Ag must flex manufacturing muscle

Boost food processing to secure sector, CSIRO says


National Issues
CSIRO says Australian food and agribusiness must manufacture at home to secure the sector's future. Pictured is an Australian vegetable processor canning beetroots.

CSIRO says Australian food and agribusiness must manufacture at home to secure the sector's future. Pictured is an Australian vegetable processor canning beetroots.

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Boost food processing to secure sector, CSIRO says

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PLUCKING the best from booming Asian demand for quality food requires more than a clean, green image.

Australia’s food and agribusiness sector must flex its manufacturing muscle to maximise the opportunity, according to the CSIRO’s Roadmap for Food and Agribusiness report.

Food and Agribusiness contributes a hefty 27 per cent, or $26 billion, to Australian manufacturing overall contribution to gross domestic product. 

A whopping 88 per cent of Australia’s $40 billion in annual food and drink exports are commodity based, the Roadmap noted.

Unsurprisingly, CSIRO adheres to the mantra of producing high-value produce to become “the delicatessen of Asia”, and emphasised the need to pivot export strategies away from bulk commodities to lower-volume, higher value exports.

Despite the need to shift from commodity focus, “the largest potential gains to the farming and processing/marketing sectors can come from increases in export demand”, according to the Roadmap.

Smarter strategies from government, industry and research are key to tapping future growth, accrding to Deputy Director of CSIRO Agriculture and Food professor Marin Cole.

He said to benefit “the high proportion of relatively small farm businesses” government and industry must cooperate to drive export demand, build profit into both ends of supply chain and manufacture locally to keep profits onshore.

International competition

New Zealand and the UK realise more value per kg of exports.

“Australia creates more produce the than Netherlands, but they do a lot more value-adding. They collaborate to a greater level, putting a plan around government policy, industry direction and the science,” Prof. Cole said.

Global competition in value-added food and agribusiness was “coming whether we like it or not, he said.

“We used to be able to rely on our clean, green image. But it has become a time-based proposition now. European countries are in the Asian market telling their story of trust and food safety.

“We need to innovate now, the global food sector is a very, very competitive space.”

Early adopters have tested and proved the rule, CSIRO said. For the first time, value-added food accounted for two-thirds of Australian food export growth in the three years to 2106.

To get the best bang for public and private buck, food manufacturing must be done onshore, Prof. Cole said.

“We need more processing hubs on a regional scale to capture value and move value down the supply chain.

We used to be able to rely on our clean, green image. But it has become a time-based proposition now - Prof. Martin Cole

“A lot of farm businesses are small companies. The question is how do we get behind them, particularly businesses that want to grow, and help create supply chains that allow them to take off?”

“Support can range from investing in systems or technologies that improve productivity and reduce the unit cost of production through to financial incentives.”

Strategic direction

Prof. Cole noted that compared to most developed nations, entrepreneurial Australian business receive weak support from venture capital.

CSIRO’s innovation fund, backed with $100m in public funds and targeting a further $100m in private investment was established to turn research opportunities into new private enterprises.

Quality control at Kagome's Echuca, Victoria processing plant - Australia's last major tomato processor.

Quality control at Kagome's Echuca, Victoria processing plant - Australia's last major tomato processor.

And Prof. Cole noted a positive development in the private sector.

“We are seeing a lot of interest from bigger players, like superannuation funds. Normally, these investors wouldn't play in that size of things (early stage agribusiness) but now the bigger companies are being more precise in where they invest, and values like sustainability, health and wellness are on the agenda.”

The Roadmap report recommended publicly-supported food manufacturing plants, where hopeful companies can test their product run, export compliance, packaging or supply systems are a critical idea.

“Australia needs to provide industry with a complete ‘end to-end’ facility for businesses to perform pilot scale manufacturing and packaging of new beverages, ingredients and meals, including subsequent market testing in export markets,” the Roadmap said.

New Zealand’s provides a precedent. FoodBowl is an open access facility for commercial trial runs food and beverage products.

Federal agency Food Innovation Australia Limited (FIAL), a contributor to CSIRO’s report, completed a study in 2016 that highlighted the lack of ambition in Australia’s food exporters.

Just above six per cent of Australian food and agribusinesses are ready to grow, while the vast majority are are risk averse FIAL said.

There are 60,000 australian food and agribusinesses that employ workers (total businesses is 180,000) and almost all are small to medium sized enterprises.

Under 4000 were identified by FIAL as growth potential, with a healthy appetite for risk and  calculated investment, able to respond to market demand and with growth plans in place.

Between 5 to 10pc are ‘transitional’ businesses, that have some key elements in place but would benefit from government assistance around issues such as lack of access to capital, expertise, market knowledge and technology.

The remaining 85pc or so do not build expansion into their plans.

Health kick

It is not just local processing that Australian food and agribusiness should focus on. Smart marketing is needed to position products for maximum value capture.

The proportion of the global population aged 60 and over is projected to grow by 56pc by 2030. A Nielsen survey the proportion of the global population willing to pay more for sustainable brands rose from 50pc to 66 between 2013 and 2015

Market growth is forecast at 4.5pc annual compound rates the segments ‘naturally healthy’ (US $291b), food intolerance ($US 42b) and organic (US$45b).

Prof. Cole said there were obvious opportunities in non-supermarket grade  that is “still packed with bioactives” for health care production.

“We waste about one-third of the food we produce. Anytime you can add value to waste products, that profit drops straight onto the (business) bottom line.” Prof. Cole said.

A North Queensland business is a leading example, utilising the region’s 500 tonnes of wasted bananas a week.

Natural Evolution has built a pharmaceutical grade green banana processing plant to turn unsaleable bananas into a long shelf life nutritional product, and the company is also developing skin care products.

A federal government policy commitment from June 2016 may also capture the attention of savvy investors, with a commitment to halve food waste by 2030.

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