Australian food and agriculture:

opportunities and challenges

Updated 4 March 2014

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Agribusiness and food: the next big thing for

Australia’s economic prosperity?

What can Austrade

contribute to this

discussion?

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We help business understand and access

overseas markets and business networks

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Short-term

Price-driven

Integrated supply chains

Long-term relationships

Differentiation between suppliers and countries of origin

The shift in Asian markets

FROM TO

What does Australia

need to do to adapt?

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Australia’s challenge - how do we:

• Find a differentiated position with trading partners and

consumers

• Maintain competitiveness against emerging ‘good

enough’ rivals

• Stay relevant despite a small market share, spread

across a diversified sector

– Sharp focus

– Niche strategies

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The two major trends we are seeing

• Discretionary consumer demand

• Food security

Discretionary

food

demand

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Why is our milk fetching $9 a litre?

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Food safety and children’s welfare outrank food

prices as a concern

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Middle-class consumers: 2009 vs 2030 forecast

Kharas and Ghertz, 2010

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As income increases, consumption shifts

ABARES 2014

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Discretionary demand opens up export

opportunities

ABARES 2014

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China is important – but other markets are too

Cereals & crops 1903

Meat, livestock, animal

products 1328

Horticulture 448

Dairy 380

Forest products 40

Alcohol 18

Miscellaneous 18

Seafood 4

Sugar & Confectionary 2

Total 4121

Cereals & crops 1067

Meat, livestock, animal products

1373

Horticulture 88

Dairy 312

Forest products 675

Alcohol 218

Miscellaneous 162

Seafood 37

Sugar & Confectionary 60

Total 3992

Middle East/North Africa ( Agricultural exports A$m)

China (Agricultural exports A$m)

(ABARES/ABS, 2014)

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The opportunity and the challenges

• Become an aspirational choice for

fresh and packaged food

• Use premium positioning to get

better returns

• Deliver what our customers want

• Tell a consistent, compelling

Australian story

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We have work to do

Underpromoted Packaged too

cheaply for

price point

Inconsistent,

confusing or

absent brand for

Australian food

Not consistently

available

Slow to innovate or

respond to trends

What we hear from

overseas about

Australian foods Slow to innovate or

respond to trends

Not tailored to

local tastes

What about

online?

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Online is growing – and we need to be there

• Asian consumers are increasingly turning to online channels

• Online is growing in popularity as a trusted source of safe and quality

products

Source: JD.COM; CNNIC (China Internet Network Information Centre, 2007 & 2014), iResearch

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We’re clean, safe, nutritious and good

quality…but we don’t own that territory

• Lack of differentiation puts us at risk from emerging – and cheaper – ‘good

enough’ competitors

• No compelling reason for overseas consumers to buy Australian

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A national food brand for Australia

• Promote our strengths in a distinctively Australian way

• Link our offering to the aspirational qualities of Australia’s agriculture, pristine environment, enviable lifestyle, energy and vitality

• Be more than just another ‘clean and safe’ supplier

• Create a unified voice for the sector

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We are a small player, spread thinly across

diverse categories and markets

Major Asian economies, food imports from the world (US$bn)

ITC database 2013: major Asian economies include China, Japan, Korea, India, Hong Kong, Indonesia, Singapore, Malaysia,

Taiwan, Thailand, Vietnam, Philippines

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But the opportunities are there if we want them

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Case example: Bindaree Beef tastes success

• Selling retail ready beef

to China

• Chinese language

premium packaging

• Cuts of meat tailored to

local cooking

preferences

• Building on the success

of other Australian firms

for market access

Food security

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Increasing pressure on global land resources

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Food security: a heat map

The Economist Intelligence Unit 2014

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Australia as a staple food supplier

• Staples like bulk grains, commodity meats and animal feeds traditionally our

largest exports (volume and value)

• How do we stay relevant with a shrinking market share in a price-driven

market?

Major Asian economies, food imports from the world (US$bn)

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Risks of a short-term approach

• Chasing buyers and

prices

• No long-term

guarantees

• Not aligned with

trading partners’

strategic food

security interests

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What’s missing from this picture?

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Our broader offer

• Bulk agricultural commodities (and premium products)

• The capabilities behind our foods

– equipment

– technology

– systems

– services, education and research

• Quality inputs

• Investment opportunities

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How this approach benefits Australia

• Diversified income now

– New services exports

– Opportunities for joint ventures

• Not a risk to our product exports

– Sheer size of demand means we are

not doing ourselves out of a market

• Building differentiation of our

products

– Australia as the home of the best

systems and processes

• Long-term relationships

– Partners, not just vendors

– Alignment of systems and standards

facilitates market access

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Some current opportunities

• India – Austrade is

currently working

with the dairy sector

• Grains

• Red meat

• Seafood production

• Cropping industries

• Asian, Middle

Eastern and other

markets

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Case example: building Sri Lankan dairy

capacity, one cow at a time

• 2012 joint venture

• Sri Lanka’s National Livestock Development Board (NLDB) and Wellard Rural Exports – Dairy cattle (2000 + 2500 in

first two phases)

– Infrastructure

– Equipment

– Management

• Results to date: – Milk production up from 3L/day

to 18-21 L/day

– All three farms in pilot program now self-sufficient in fodder

The role of

investment

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Why investment in Australian agribusiness and

food?

• Build connections to market

• Enable production growth

• Fund research and development

• Support innovation and adaptation to the needs of new consumers

• Achieve cost efficiencies

• Allow the sector to be (and remain) competitive

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Australia offers strong investment returns

Australia ranks highly as an investment

destination based on:

• Opportunities for large-scale farming

• Location

• Rainfall/water/soils

• Infrastructure

• Political and economic stability

• Liquidity of farmland market

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Case example: Cubbie Station

• Largest irrigated cotton property

in Southern Hemisphere

(>90,000 ha)

• Went into administration in 2009

with A$300million of debt

• Acquired in 2012 via joint

venture between Chinese group

and local company

• Since then:

• Back to productivity and

profitability

• Investment in new infrastructure

and equipment

• Number of employees steady

and growing

Conclusions

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A world of opportunities

• Enormous growth in demand in coming decades

– How can we claim our share?

• Our reputation is strong

– But the market has shifted and we need to adapt

• We need

– A lasting source of differentiation from new and old competitors

– A clear focus on where we are going to succeed and strategies

for getting there

How Austrade is

positioning itself

around these areas

of opportunity

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What we’re doing

• Processed and packaged foods: a focus on differentiated

products and exporters

• Working with industry and government towards a national

brand and a unified voice for the sector internationally

• Helping coordinate industry and government overseas to

improve our collective impact and messages

• Through our international network, understanding our

trading partners’ specific needs and identifying trade and

investment opportunities

• Bringing together agricultural services, technology and

skills providers in an industry body

Thank you