The Australian Food and Grocery Council’s (AFGC) State of the Industry report shows the food and beverage manufacturing sector is still suffering the side effects of Covid, recent natural disasters and the war in Ukraine.

While the data shows the food and grocery manufacturing industry increased in value by 7.4 percent to $144.1 billion in 2021-22, thanks largely to increases in domestic consumption and prices, as well as a rebounding in exports, employment slipped one percent, with regional areas particularly affected.

The data, which analysed the 2021-22 period, also showed that capital investment across the industry grew by only 1.6 percent. This was largely driven by a strong increase in investment in beverage manufacturing, up 55 percent on the previous year to just over $1 billion. Investment in the larger food product manufacturing subsector suffered a 12.3 percent year-on-year contraction, to $2.23 billion.

“The landscape has changed dramatically for food and grocery manufacturers with limited relief after three years of natural disasters, Covid disruptions and the war in Ukraine,” said AFGC CEO, Tanya Barden.

“Just like anyone doing their weekly shopping is feeling the effects of higher inflation, Australian manufacturers are also battling higher costs in areas includeing freight, labour and energy.”

Australian Bureau of Statistics data also shows increased cost pressures for food manufacturers, with producer prices, which includes the cost of inputs and the wholesale price of goods, rising 12.5 percent between June 2021 and June 2022. This is higher than CPI inflation of 6.1 percent for the same period.

Barden said that since Covid, the industry has also noticed a shift away from ‘just in time’ supply chains to ‘just in case’, with manufacturers holding on to higher inventory levels to maintain supply, which drives costs up.

“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,” she said.

Key findings from the State of the Industry report include:

  • The value of turnover in the Australian food and grocery industry rose from $134b to $144.1b, a 7.4 percent increase driven by price rises, higher domestic consumption and export growth
  • Employment in the industry fell from 273,002 in 2020-21 to 270,661 in 2021-22, a drop of 0.9 percent likely due to labour shortages and border closures
  • Industry employment remained strong in regional Australia with 36.9 percent of the industry workforce located outside major metropolitan centres, albeit down slightly from 40.3 percent in 2020-21
  • Sector exports increased by 15.3 percent to $39.4b, regaining most of the losses of the previous year but still down on pre-pandemic levels
  • Capital investment grew by a slim 1.6 percent, from $3.2b in 2020-21 to $3.25b in 2021-22, with a 55 percent year-on-year growth in beverages investment offset by a 12.3 percent decline in the much larger food product manufacturing subsector
  • Food and grocery manufacturing accounted for 31.3 percent of Australian manufacturing activity – down from 32.1 percent in 2020-21 but still the nation’s largest manufacturing sector.

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