Australia's beverage industry has demonstrated resilience, defying expectations of a 'craft beer recession,' according to a report from inventory management software provider Unleashed. The Australian Manufacturing Health Index, measuring industry fitness on a scale of 0-100, indicates a score of 70 for the beverage sector, showcasing its robustness. In contrast, the food industry in Australia scored lower at 30.
Excess stock levels have decreased in both sectors over the past year, from $69,239 to $59,623 in beverages and $286,005 to $224,025 in food. Despite concerns about a cost of living crisis and tightening margins, Australian food and beverage manufacturers, particularly independent small to medium-sized businesses, have displayed innovation and adaptability.
"The sentiment for Australian food and beverage manufacturers may be gloomy off the back of a cost of living crisis and tightening margins, but the independent SMBs have proven where there is a will, there's a way for innovating on products and attracting new consumers," said Jarrod Adam, Unleashed Head of Product.
By contrast, New Zealand's struggling beverage and food industries are on the ropes, scoring just 2 and 1 out of 100, respectively.
The Manufacturing Health Index, encompassing small to medium-sized manufacturers in New Zealand, Australia, and the United Kingdom, highlights the challenges faced by the manufacturing sector of these countries. While the overall score for Australian manufacturers is 63 out of 100, indicating a rebound from pandemic challenges, the sector's performance is varied. The report identifies a distinction between industries performing well and those facing challenges. In particular, the 'rag trade' or clothing manufacturing sector has seen a resurgence, with a health score 96, reflecting improved profitability and reduced overstock volumes.
Despite a positive overall score, Q3 2023 has been a case of the haves and the have-nots in Australian manufacturing, where most of the 16 sectors studied are either doing poorly or very well.
Nine of the 16 industries scored 39 or below, and the remaining seven registered a health score of 57 or better. Further, only Beverages (57) registered within the 40-60 range, compared to New Zealand and the UK, which had six each in the middle range.
A secondary concern for the broader Australian manufacturing industry is high levels of overstock, which Unleashed calculates in terms of inventory in excess of the needs of a business.
Unlike New Zealand, which is gradually reducing the amount of excess inventory on its books, Australian manufacturers have seen these numbers rise since last year, up to an average of $259,390 from $244,205 in 2022.
Australia's cosmetics and personal care industry faces challenges, scoring only 13, the lowest among the 16 industries studied. Consolidation within the sector and the entry of prominent international players have impacted smaller independent brands. In contrast, New Zealand's cosmetics and personal care brands scored a perfect 100 in health for Q3. Additionally, Australia's sports and recreation manufacturing sector scored 17, indicating diminishing profitability despite improvements in lead times.
Australia's building and construction industry scored 76, demonstrating robust health based on improving overall profitability. However, the industry continues to grapple with overstocking. Overall, while individual industries within Australian manufacturing show diverse health positions, the sector appears to be heading in the right direction. Industries like Industrial Machinery, Raw Material and Equipment, and Automotive and Automotive Supplies have received a perfect health score of 100, showcasing their ability to navigate a complex economic environment and maximise operational efficiency.
