This article was written by Tanya Barden, in her capacity as CEO of the Australian Food and Grocery Council, for Food & Drink Business' December/January 2025 print edition.
Australia’s food and grocery manufacturing industry is at a crucial point. We need collaboration with government and constructive commercial relationships with our retail partners for food and grocery manufacturers to thrive.
What we do in these next few months will echo in the health of the sector for years to come. The upcoming Federal election, packaging reforms, energy security, preventive health reforms and the outcome of the ACCC supermarket inquiry will for the industry’s future.
Food and grocery manufacturing generates $163 billion in sales and supports over 280,000 jobs. It cannot be taken for granted.
The challenge
The industry is squeezed between rising costs, tight margins, and evolving regulations on one side and fast-changing consumer patterns that require investment in new and improved products on the other end.
Prices for gas, crucial to many food and grocery operations, have nearly doubled over the last year. Cocoa prices have spiked nearly 200 per cent this year, while paper packaging is up about 30 per cent. Inflation remains sticky for manufacturers.
Meanwhile, wholesale price increases don’t match these higher costs. This is evident in the seven per cent fall in industry profits in 2022-23. This leaves businesses with tough choices: shrink pack sizes, reduce quality, reduce product ranges, move production offshore or shut down.
If the situation hits breaking point, the case for Australian manufacturers to shift overseas builds quickly. This could create a dangerous dependency on imports. Australia risks losing access to its iconic, locally made products. Worse, we’ll be more exposed to supply chain shocks, like those experienced during Covid-19, or global trade conflicts.
It’s about more than business. It’s about food security, rural livelihoods, and the economy’s resilience.
Time for Solutions
To thrive, the sector needs the government to act. A “cost of doing business” agenda is essential, focused on boosting productivity and competitiveness. Tax incentives for automation and digitisation would increase efficiency, reduce costs, and help manufacturers compete globally.
Regulatory changes including the energy transition, packaging changes, climate disclosures will need manufacturers to make major investments. Without government support, these changes will take longer to implement and risk falling short.
Right now, food and grocery manufacturing is overlooked in the national productivity conversation. The focus is on critical minerals and green energy, which while laudable, paints an incomplete picture of Australia’s priorities. Food and grocery is Australia’s largest manufacturing sector, integral to daily life and the nation’s economy.
Finally, we need bold measures to drive investment. An investment allowance, offering accelerated tax deductions, would encourage manufacturers to spend on equipment, technology, and growth. This would shore up the industry’s future while helping to tackle inflation.
Protecting Manufacturing
The stakes are too high to ignore. The food and grocery industry touches every Australian household, from your breakfast cereal to your pantry staples and cleaning supplies. Its size, reach, and impact on everyday life make it a cause worthy of investment.
By supporting the sector with smart, long-term policies, the government can protect jobs, secure our supply chains, and strengthen the economy. The time to act is now. With the right approach, we can ensure Australian manufacturing not only survives but thrives for generations to come.
This article first appeared in the December/January 2025 edition of Food & Drink Business magazine.
