Noumi sounds warning on high-cost Australia

Lessons needed to be learned from the closure of industries in Australia because of high domestic costs, Noumi CEO Michael Perich warns.

Australia needs to be careful that it does not price itself out of the market by making its manufacturing sector too expensive, food producer Noumi’s chief executive Michael Perich has warned.

Mr Perich said customers liked to buy Australian products, but they were not prepared to pay significantly more for locally made goods.

He said the expansion of free trade agreements by Australia with countries overseas had also led to an expansion of offshore companies that sold into the Australian market and competed with local producers.

“The average customer will buy Australian if it is a similar price and not normally more if there isn’t a value proposition around it,” Mr Perich told The Australian’s Global Food Forum in Brisbane on Wednesday.

“That’s one of the risks we have in Australia.”

He said lessons needed to be learned from the closure of industries in Australia, including car and clothing businesses, because of high domestic costs.

“We don’t manufacture attire in Australia anymore because we priced ourselves out,” he said.

“We have to be careful we don’t price ourselves out of the (food manufacturing) market.”

Mr Perich said gas was a huge requirement for Noumi’s businesses to be able to create long-life milk, and that without a reliable energy source, more businesses were going to struggle to be competitive.

“Our gas price has gone up fourfold over the last number of years,” he said.

“We have one of the largest roof-mounted solar installations on our roof, but it only covers 25 per cent of its power.”

He said the company had to use outside electricity sources for the rest of its requirements.

Australia also had high costs in terms of access to water and labour.

Noumi chief executive Michael Perich speaking at the Global Food Forum in Brisbane. Picture: Glenn Hunt

Reg Weine, the chief executive of infant formula group, Bubs Australia, told the forum the company was on track to report a profit for the first time since it listed in 2017, as it expanded into new markets, including the US, Japan and Vietnam.

“We’ve got this beautiful brand which has limitless potential globally,” Mr Weine said.

“We operate in a very large addressable market in infant nutrition and adult nutrition.”

He said the company’s revenues had grown by 50 per cent last year.

“We would expect that growth to continue,” he said.

“Our US business doubled year on year to about $50m in revenue.

“We expect to be profitable as a company for the first time since listing in 2017.”

He said the company’s sales to China were “going through a well-publicised reset in the last few months.”

But it also had good markets in the US and Japan.

“Japan is a good market for us, Vietnam is an exciting market for us,” Mr Weine said.

He said the company had been given a significant boost in 2022, when US President Joe Biden announced that the company had been given special dispensation from the US Food and Drug Administration to fly in more of its formula during an infant formula shortage in the country.

While this was a great benefit for the company, it still had to take advantage of the market boost by rolling out its sales program in the US.

“But then of course you have to execute,” he said.

He said Bubs Australia now sold in more than 5800 bricks-and-mortar stores in the US.

But he said about half of its revenue in the US came from e-commerce platforms such as Amazon.