Australia’s Food Manufacturing Industry Faces Rising Costs and Increasing Imports

Australia is known for its abundant fresh food production. However, when it comes to processed foods like canned fruits, sauces, and packaged snacks, there is a growing trend of these items being imported. In some cases, Australian-grown food is processed overseas and then re-imported. Shoppers, such as Cody Summers fr om Hobart, often have little knowledge of wh ere their food originates and make purchasing decisions primarily based on cost.

Beth Joyce and Annette Bailey prefer to buy Australian-made products but acknowledge that significant price differences can influence their choices. However, the rising cost of doing business in Australia is a major concern for local food manufacturers.

For instance, Australian cannery SPC recently reduced its orders for pears and peaches by 40% due to declining demand, as consumers opt for cheaper imported products from countries like South Africa and China amid the cost-of-living crisis. Ken Mahlab, owner of a Melbourne-based biscuit factory, highlights the struggles his business faces with increasing ingredient costs. He stresses the urgent need for government intervention to prevent the decline of food manufacturing in Australia, similar to what happened with the car manufacturing industry.

Large manufacturers like Cadbury are also grappling with the rising costs of production. Darren O’Brien, president of Cadbury owner Mondelez’s Australian arm, points out that increased energy costs, regulatory complexities, and a lack of investment incentives are significant challenges. O’Brien is currently deciding whether to invest millions in upgrading Cadbury’s factory in Tasmania or move operations overseas, emphasizing that once businesses relocate, they rarely return.

Smaller manufacturers like Simon Wise, who runs a sauce and jam company in Tasmania, also express the importance of supporting Australian-made products to protect jobs and local farmers. Despite the rising costs of ingredients and packaging, Wise's company is investing in new equipment to improve efficiency and absorb costs without passing them on to consumers.

The shift towards cheaper imports is evident, with Professor Roger Stanley from the University of Tasmania’s Institute of Agriculture noting that consumers’ purchasing decisions are driven by price. This trend is reflected in a parliamentary inquiry showing that about 11% of the food consumed in Australia is imported, primarily packaged and canned food. The Australian Food and Grocery Council reports a decline in the profitability of the food and beverage manufacturing sector, which dropped from $8 billion annually in 2009-10 to $5 billion a decade later.

Tanya Barden, CEO of the Australian Food and Grocery Council, emphasizes that while Australia produces a significant amount of agricultural output, the processing sector is at risk. Agrifood strategy consultant Dr. David McKinna warns that the decline of the food manufacturing sector could lead to substantial job losses in regional areas, impacting towns like Shepparton, Ballarat, and Albury-Wodonga.

In response, the federal government highlights initiatives such as the $15 billion National Reconstruction Fund and a $392 million grant program aimed at early-stage innovation to help Australian businesses invest and grow. Assistant Minister for Trade and Manufacturing, Senator Tim Ayres, states that $100 million is being invested in research to improve the productivity and sustainability of the food manufacturing sector.

The industry remains hopeful that these measures will provide the necessary support to sustain and grow local food manufacturing in the face of rising costs and increasing competition from imports.