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Australia Food and Drink Report Q2 2008
Business Monitor International, March 2008, Pages: 87
The Australia Food Drink Report provides independent forecasts and competitive intelligence on Australias food and drink industry.
In BMI’s new Food & Drink Business Environment Ratings for Q208, Australia is once again in second place out of 14 markets surveyed in the Asia Pacific region. This time, however, the position is shared with Taiwan, the operating environment of which improved in the past three months. Nevertheless, Australia continues to offer one of the lowest risk regional markets for food and drink companies. Although relatively small (limited by the 20mn population and vast inhospitable areas of land) and mature, strong competition and high per capita disposable income and consumption as well as developed interest in novel products have provided a solid base for dynamism.
The past few months have witnessed a number of changes in the Australian food and drink and mass grocery retail (MGR) landscape. The overall trend is, on the one hand, towards consolidation in the industry, with larger chains continuing to expand through acquisition of smaller domestic operators. In November 2007, Japanese brewing giant Kirin Holdings - which holds stakes in the country’s brewer Lion Nathan, among other interests - acquired Australian dairy and beverage manufacturer National Foods from Philippines-based partner San Miguel Corporation (SMC), which had decided to leave Australia to pursue interests in heavy industry. More recently, in February 2008, one of the country’s largest food manufacturers, George Weston Foods (GWF), acquired meat and smallgoods firm KR Castlemaine.
On the other, premiumisation remains one of the key growth drivers of the Australian food and drink markets. The trend is evident across all food and drink categories, and best illustrated by the record volume sales posted for 2007 by Coopers Brewery. The company’s unique premium portfolio will continue to provide a competitive edge against its rivals in the beer industry, namely market leaders Fosters Group and Lion Nathan, and their mass-market brands, although the recent acquisition of
Tasmanian boutique brewer J. Boag & Son by Lion Nathan poses a threat.
In the current year, however, Australian retail giants are facing considerable challenges. Grocery prices are currently being investigated by competition authorities, with the possible introduction of unit pricing stifling both values and volumes of more expensive items. The threat comes shortly after the legislation banning large retail stores from selling below cost price, which Woolworths - one of the two leading retail groups in the country - has attacked as being unfair. The rising price of fuel will also negatively impact affordability of food items, with many consumers turning to independent retail operators, which are seen as having more consumer-friendly pricing criteria. Australian independent supermarket group FoodWorks is set to explore this potential by becoming the national chain through the opening of stores in the state of South Australia. In the meantime, the take-over and planned restructuring of the retail giant Coles by local conglomerate Wesfarmers will certainly raise stakes in the MGR sector.
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