Australia may not have much rice to export after three drought-savaged growing seasons, but national brand SunRice is digging in to defend its long established trade in the Pacific from a low-priced assault by Asian agribusiness giant Wilmar.
While SunRice's overall export business achieved a 10 per cent lift in revenue last financial year, despite Australia's supply shortages, an intensifying sales effort by Singapore-based Wilmar International added to regional pressures on the market in 2019-20.
Papua New Guinea's struggling economy and depreciating kina have been particular concerns for a few years, undermining consumer demand for the 50-year-old premium quality Trukai brand, which is majority owned by the Australian milling and marketing kingpin.
Its 13 Pacific markets represent a whopping 60pc of SunRice's international business revenue - well ahead of its next biggest offshore revenue earner, the Middle East at 19pc.
They're trying to buy market share by selling product at very low prices
However Wilmar, which acquired full ownership of the former Australian food business Goodman Fielder last year, has aggressively upscaled its efforts to grab markets in the region, taking full advantage of Goodman Fielder's trusted footprint to get its own foot in the door in the Pacific.
"They're trying to buy market share by selling product at very low prices," said SunRice managing director, Rob Gordon.
"We're up for the fight if they want to bring it on.
"We've held our position and are holding back their assault, but given they have a toehold in the region they can't be ignored."
Wilmar is one of Singapore's biggest listed businesses and one of the world's biggest integrated agribusinesses with interests spanning oil palm production, oilseed processing, sugar milling, biodiesel, fertilisers and rice processing.
Its rice sales in the Pacific are largely sourced from Vietnam, although are not the quality or Japonica style of rice the market has traditionally enjoyed from Australia, or from SunRice's alternate sources when Australian rice is in short supply.
Mr Gordon said SunRice had the benefit of better quality product, a shorter supply chain and a well established regional supply network.
Closer, better quality
In fact, the PNG business employs about half the 2000 staff working for SunRice and all its subsidiaries in Australia and overseas.
"At some point Wilmar also has to make some money from its markets in PNG or elsewhere, so it can't keep discounting product forever," he said.
"We're taking them on. We'll go toe to toe with them."
Part of SunRice's defence strategy has been the launch of a Pacific "price fighter" range during 2020 using rice from Vietnam where the company has its own mill and farmer contracts, or China where it has cemented supply arrangements with a state enterprise in recent years.
Its ramping up of extra offshore supply sources became even more important when 2019 yielded a paltry 54,000 tonne Australian rice crop, followed by this year's smaller 45,000t crop.
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SunRice now sources rice from 11 countries around the world, including its own mills in the US, Jordan and Vietnam.
Traditionally Trukai, SolRice and SunRice branded rice was mostly exported from Australia, but the big exchange rate difference between the dollar and local currencies, particularly kina, have created extra affordability headwinds for the brand.
Further challenges have included rising global rice prices, especially after the coronavirus outbreak, and disruptions and slowdowns in shipping activity caused by COVID-19 related labour restrictions.
Sales to food service customers such as the cruise ship and wider tourist sector had also been hit hard, notably in Hawaii.
Despite selling more than 1 million tonnes of rice around the world in 2019-20, the extra costs, market disruptions, frequent brand changes and a lack of Australian-grown crop to service export demand left SunRice's international division posting a $1.4m pre-tax loss, compared with a $2m profit in 2018-19.
Pacific hit export result
"The challenging Pacific market conditions significantly weighed against the improved year-on-year performance of the rest of our international operations," Mr Gordon said.
However, on the plus side, the challenge to find more rice to backfill into markets normally serviced from Australia, had revealed new temperate climate sources for a range of different rice styles in South America.
There is substantial water availability which gives us confidence in South America's potential for us
"We've done a good deal of research and are employing further opportunities in this market," Mr Gordon said.
Initially SunRice had sourced koshihikari-style grain from Uruguay, but had expanded its buying activities, looking to Argentina, Paraguay and Brazil.
"There is substantial water availability which gives us confidence in South America's potential for us."
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