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Australia Food and Drink Report Q4 2010
Business Monitor International, Aug 2010, Pages: 88
The Australia Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Australia's food and drink industry.
BMI View: A mature market, in which we expect reduced consumer confidence in 2011 as a secondary Chinese slowdown and a growing public debt burden weigh on the economy, Australia’s food and drink industry lacks the pull of its Asian emerging market counterparts. That said, high existing consumption levels and susceptibility to higher-value, premium product launches – particularly in categories such as health and functional foods – ensure that expansion and marketing activity remains high as producers and retailers jostle for customers in a highly competitive marketplace.
Headline Industry Data
- Mass Grocery Retail sales to increase by 22.9% to 2014, with the underdeveloped discount sector set to be the key driver of growth – sector sales forecast to increase by 39.7% over that period
- Beer volume sales are forecast to increase by just 2.5% to 1,898mn litres in 2014, although value growth is set to outperform volume growth thanks to ongoing industry premiumisation
- Per capita food consumption is forecast to increase by 2.6% in 2010, but growth is expected to drop to just 1% in 2011 as the Australian economy, and in turn consumer confidence, is hurt by a slowdown in Chinese demand
Key Trends
Dairy Industry Dynamism – National Foods has again demonstrated its commitment to the country, announcing in April 2010 that it was to invest an additional AUD5.5mn (US$5.1mn) in its milk processing plant in Malanda, Queensland, on top of the AUD1.2mn (US$1.1mn) already spent on the plant in the previous eight months. The company also plans to invest AUD55mn (US$49mn) expanding its Crestmead dairy plant. These investments can be seen as an effort by the company to remain competitive amid increasingly tough operating conditions. Also in this vein, in May, Murray Goulburn Cooperative (MGC) entered into a joint venture with French multinational Danone in a bid to improve its ability to compete and manage volatile dairy prices, while also lifting its domestic competitive position. By entering Australia, Danone will benefit from the high-spending market.
Foster’s Comes To A Decision – After much speculation over what Foster’s Group would do with its underperforming wine business it announced that it would be completely demerging its beer and wine divisions. It is expected that Foster’s beer unit will receive particular attention from potential takeover partners. While the Australian beer market is a mature one, which does not allow for explosive growth opportunities, it still represents a valuable asset in any multinational brewer’s portfolio due to high
existing spending levels and a 104.7-litre annual per capita beer consumption rate. As such, this development is likely to generate significant competition in what is already an intensely competitive industry as brewers compete to land a market leader.
Key Risks To Outlook
A secondary slowdown in China would weigh on demand for Australian exports, in turn impacting domestic economic growth and consumer confidence and spending. Furthermore, there is the risk that a slump in house prices would negatively impact the discretionary spending levels of heavily-indebted Australian consumers.
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