Australia’s food and grocery manufacturers feel the effects of years of pandemic and supply chain disruptions. New analysis shows a drop in food product investment and a dip in job numbers.
The latest AFGC State of Industry (SOI) data shows the food and grocery manufacturing industry, the largest manufacturing sector in the nation, increased in value by 7.4 percent to AU$144.1 billion in 2021-22 as domestic consumption and prices rose while exports rebounded from declines during the COVID-19 pandemic.
Despite the headline value growth, driven by inflationary prices and recovering exports, employment in the sector slipped one percent, with regional areas particularly affected due to labour shortages and COVID-era border closures.
Capital investment across the industry was almost flat at 1.6 percent growth. While investment in beverage manufacturing enjoyed a healthy bounce, up 55 percent on the previous year to AU$1.02 billion, investment in the larger food product manufacturing subsector showed a 12.3 percent contraction, year-on-year, to AU$2.23 billion.
The SOI report represents a detailed analysis of Australian food and grocery manufacturing performance. This latest report analyses the 2021-22 period, which was affected by pandemic-related disruption, the war in Ukraine and supply chain impacts.
AFGC CEO Tanya Barden said cost pressures on the domestic industry remain high.
“The landscape has changed dramatically for food and grocery manufacturers with limited relief after three years of natural disasters, COVID disruptions and war in Ukraine,” said Barden.
Like anyone doing their weekly shopping feels the effects of higher inflation, Australian manufacturers also battle higher freight, labour and energy costs.”
The AFGC has also seen a shift away from ‘just in time’ supply chains to ‘just in case’ since the pandemic, and manufacturers are now holding higher inventory levels to maintain supply, which pushes costs higher.
“These are significant challenges for an industry that must attract new capital to embrace new technologies and remain competitive with offshore competitors after more than a decade of stagnant investment.”
Separately from the SOI report, data from the Australian Bureau of Statistics (ABS) showed producer prices in food manufacturing, which include the cost of inputs used by manufacturers and the wholesale price of goods, rose 12.5 percent between June 2021 and June 2022.
This is above the Consumer Price Index (CPI) inflation of 6.1 percent for the same period. Since June 2021, ABS data shows the value of inventories has risen from AU$8.8 billion to AU$11.3 billion in March 2023 for food manufacturing.