At The Australian's Global Food Forum in Sydney this week, a panel of industry leaders weighed in on the question.
The short answer is “very unlikely”, for although both industries are capital intensive, labour intensive and have high fixed costs, the similarities end there.
In a panel session chaired by The Australian's business editor Erik Johnston, an optimistic view of our food industry's future was shared by panellists Tanya Barden, CEO of The Australian Food & Grocery Council; Terry O'Brien, (former CEO of Simplot) chairman of Clean Seas and Bundaberg Brewed Drinks, and René Dedoncker, managing director, Fonterra Australia.
In her opening quip, Barden said “I like to think that we’ve always been much better at making food than Fords...” and went on to qualify why.
I like to think that we’ve always been much better at making food than Fords...
“The food and beverage manufacturing industry has always been founded on a comparative advantage that the car industry never had. It’s a sector that has been incredibly resilient over many years and has a much greater level of competitiveness and efficiency,” Barden said.
She shared a few key figures to back up her statement, and draw a clear comparison between the two:
“The turnover of food and beverage manufacturing is $105 billion annually, which is six times the size of the car industry.
“It has got a value-added of $29 billion to the Australian economy, which is eight times what the car industry contributed, and... it employs 290,000 people, 40 per cent of which are in regional areas, where car manufacturing, even at its height, employed only about 100,000 people."
She added that the car industry was very domestically focused, where food and grocery manufacturing has a very strong export focus.
“We export about $29 billion of processed food annually, as well as beverages, and that really builds on [our] comparative advantage... clean, green, safe.
“... and the car industry was very heavily subsidised. It was something like about $30 billion up until 2013, so even more since then, where food and grocery manufacturing gets very little by way of government assistance, and it has really driven itself to be much more efficient, investing in innovation technologies, becoming lean and efficient.”
Terry O'Brien was asked to comment on the food industry's future from the perspective of his recent role as CEO of Simplot.
He made the point that the industry's fortunes have changed significantly over the last decade, that food manufacturers are 'back in the game' as a result of a reduction in wage increases, a more stable Aussie dollar, and industry consolidation, among other factors.
“If you go back 10 or 12 years, we were regularly facing annual wage increases of four to five per cent. Just about everyone in the food industry were facing that and it was – the productivity gains had started to fall away.
“And so when you added to that the increased competitiveness of the retailers in Australia, the margins started to really suffer,” O'Brien said.
“I’m actually quite confident now that things have changed to some degree. In those days, you were battling to keep the imports out, let alone think about exporting anything, but if you look over the last six or so years, the wage increases have dropped down to more like one-and-a-half to two-and-a-half a year. I know there’s a lot of press at the moment looking for that to be re-stimulated, but what it has done is it has put a lot of Australian food manufacturers back in the game.”
“Also, of course, the Australian dollar [is] back to, sort of, closer to more historical levels and reasonably stable, which is a major positive for export.
“I think also there has been a bit of consolidation in Australia of a number of companies that have... stimulated again the ability to have the capacity to start thinking more about export.”
O'Brien noted that the current market (increased export demand for Aussie food products) favours SMEs, with government grants available as well as education on how to go to export through organisations like FIAL – Food Innovation Australia Limited – on whose board O'Brien also sits.
There are large companies, of course, who are having success in export markets and Johnston asked René Dedoncker about Fonterra Australia's experience of exporting to China.
Dedoncker said that food produce made in Australia is “incredibly attractive” in China.
“I think the provenance story that we have is one aspect that unifies us. And what we’ve discovered is that – it’s not as easy as just making it here. You need to have access to markets. And, in China, the pizza story [alluding to a figure cited earlier in the day that one half the pizzas in China are carrying mozzarella made by Fonterra] is driven by the fact that we’ve got people on the ground in 70 cities, and 71 tomorrow, that are creating the opportunity...
"... but the fact that they want to buy it from Australia is because of our provenance and because of the quality and because of the betacarotene in our cheese which makes it yellow, and that makes a huge difference.
“People need to trust in the source of produce that we make here. That is our competitive edge. That’s the advantage. But to do that, you need to systemise it.
“People judge us in the moment. You know, they stretch pizzas, they look at our products. And consumers today Snapchat it, Instagram it, Facebook it and judge us in the moment.
“And if we want to continue to have the integrity, then we need systems behind that that give authenticity – tell you where the product comes from, ideally, trace it to farm and can fingerprint it back to a cow.
Johnston interjected that branding also has a strong part to play, and Dondecker agreed: “I think it goes hand-in-hand. Branding and the source, the fact that it comes from Australia as a source – those two things do go together to create the equity over time.”
Does the Australian food industry need a unifying brand mark?
As a last word on branding in export markets, during question time the subject was raised of devising a single brand to represent Australian produce (like the successful Pure New Zealand branding).
Barden was of the view that the food industry needs a "common theme, some common messaging that provides an umbrella within which state brands can sit, within which strong company brands can also sit, but so that you have got consistency of message".
Dedonker said: "So the interesting thing with New Zealand is that they worked out pretty quickly what the market was. It wasn’t fighting each other. It was going to the world. And I think that’s what we have got to get our head around here, you know. Are we – is it argy bargy inside the boundaries of our country or do we say, collectively, there are some things where we come together?
He concluded that there is merit in a unifying mark.
"I think an Aussie mark that complemented a Western Star product that we put on shelf in Malaysia, I think it makes great sense. So you can get the best of both worlds. You can still have your brand identity but you can say it’s the real
thing. So I think there’s merit in that."
