Australia's AUD$108 billion (US$112 billion) food and grocery manufacturing industry stands to lose competitiveness without reforms, a recent report has shown.

The Australian Food and Grocery Council's (AGFC) and  A.T. Kearney  '2020: Industry at a Crossroads' report, said reform measures were needed to target investment incentives, improved skills development and a more competitive retail sector, or else 130,000 jobs could be lost.

In addition, the report found a further 6,000 jobs could be lost in associated industries like agriculture.

"Industry turn-over is forecast to decline by 0.2 per cent per annum over the coming decade from (AUD)$108 billion (US$112 million) to between (AUD)$105 billion (US$109 billion) and (AUD)$106 billion (US$110 billion) in 2020," the report said.

"Over that same period, retail demand is due to grow at 3.7 per cent per annum with the growth gap being increasingly filled by imports and retailers’ private label products," the report said.

In a release, AFGC chief executive Kate Carnell said the report aimed to tackle the industry's 'intense' challenges to improve sustainability, profitability and competitiveness.

"Australians and our political leaders overwhelmingly want a local, value-adding food and grocery manufacturing sector – it’s Australia’s largest manufacturing industry that we can’t live without," she said.

"Consumers want to be confident about buying affordable food and grocery brands, that they know and trust.  I urge all political leaders – both Federal and State – to seriously consider this report and reconsider the current business-as-usual approach towards the sector."

The report found regional towns in the states of New South Wales, Victoria and Queensland would be the hardest hit by employment losses.

Challenging environment, but opportunities exist

A.T. Kearney Australia vice president Irvinder Goodhew, said the current approach to food manufacturing was no longer acceptable.

"Using a combination of economic modelling, interviews and surveys with industry leaders, our report concludes that food and grocery manufacturing is facing pressures on many fronts.  Retailer concentration, a high Australian dollar, low-cost country manufacturing, energy prices, global commodity volatility and labour scarcity will continue to create challenges for the sector.

"Private label development continues to erode margins for many players, as does the relative cost position of Australian manufacturers – it’s simply more expensive to do business here. Compared to the lowest cost regional competitors, Australia has an average 22 per cent cost differential.

"A ‘do-nothing’ approach in this area is no longer acceptable – the time for a new policy menu to encourage investment, innovation and growth is now as the jobs and livelihoods of 312,000 Australians, and the future of our food supply, depends on it."

Carnell said that despite the current challenges, Australia was in a good position to leverage off its strong economy and help feed the world.

"Australia has the capacity to produce high quality, healthy food and groceries for Australia's growing population and to contribute to feeding the world. But this will not happen unless there is commitment from government, industry and consumers."

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