsically tied to Australia’s agricultural
industries for supply of quality, nutritious food to the population and to the
food security of Australia. It is simply not possible to substitute all locally
produced foods with imports. For example, if we do not have a viable dairy
industry then we do not have a sustainable supply of fresh milk. This has not
only economic implications for Australia but also health and nutrition
implications as well.
challenges currently facing the sector, the committee was also informed of
opportunities for growth and increased international competitiveness. Data
collated in the 2010–11 Australian Food Statistics Report identified that while
the value of imports increased over 2010–11, Australia's food export markets
continued to grow.
Figure 1.2: economic overview of Australia's
It was put to
the committee that export markets provide significant opportunities for sectors
across Australia's food supply chain. In particular, the committee's attention
was drawn to opportunities presented by the expanding Asian markets.
The growing awareness of the importance of the growth in Asian markets to
Australia's food processing sector is evident in the Prime Minister's recent
assertion that '[j]ust as we have become a minerals and energy giant, Australia
can be a great provider of reliable, high quality food to meet Asia's growing
the challenges currently facing the sector Treasury conveyed similar sentiments
to those recently expressed by the Prime Minister, noting the important opportunities
that the rising middle class in the developing economies of Asia present to the
future of food processing in Australia. More broadly, opportunities
arising from global population growth were noted, with BusinessSA advising that
the growth 'is leading to stronger demand of food, both in terms of quantity
participants, including Lion, who provided evidence to the committee also identified
these opportunities as being those that would most likely ensure the viability
of the sector into the future:
conducting this inquiry I think senators should consider the unique nature of
Australia―its size and relatively small and
concentrated population; its efficient and productive farm sector; its clean,
green image internationally; and its proximity to the growing populations of
Asia―and ask itself what sort of food processing sector Australia wants
and needs for the future and what the government can do to help. I think in
that regard that possibly Europe and the US do not provide a lot of insight
into what is required in Australia. It is a uniquely Australian issue.
submitters advised that Australia is in a strong position to capitalise on the
opportunities provided by expected population growth and expansion in the Asian
markets. Comments by BusinessSA are indicative of the optimism that some
Australia's geographic size and location, strong history of agricultural
production, food processing and technological know-how, supply reliability and
strong food and agricultural products standards, the country should be well
placed to cater for a substantial part of this increasing food demand.
statements by BusinessSA and Lion indicate, it was put to the committee that
Australia's access to these markets is enhanced by the sector's 'clean green'
image. As the Australian Meat Industry Council commented, opportunities exist
in '[c]reating and promoting an image of the Australian food industry as
vibrant and innovative, consumer driven, future focus, ethical, sustainable'.
This view was shared by other submitters to the inquiry.
opportunities, and others, are explored in subsequent chapters.
Context of the inquiry
National Food Plan
challenging and multifaceted circumstances require a coordinated response from
government. Although it conceded that to-date a coordinated government approach
to the food processing sector has not existed, Treasury advised the committee
that as a result of the government's commitment to a National Food Plan,
Australia will have an overarching and integrated policy for the food industry
in the near future:
2010 federal election the Government committed to develop a national food plan
and subsequently announced that it was providing $1.5 million over four
years to support the creation of the Plan. The Government envisages that the
Plan will outline the Australian Government's vision for the food industry and
consumers, to guide Australian Government actions and provide certainty for
other stakeholders. A national food plan, when finalised, would seek to better
explain and better integrate Australia's approach to food policy, from
production through to consumption, and be consistent with the Government's
market‑based policy approach.
Department of Agriculture, Fisheries and Forestry further explained how the
plan would present an overarching policy:
of the food plan, as you would be aware the commitment was to develop a plan
that covers from paddock to plate, so it involves production, manufacturing,
distribution, retail, competition. The plan will deal with everything through
the chain... The commitments made by the government in the food plan said it
would be from paddock to plate. So the interactions through the chain are
important in the food plan and the food plan will need to address the concerns
that producers have raised.
announcement of a National Food Plan, and the steps that have been taken to
develop that plan thus far, have been welcomed by industry stakeholders:
AMWU recognises the work that this government has done to highlight the importance
of the food manufacturing industry through its establishment of the Food
Processing Industry Strategy Group, the national food plan group. It is a
progressive step to support tripartite forums to examine our important
industries and consider policy.
Health Association of Australia, however, identified various challenges that
developing a coordinated approach will present:
concept of the National Food Plan of course is to actually balance the
different needs and the different policy areas that cover food. It is very easy
to see the different areas when we have a parliamentary secretary for health
responsible for food and food regulation, yet the National Food Plan has been
developed through the Department of Agriculture, Fisheries and Forestry.
national food plan should recognise, apart from the importance of
profitability, that there are five important regulatory challenges, as we see
it: food safety, which is at the moment conducted by FSANZ, we think largely
very well, although occasionally we have issues; diet quality; food security; a
healthy food economy; and a sustainable food supply. It is about trying to
manage those competing challenges. Some of those things, of course, overlap..
submission to this inquiry, Summerfruit Australia argued that there is a 'real
lack of vision flowing from ALL governments in Australia'.
As will be explored, the evidence provided to the committee is clear that now
is the time to act to secure the future of Australia's food processing sector,
and all sectors across the food supply chain. Through this inquiry, the
committee has focused on measures to harness available opportunities and
address evident challenges, to promote the ongoing viability and international
competitiveness of Australia's food processing sector. As further detailed in Chapter
9, the committee draws the government's attention to its findings for
consideration as part of the development of a National Food Plan.
and previous Senate inquiries
The health of Australia's food processing sector, and related sectors
across Australia's food supply chain, is of enduring concern to the Australian
Parliament. The committee acknowledges the work of other Senate committees in
considering issues that affect Australian food processors, producers and
retailers. In particular, the committee notes recent inquiries by the Senate
Economics Legislation Committee into proposed amendments to Australia's
anti-dumping laws and rules regarding foreign acquisition of Australian
the Senate Economics References Committee's inquiry into the impact of
supermarket price decisions on the dairy industry and decisions of the
Australian Competition and Consumer Commission on the proposed acquisition of
Franklin by Metcash Trading Ltd;
the Senate Education References Committee's Inquiry into all aspects of
higher education and skills training to support future demand in agriculture
and agribusiness in Australia;
and the Senate Rural and Regional Affairs and Transport References Committee's
inquiry into Australia's bio- security and quarantine arrangements.
In preparing this report, the committee has not sought to replicate but
to build on these inquiries. Collectively, the inquiries provide detailed
evidence for the Senate's and the government's consideration.
Structure of the report
challenges facing the sector are facts of life for many businesses. However, government
has a clear role in ensuring that taxation and regulatory settings are
appropriate so the sector can continue to innovate, access and effectively
utilise skilled labour, and remain competitive in international markets. This
report focuses on these types of issues. It is divided into nine chapters, as
- Chapter 2 investigates
the importance of the labour market to this sector.
- Chapter 3
considers the taxation and regulatory environment that applies to food
- Chapter 4 examines
the current retail environment characterised by concentrated competition.
examines the issue of food labelling.
- Chapter 6
explores matters of biosecurity and food safety.
- Chapter 7
looks at the role of innovation and research and development in the food
investigates the role that export markets can play in promoting the long-term
viability of Australia's food processing sector.
- Chapter 9
sets out the committee's concluding thoughts.
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