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Australia Food and Drink Report Q1 2008
Business Monitor International, Feb 2008, Pages: 74
The Australia Food Drink Report provides independent forecasts and competitive intelligence on Australias food and drink industry.
If one trend can account for Australia’s ranking in the new Food & Drink Business Environment Ratings it is premiumisation. This mature market, with its relatively tiny population and vast areas of unpopulated and under-developed land, ranks second out of 14 Asia Pacific markets in terms of the potential it offers to would be food and drink investors. A high spending population, intrigued by, and willing to part with cash for, innovative products ensures attractive consumption levels and yet these levels are forecast to grow further still thanks to industry dynamism and the continued pursuit of premiumisation. In the newly-published Q108 Australia Food & Drink Report we examine the nature of the investments driving industry growth and assess the five-year sales outlook for the industry.
Two of our industry forecasts that best demonstrate the extent of premiumisation in the local market are our food consumption forecast and our confectionery sales forecast. Food consumption is forecast to increase by 10.4% to US$32.28bn in 2011. This represents considerable growth in a market in which food consumption in volume terms is forecast to remain fairly constant. Of course, this growth will in part by fuelled by rising food prices; a global trend caused by severe climatic extremities of the past couple of years, by heavy demand from the alternative energy sector and by soaring fuel prices which push up both production and transportation costs. However, this growth also reflects an ever-growing Australian demand for higher-value, better-quality food and beverage products. Growth in the confectionery sector perhaps sums this up best. This is a completely non-essential product category which consumers would simply retreat from should rising food prices jeopardise their spending patterns. However, our confectionery sales growth forecast of 5.3% to 2011 in volume terms, is completely usurped by our growth forecast of 17% in value terms, reflecting the fact that Australian consumers are still buying nonessential goods such as confectionery and are increasingly buying more expensive, added-value variants.
This trend is in evidence across multiple sectors of the food and drink industry; soft drinks, alcoholic drinks, frozen foods, snacks and processed foods among them. Two, reasonably small, yet significant investments from the last three months, ably highlight the phenomenon. Coopers Brewery - a mere bit part player in Australia’s vast beer market - announced plans to invest US$9.7mn in production and warehousing in order to boost its market share from 3% to 5% by 2011. The company plans to exploit interest in its premium niche and boutique brands to get one over on the industry giants whose expertise lies in the mass-market sector. Meanwhile US food major Heinz announced a US$8.6mn investment in its Wagga Wagga processing plant, the bulk of which would go towards a new ready meal line. This is notable not just because of the impact that convenience foods such as ready meals have on the value of food sales in Australia, but because it highlights a rare case of a global major opting to stay in Australia and exploit the market’s potential from within rather than looking to the low-cost and potentially higher growth markets of Asia. In summary, the Australia food and beverage market might be mature, but it remains immensely profitable and dynamic.
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