Grim forecast for food industry

Sue Neales
The Australian
March 08, 2012

THERE are dire times ahead for Australia’s food-processing sector, with more fruit and dairy factories to close and jobs lost.

That was the grim forecast yesterday by leading agrifood consultant David McKinna at the Australian Bureau of Agricultural and Resource Economics and Sciences annual Outlook conference in Canberra.

Dr McKinna says the Australian food industry is in the grip of the biggest structural shift in its history.

The damage is being caused by frugal consumers chasing cut-price specials and the swamping of the food market by the discount home-brand labels of Coles and Woolworths, often containing cheap food imports.

Dr McKinna predicts that price and market squeezing by the two dominant supermarket chains will eventually drive even major food companies such as Simplot and SPC Ardmona to abandon local processing.

He said the closure of the Heinz tomato processing factory at Girgarre, near Echuca, the move of frozen vegetable processor McCain to New Zealand, and the closure of SPC’s Mooroopna canned stonefruit plant were harbingers of worse to come across rural Australia.

In the past six months, 600 jobs have been lost from Victoria’s fertile Goulburn Valley, where many fruit and dairy factories are based.

On Tuesday, Australia’s largest processor of dairy products, Murray Goulburn, announced it would stop producing powdered milk at its Rochester factory in April, costing another 64 jobs.

“These are jobs that are all going offshore to places like Malaysia and China because, frankly, multinational food companies are being driven out of business in Australia by the immense power of the two supermarkets,” Dr McKinna said.

“And it is regional Australia and small country towns that will bear the brunt of this shift; jobs will go, schools will close, the local doctor will leave and there will unfortunately be suicides — we are talking about a massive social impact here.”

Local food processors are finding their own brands such as SPC Goulburn Valley fruit tins or Birdseye frozen Tasmanian peas increasingly unable to compete either in shelf space or pricing with Coles and Woolworths-branded products.

Sales of the so-called private food labels of the two supermarkets in Australia total $30 billion a year, 25 per cent of the mass food market. Dr McKinna forecasts this share will leap to 50 per cent of all food sold in five years.