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Global business environment

The South Australian food industry operates in a changing and demanding global business
environment that presents a range of challenges and opportunities.

Global market volatility

South Australia has a high dependency on commodity returns, which have in the past experienced volatility due to shifts in the balance of global market supply and demand as well as fluctuating currencies.

The long-term outlook for demand in staple food categories remains positive due to expanding populations in developing economies and shifting consumption patterns which will see greater value placed on nutritious food items in those markets.

Global supply is constrained by limits on available arable land and the ongoing effects of climate change, which has reduced the reliance of production for a number of major producers and exporters.

As markets sustain variable economic conditions, volatility will be an ongoing challenge. These changing dynamics in global trade have seen the emergence of countries including Brazil, Russia, India and China who also compete in a number of Australia’s established markets. Additionally, the shift towards vertically integrated chains in international markets requires sophisticated and collaborative business practices to gain and maintain access to the food markets.

What this means for South Australia

To grow, greater intelligence and a focus on value adding and risk management are required as a result of commodity movements which are beyond the influence of the food industry.

Consumer demands

Consumers are the driver for this industry and are shaping its direction. As such, understanding their needs is critical in establishing a successful and competitive food industry.

Higher income, value for money (price), urbanisation, migration, demographic shifts, improved transportation, consumer perceptions regarding quality and safety and ethical values based on production system integrity are changing global food consumption patterns.

Consumers are increasingly vigilant regarding the sustainability of the production and delivery systems including economic, social and environmental aspects behind the food they are buying.

What this means for South Australia

Having a greater understanding of consumer wants and needs will maintain and grow profitable value chains.

Nutrition and health

Healthy and nutritional foods are becoming a key deliverable, not only for consumers, but also for governments around the globe. The global obesity epidemic linked to changing lifestyle, as well as an ageing population, are driving the escalating rates of preventable chronic diseases often associated with unhealthy diets.

In response to the crisis, governments are developing preventative health strategies and supporting social marketing campaigns aimed at promoting the adoption of healthy and nutritional food alternatives and decreasing the acceptance of unhealthy options.

What this means for South Australia

Take advantage of the opportunity to provide existing and new products due to the shift in consumer patterns for healthier, nutritional and ethical food choices.

Climate change and variability

While the impact of global warming will be felt in the medium to long term, all industries are under pressure to adapt and mitigate in the hope of alleviating or managing climate change. With a strong dependence on natural resources and energy, the food industry needs to consider new ways of doing business.

Governments will pursue regulatory responses to drive change, such as the Carbon Pollution Reduction Scheme. The expansion of regulation presents a risk of increased compliance and food costs, but adopting these changes will support competitiveness.

What this means for South Australia

The urgency of climate change and the need for early action (to reduce emissions now to avoid higher costs later) requires a holistic approach across the value chain.

Community expectations

As with consumers, the community and lobby groups are increasingly demanding the sustainability of primary industries. Community opinion on specific production and processing systems, ethics, climate change, other environmental issues and animal welfare, are examples of issues having an increasing influence on policy direction and consumer preferences.

What this means for South Australia

Industry needs to be proactive in the management of specific issues and continue a strong dialogue with Government. These expectations may also present new opportunities.

Finite natural resources

Prolonged drought in recent years has highlighted the scarcity of natural resources and the need for careful management within sustainable limits.

There is a raft of issues that impact on the food value chain including availability and access to water, land and marine environments, property rights, waste management, biosecurity and land management.

What this means for South Australia

Community expectations regarding sustainable production will increase and as such initiatives that respond to the scarcity will be paramount. South Australia will need to be adaptive and considered to ensure sustained growth.

Workforce and skills

The shortage of skilled labour across the economy is creating difficulties for most industries, including food. The forecast retirement of ‘Baby Boomers’ when combined with expansion of mining activity will increase pressure of labour and skill availability. This will make it imperative that primary production and food processing businesses develop and refine strategies to attract and retain appropriately skilled workers.

Skill deficiency is not only at the operational level, but also affects middle management and even food industry executives. There is a need to invest in skills and knowledge across the board — entrepreneurship, technical, people management, innovation, marketing, value chain management and financial performance.

What this means for South Australia

Industry needs to maintain a strong focus on attracting, developing and retaining people. This will require improved clarity of career opportunities within food businesses and changing the perception amongst young people.

Productivity and competitiveness

Productivity remains the cornerstone of competitiveness. Many sectors within the food value chain are experiencing challenges to their productivity growth.

The rising cost of inputs (energy, water, transport etc) and the changing ability to produce outputs in a variable climate is placing pressure on business returns and highlights the need for continued research and development.

What this means for South Australia

There is a need to rigorously assess and implement the opportunities that the application of new technology, research and information systems can provide with a focus on value adding.

Value chain

Rationalisation and integration are driving significant restructure not only in the local industry but across the globe. The result is increasing pressure on price and therefore competitiveness. Whilst it provides cost advantages to the consumer, it places continued pressure on margins through the value chain.

What this means for South Australia

Industry will need to adapt, differentiate and build value through the value chain with an increased focus on collaborative innovation to assist in improving productivity and competitiveness.

Composition of the South Australian food industry

The South Australian food industry is characterised by a large proportion of small to medium enterprises.

Due to its geography these enterprises are distant from many of their markets.

This includes domestic markets on the eastern seaboard of Australia meaning greater value chain integration and collaboration is required to maintain market positions.

What this means for South Australia

The composition and structure affects the capability of the industry to collaborate and innovate, yet smaller businesses possess the advantage of being able to respond faster to change. Specific attention is required to harness the capacity of the whole food sector.

How industry and Government respond will ultimately determine the success of the industry and its contribution to South Australia’s prosperity.