Reality and potential. That is what this week’s Global Food Forum in Brisbane boiled down to. More than 400 people working in agriculture and food and beverage manufacturing – let’s call it what it is, our food system – brought together to hear about the industry feeling the weight of myriad issues while bright and ever present in the distance, the industry’s own green light at the end of the dock with its promise of opportunities, growth, and economic security.
Visy chair, Anthony Pratt’s keynote focused on the industry’s achievements in just the last 10 years – 1200 new food factories, food exports more than doubling to $59 billion, beef exports to China up 200 per cent, farming output up 91 per cent, and food and beverage manufacturing growing 56 per cent.
But then there were sobering moments when the reality of 13 interest rate rises, high energy prices and production cost pressures, finding and retaining employees – and paying them, balancing sustainability targets and ESG expectations, regulation versus reality, accessing export markets and, for the purpose of expediency, “all the rest”, were laid bare.
Ritchies IGA CEO, Fred Harrison, painted the stark picture of how high costs impact not just profits but the ability to then reinvest in the business and its people.
“On the first of July, the (Victorian) state government introduced a mental health levy tax on any company who had a Victorian payroll of more than $100 million, and we fell into that. So, we had to add a one per cent mental health cost to our business, or around $1.5 million, plus payroll tax went up a further one per cent, another $1.5 million, and Victorian WorkCover bill went up $1 million.
“So we were up on the first of July, day one of the new financial year, $4 million in additional costs and that was just from the Victorian state government – don’t worry about the power, the rent, or the wages costs that also went up that day, we were already up $4 million in additional costs. We only pass on manufacturers’ increases, so somehow, we’ve got to absorb those additional costs,” Harrison said.
And while Harrison spoke from the supermarket perspective, the issues of high costs throughout the food system permeated nearly every session.
Looking at energy costs, Noumi CEO, Michael Perich, said gas was a “huge requirement” for the business because it needs heat to generate steam to produce long life milk.
“Our gas prices have gone up fourfold in recent years. We have one of the largest roof mounted solar installations at Shepparton, but it only covers 25 per cent of our power for a few hours of the day. For the rest of the day, we’ve got to supplement it with other power, so reliable gas and electricity are critical.
Bundaberg Brewed Drinks CEO, John McLean, said they have just invested $160 million into a new facility with all the latest technology to help minimise its energy bills, mitigate escalating prices, and keep manufacturing in Queensland.
“Manufacturing poses lots of wonderful challenges every day. But our boiler now only runs very small numbers because we regenerate all our heat off the back of our air and refrigeration compressors, and we balance our processes out that way.
“But as a manufacturer in Australia, we have a lot of toughness, and I agree with what everyone has been saying today. Prices go up and I’ve never seen a price come down,”
Bubs Australia CEO, Reg Weine, said the energy costs for its canning facility are bruising because of the equipment needed.
“Bubs is an amazing little business. We’ve got this incredibly capable, talented and engaged team. We’ve got this beautiful brand that I think is limitless in its potential globally.
“Revenues last year grew about 30 per cent year on year. We’d expect that growth to continue in FY25 which is great. Our US business doubled year on year to about $50 million in revenue, and we expect to be profitable for the first time since listing as a company back in 2017.
“But I’m not sure I can make a business case today for an energy-intensive facility located in Australia,” Weine said.
Perich pointed out that there is a flipside to free trade agreements (FTAs) in that Australia has to open itself up to imports.
“The customers we deal with everyday are also global players and we have a good relationship with them, but they will look to import product instead if the economics makes sense.
“The average consumer will buy Australian if it’s a similar price, they’re not normally going to pay more or less – so there a value proposition around it. What I get concerned about from a manufacturing perspective is we’ve got to be careful we don’t price ourselves out of the market. We don’t manufacture a car in Australia anymore because we priced ourselves out,” he said
Costa Group CEO, Marc Werner, said a shortcoming of free trade agreements is they only address tariffs, meaning other barriers like export protocols were overlooked. For a fresh produce company like Costa, those protocols included issues like the treatment of produce for fruit fly. These negotiations are then deferred to the Department of Agriculture as a “technical issue”.
“The department does a great job under difficult circumstances, but these technical negotiations often take many years, and they seemingly do not attract the whole-of-government attention that is given to resolving market access issues for wine, meat, grain and more recently lobster,” Werner said.
That lack of being a “trade priority” was “immensely frustrating” for the group, particularly as over the last decade it “had to sit by and watch many other countries with inferior product gain access to China, Peru, Chile, Mexico, Argentina, Canada and even the US”, he said.
And while Australia has access to Japan – one of the biggest importers of avocados – for avocados grown in Western Australia, it doesn’t for Queensland, where 65 per cent of the country’s avocados are grown.
Apart from the loss of an export market, it also causes an oversupply domestically, which depresses pricing.
“If Queensland had access to Japan, then together with the West Australian access, Australia could supply the Japanese and China markets, year-round, something no other country can do.
“This would not require any complex regulation or threatened actions and fines, but would make a meaningful difference,” Werner said.
Werner said a “whole of government” approach was needed to negotiating export protocols for these products in the same way as the government had backed other exporters, such as barley and wine producers.
“We need the Agricultural Minister, Trade Minister, Foreign Affairs Minister and even the Prime Minister, to take up the cause of export market access for Australian-grown fresh produce,” he said.
The role of government was a hot topic throughout the day. Jeff Kennett, chair of CT Management Group and Original Juice Company, made his opinion known when he said, “Governments are screwing the private sector”.
Kennett was highly critical of the government, particularly in relation to the recent heat put on the supermarkets.
“So, if governments are serious, address some things that they can add rather than set themselves as private enterprise arbiters. It doesn’t work and never has,” he said.
For Kennett, the role of government is to create cohesion across critical resources and services to give certainty and stability to the industry.
“My greatest regret in all of my life is that since Anthony’s (Pratt) father and I, in the 1990s, started arguing for a national water plan and a national agricultural plan – and now has to be one for security of energy – nothing has happened. We have wasted decades,” Kennett said.
Independent Food Distributors CEO, Richard Forbes, warned that Australia’s supply chains are at risk of collapsing in a disaster if a comprehensive national food plan isn’t developed.
“We need a food supply chain resilience plan because make no mistake, it’s coming and we don't have a plan for it.
“When Covid hit the UK, the US and Canada pumped billions of dollars into their economy to strengthen their food supply chain. What’s Australia done?” he said.
Forbes added that Australia has never had such a plan, but in 2013, Julia Gillard as prime minister tried to get one underway, but the change in government saw it relegated once more.
Bega Group chair, Barry Irvin, called on greater coordination between state and federal governments for the industry to be propelled forward.
“In reality, we have different policies on water, estuary management and all sorts of opportunities that we might have had in this country, and we can’t even get a single policy or plan because every state government has a different idea.
“That calls for a national plan that actually looks into areas such as what resources do we have, and how we can best implement it,” Irvin said.
So, what’s going on here? Whether you’re a farmer or manufacturer in Australia’s food system, the call is there – we need a plan, any plan! Food, agriculture, water, energy – so many choices.
If there is something we all know, is that governments love a plan almost as much as they love forming the committee to formulate the plan.
There are those that will say, just get on with it. We don’t want/need more government oversight or regulations, but that is the equivalent of being a climate change denier, so you can still do your thing, run your business, and stay in your lane.
For everyone else, national plans are important because they provide an operating structure, a context, of how the system fits together and where their product or service not only fits but has opportunities to explore. Such plans give people and the business world surety. And when the wheels fall off – be it a pandemic, catastrophic weather event, geopolitical unrest, a biosecurity incident, or – it means we have systems, structures, communication channels, and well, A PLAN to lean on.
The reason it hasn’t been done is because it’s not urgent in terms of the political definition of urgent. It’s important, but not urgent. It’s not going to be ripping through talkback radio, it won’t make the front page of the daily metros instead of it’s not in the urgent column. It’s difficult, nuanced, requiring collaboration and negotiations, maybe even compromise from all the sectors that need to be included. I mean, it might as well be dead.
But not getting airtime or being an election winner should not be enough to snuff it out. And from the sentiment expressed at the GFF this week, that green light in the distance, that we’re desperately trying to row towards, may be closer than we think.
