Offshore trend will take a big bite out of food and grocery jobs

The Australian food and grocery sector’s plan to double the industry’s value by 2030 could result in 16,000 job losses if companies are held back from keeping pace with global competitors.

The Australian food and grocery sector’s plan to double the industry’s value to $250 billion by 2030 via new export markets, growing investment and advanced research says up to 16,000 jobs are at risk if companies are held back from keeping pace with global competitors.

In its Sustaining Australia report, the Australian Food and Grocery Council has outlined three scenarios for the future of the industry, which has experienced stagnant profitability and capital investment.

The high-growth scenario requires the industry to increase the level of domestic consumer spending, a higher rate of wholesale price inflation, a reduction in import penetration and growing new export markets.

Under a declining sector scenario, there is a further erosion of international competitiveness, the pressure to offshore production moves beyond non-food grocery products and domestic production stalls across the decade.

“In this worst-case scenario … sector employment falls by just under 1 per cent a year to be 260,000 in 2030 – a loss of 16,000 jobs over the decade,” the report says.

Prepared by Warren Hogan’s EQ Economics, the report says high growth will not happen ­“organically” and without intervention, the rate of companies moving offshore could increase.

“There is a real risk that the current trend of offshoring manufacturing and importing increasing levels of high value-added food and grocery products could continue to the point where consumers will struggle to find high value-added products made in Australia,” it says.

“Over the 10 years, Australian food manufacturers’ input prices have increased by 49 per cent from 2010 to 2020, whereas output (wholesale selling) prices have only increased by 24 per cent in the same period. Compare this to the broader manufacturing sector where output prices have closely tracked input prices, and the challenge is obvious.”

The $127 billion sector, which supports 276,000 jobs including 108,000 in regional Australia, also faces profitability pressures, with profits in the food and beverage manufacturing sector falling from $8 billion in 2010 to $5 billion.

AFGC chief executive Tanya Barden said if “we do nothing different”, the industry would fall behind global competitors and spark a drop off in investment and jobs.

Ms Barden said rapid consumer demand, online shopping trends and targeting new export markets with Australian-made health, wellness “clean and green” products would guide investment in technologies and advanced manufacturing. including robotics, artificial intelligence and 3D printing.

“It will keep us competitive at a cost level and allow the industry to be agile and more resilient through shocks like Covid,” Ms Barden said. “If you don’t have smart manufacturing and more automation. we will fall behind our global competitors. We’ve already seen the offshoring of some non-food grocery products.”

Ms Barden said the increase in input cost pressures in the past decade had coincided with intensive retail competition and higher energy, commodity and freight price increases. The impact of drought, bushfires and Covid-19 had also placed strain on the ­industry’s growth, supply and cost pressures.

“We have seen that retail pressure through the supply chains, which has had an impact on manufacturing profitability,” she said. “We’re working with retail partners and governments to secure a strong future for the food and grocery sectors.”

Ms Barden said levers needed to be pulled to “shift the dial” and drive long-term growth in the sector. “There’s a great framework through the government’s manufacturing strategy and one ­example is around sustainable packaging and research and development,” she said.