Australia lags in food processing

By Boyd Champness

AUSTRALIAS much-vaunted food-processing sector was not quite the success story it is often made out to be, according to a recent study published in the Stock and Land.

Australia may be one of the worlds largest exporters of agricultural produce but, when it comes to adding value to that produce through processing, it lags severely behind its competitors.

The study, by Sydney-based strategic analysis consultancy firm INSTATE, shows that Australia is dragging its feet on processing, which has become the fastest-growing sector of the export market.

More importantly, processing is seen as the sector offering the most promising jobs growth prospects for struggling regional Australia.

Food processing is Australias biggest manufacturing industry, worth A$46 billion (17bn) in 1997-98.

But figures from the Department of Foreign Affairs and Trade reveal that, while Australias unprocessed food exports grew by almost 40% from 1994 to 1998, processed food exports increased by a paltry 5%.

More damning are statistics for the same period (but using different definitions of “processed food”) compiled by the International Trade Centre.

These show Australias growth of processed foods at 1.8%, compared to United States growth of 21%, Germany 9.9%, France 9.2% and a global growth of 7.9%.

According to the report:

• Labour productivity in Australia lags behind other countries, which means the more value added to a product, the less competitive it becomes;

• Investment in research and development by Australian food manufacturers is falling, limiting our ability to produce unique products that are able to compete on anything other than price;
• The cost of farm products in Australia is generally no cheaper than those incurred by overseas competitors, resulting in no comparative advantage for exporters.

INSTATEs managing director Denis Gastin told the Stock and Land that Australia was continuing to focus on exporting unprocessed foods despite this sector having shrunk from 50% of total food exports to 25% in the past 20 years.

He said other countries were recognising the importance of developing markets for branded food products.

This enabled the supplier to exercise a degree of control over price and quality, retain more value on-shore, and develop brand loyalty direct with customers.