By Produce Marketing Association (PMA) Australia-New Zealand CEO Michael Worthington
The big news in Australia recently was the announcement that the country's largest fruit processor, SPC Ardmona (part of the Coca-Cola Amatil Group) was halving its intake of peaches and pears for its canning operations, citing “imports from countries with lower labour and production costs” as the main cause, and obviously not helped by Australia’s strong currency.
This announcement joins a long line of similar stories from the processed (canned and frozen) fruit and vegetable sectors about the serious impact that imports are having on the industry.
So what does this mean for the imports of fresh produce into Australia?
At the moment, about 95% of all fresh fruits and vegetables consumed in Australia are produced in the country and there are a number of reasons for this:
- Australia has a strong biosecurity regime to protect itself against unwanted pests and diseases that not only have the potential to severely impact the specific industries, but also cause ripple effects to other sectors;
- Australia is a relatively small consumer market that is a long way from exporting countries, which does not make it logistically easy for them;
- Many fresh products have a built-in barrier to imports for shelf-life reasons – it does not make sense to export leafy vegetables, for instance, to Australia;
- The retailers are responding to Australian consumers' demand for locally-grown over imported product when it comes to fresh – but more of that later;
- The bulk of fresh imports such as cherries, grapes, citrus and asparagus are counter-seasonal to local production, so there has been ready acceptance by consumers who are looking for year-round availability.
So, fresh imports have a number of 'barriers' that the processing sector just does not have. But the two are inter-connected. Growers of crops for the declining processed sector are looking to switch to the domestic fresh market as an alternative, leading to oversupplied markets and depressed prices, with the obvious flow-on effects to the existing fresh growers. This has been very evident in the potato industry, with experienced growers trying to break into the fresh market as their processing contracts dry up.
More products are gaining access to the Australian fresh produce market. For instance California grapes have now got access to Western Australia and mangoes from Pakistan could soon make their way to Australia. But these are still mainly to fill counter-seasonal gaps in the market, with not too many examples of imported product competing head-on with the local season.
The industry is watching with interest to see how the importation of same-season apples from New Zealand will evolve. So far exporters have faced difficulties in meeting the strict quarantine rules, retailers have been fairly reluctant to upset the apple-cart by stocking NZ apples, and the local industry has had a strong "Aussie Apple" marketing campaign - all meaning that so far the 'floodgates' have not opened.
Interestingly, there are examples of where imports have actually stimulated local industries, under the old adage that "import competition stimulates innovation". Consumption of fresh asparagus in Australia has grown 30% over the past decade as product has become more readily available from both imports and domestic suppliers; and, the domestic garlic industry has expanded to provide Australian consumers with an alternative product to the low-priced imports from China.
If we assume that there is a gradual (and it won't be any more than gradual) build up of imports, with potentially more 'creep' into the market windows that are currently exclusively supplied from local production, how will consumers react? Will they continue to support local growers or will they switch to imports like they have done so strongly with processed fruit and vegetables?
A recent survey conducted by Colmar-Brunton on Australian consumers' attitudes to purchasing Australian-made, indicated that 83% of consumers would prefer to buy Australian fresh produce, but the same percentage also said that they prefer to purchase shelf-stable food from Australia. If 4 out of 5 consumers are saying this, why then is food manufacturing in such dire straits? The survey also found that 58% would pay the higher prices to help sustain local production, but do they really, when it comes to making that final decision on shopping day?
So for the moment, imports in fresh produce into Australia are a long way from causing the massive pain that is being felt in the processed sector, but the industry does need to think long and hard now on how it will deal with potentially higher import volumes in the coming years.