Recent store closures and dire predictions have taken the shine off the retail sector in Australia. While revenue growth in the industry from 2012-2017 stood at 1.2%, businesses decreased by 2.2%, and are expected to decrease further by 0.9%. Many F&B companies, in particular small businesses, are looking for strategies to survive and compete in 2020.
Despite these challenges in the retail market, there are ways for grocers, restaurants, caterers, and other food and beverage business owners to take advantages of opportunities in the sector.
The increasing demand for organic and health-conscious F&B items has been consistent and significant in recent years. For example, the organic farming industry in Australia is expected to see an increase at an annualised 25.6% over the five years through 2018-19, to reach $2.2 billion.
Likewise, despite fierce price competition from major supermarket chains constraining industry growth and pointing to increasingly difficult trading conditions for supermarkets, revenue in the supermarket industry is expected to rise at an annualised 0.4% over the five years through 2018-19, to reach $3.97 billion , largely due to rising demand for higher value products, such as organic fruit and vegetables.
Australians are demanding such products due to an increasing interest in the health and environmental consequences of food. This trend for healthy and environmentally conscious F&B products is unlikely to go away any time soon, despite the shrinking retail market in general. The Australian organics market is now estimated to be worth $2.4 billion, having grown by almost 88% since 2012. Two thirds of Australian shoppers said they started buying organics for personal health reasons. In 2019, the overall number of households saying they have purchased at least one organic product in 2018 lifted to 65% from the previous year, with major concerns being the chemical-free, environmentally friendly and additive-free advantages of such items. Many consumers find the price of organic F&B items expensive, but are willing to pay more for higher quality foods.
This indicates that F&B small businesses would do well to explore the retail sale of such items.
F&B retailers would also do well to explore the burgeoning export market in Asia even as retail spending shrinks in certain sectors in Australia.
The reputation of Australian produce is such that there is an increasing demand for it in Asian markets. This demand has surged over the last 5 years for products like premium chilled meat portions, wine, fruit and vegetables, and baby formula in particular. Organically farmed products, free from artificial chemicals, pesticides and fertilisers, and genetically modified organisms, are increasingly wanted in Asia as awareness of health issues rises. Australia’s organic farmland, at 35 million acres, is the largest in the world, and focuses on organic cattle farming, producing beef which is extremely popular in Asia.
As Asia’s affluent middle-class population looks to exceed 3.5 billion by 2030 and as health-conscious eating and drinking rises amongst this population, there is a great opportunity for Australian F&B businesses to utilise Australia’s strong track-record in clean and green food production to export items. The value of the Australian brand is already evident in Asia; businesses can build a successful line of exports, especially through digital platforms, by making the most of this value. For example, based on International Enterprise Singapore’s Statlink statistics, Australia was Singapores largest supplier of beef, cheese and lamb products in 2016.
Just as the demand for Australian F&B items is strong in Asia, the Asian F&B market is flourishing locally.
This is driven by recent shifts in migration. The Asian-born population, led by people from China, India, and the Philippines, is growing due to increased migration . Migrant arrivals from South and Central Asia are now higher than Oceania, North-west Europe and South-East Asia. With this Asian-focused trend in immigration and population, the fact that ethnic-Australians’ spend on FMCG retailing is growing at a faster rate than their Australian-born counterparts is more significant than ever for the Asian F&B market. Ethnic-Australians are expected to spend $18.7 billion (or 28%) in sales for the grocery sector in the next five years, with Asian-born consumers contributing 57%.
This opens doors not only for local F&B retailers, but also for their Asian counterparts. The Asian grocery sector is booming. It expects to reach US$4,264 billion in global grocery sales by 2023, according to IGD Asia, with China expected to have a CAGR of 6% until 2023, India, with 11%, and South Korea with 5%. No longer can this sector afford to ignore Australian consumers as largely Europe-focused in regards to F&B; a burgeoning and powerful Asian F&B market in Australia, with consumers willing to spend more for healthy products, is likely to attract the attention of Asian grocers and F&B exporters.
Calibre Business Advisory has experience in this industry, with a unique understanding of the Asian F&B market. With offices in Sydney and Seoul, we are ideally placed to help businesses in Australia and Asia make a strong start to 2020 by embracing these retail and F&B trends with accurate financial forecasting and expert business planning.
Calibre Business Advisory invests more time than most firms into finding solutions for our clients. Contact our business advisors and tax accountants below to discover new options for your business in Australia and beyond.
Important Disclaimer: Readers should not act solely on the basis of the material on this page. Items herein are general comments only and do not constitute or convey advice. Legislation and proposals of legislation are also subject to constant change. We therefore recommend that formal advice be sought before acting in any of the areas. This news article is issued as a guide to the readers. Calibre Business Advisory Pty Ltd and its associated entities disclaims any losses that may be incurred as a result of the reader undertaking any action based on this article.
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