If food manufacturing is the national priority many say it is, a coordinated approach across jurisdictions, policies and incentives needs to be developed, says Mondelez International president ANZ/Japan Darren O’Brien.
Speaking at The Australian Global Food Forum, O’Brien said Covid’s impact on the supply chain had a knock-on effect around the world and opened people’s eyes to the importance of sovereign capability.
War in Ukraine, inflationary pressures, and food supply shortages are putting immense pressure on manufacturing.
Inflationary pressures
“We heard Steven Cain [Coles Group CEO] talk about pricing pressures coming through food inflation, but we haven’t even started to see what the potential demand side pressures are going to be.
“The latest inflation numbers we saw – 5.1 per cent – I suspect we'll see that pushing up towards double digits over the next couple of quarters. If the Reserve Bank continued to pursue it two to three per cent range for inflation – and using interest rates is a very blunt way to address that – you’ll slam the brakes on the economy,” O’Brien said.
The dominoes fall from there, with added price pressures affecting demand, which then impacts jobs flow on effects on demand
He said one of the things that will affect demand is added price pressure, which starts to impact jobs, compounding skills shortages, a lack of labour and labour force planning.
O’Brien touched on the lack of policies and incentives to address workforce and skills shortages in the agricultural sector, giving the example of the dairy farmers Mondelez works with in Tasmania to produce Cadbury chocolate.
“There are 46 dairy farmers in Tasmania who provide 130 million litres of milk a year for Cadbury chocolate. Their average age is 70,” he said.
“If we do want to be a highly successful food bowl domestically and for export, we’ve also got to make sure we have people who are willing and incentivised to work in the agricultural sector.”
Is food manufacturing the priority we say it is?
In terms of food manufacturing, he said while much is said of its importance, the question needed to be asked if it was a priority; pointing out there is a federal agriculture minister but not a food manufacturing minister. Instead, it is filtered across many fields, including health and environment, and then state jurisdictions need to be considered.
“If you’re a business trying to take an end-to-end view, from farm to customer, you look at every element required. We don’t do that from a food manufacturing point of view in Australia.
“We get ideas, many of them well intentioned, policies that are floated, whether it be on the manufacturing side or potentially agriculture or other incentives, but there isn’t a coordinated approach. There isn’t an end-to-end view,” he said.
He gave the example of CO2 emissions strategies. “It is seen as an energy policy, no one is looking at it in terms of the broader implications and what it means for food manufacturing.”
Labelling requirements were one example of how food manufacturing is made difficult in Australia, he added.
“Allergen labelling requirements are due to be put in place around mid-2024, and there are now discussions around sugar labelling.
“We have recycled labeling requirements around redcycle and other things on the packaging and then there's a health star rating system coming out of state governments.
“We've got about one thousand SKUs in our business. Every time we touch a piece of packaging, on average it costs us around about $5000. So, the change every pack costs $5 million.
“If you have to do that five times because none of those various labelling strategies have been linked up, or even looked at on how you can either coordinate them or reduce the cost, that’s $25 million, and we’re one business.
“Now that’s $25 million that could otherwise go into modern manufacturing, investments, plant equipment, innovation, advertising.
“This is what we need to look at.
“We have to stop talking about food manufacturing vendor priority and actually say, what does it take to win? What are the policy settings? What is the end-to-end view that we need to have and how do we make sure that lots of individual well intentioned policies or frameworks can be joined up to provide an efficient mechanism for us to be able to grow, be effective, and sustainable?”
O’Brien said he is optimistic about the sector, having proven tis resilience during the pandemic. Now is the time to capitalise on what was learnt.
