The conference attracted over 140 companies and many more delegates to make it one of the largest in the event’s history. Speakers from across the spectrum spoke on many topics including demand for protein, changing consumer trends, sustainable production and grain production.
The presentations tied into the overall themes of sustainability and the future of the Australian milling and feed industries. Also discussed were the restaurant dining boom and the Asian middle class who are largely driving it.
Conference speakers included representatives from Grain Growers Ltd., Commonwealth Bank, Rabobank, Coles, a major supermarket chain, a recycling business, feed suppliers, a leading agricultural and food processing recruiter.
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Flour milling challenges, opportunities
Giving the flour millers perspective was Peter Cobb, general manager of one of Australia’s oldest flour milling facilities, Laucke Flour Mills.
Throughout his presentation, he outlined the challenges and the opportunities the industry was currently faced with including product labeling, dietary trends, market access and grain quality.
Like others who spoke at the conference, Cobb talked about market access and a need to add value to products in order to compete with countries that could produce cheaply.
Describing Australia as the “delicatessen,” not the food bowl, Cobb said the opportunity for flour milling was to develop a niche product and to move away from a commoditized one.
Success and growth, he said, depended on whether a company could develop products that met the expectations of both low demanding and high demanding customers.
Cobb referenced Australia’s Agricultural Competitiveness White Paper released last year. The policy includes information on building infrastructure, farming more efficiently, access to premium markets and a stronger approach to drought and risk management.
Cobb said Australian consumers were increasingly taking dietary advice from celebrity experts who make claims with limited, if any, scientific basis. He used the gluten-free fad as an example, which has become very popular among Australian consumers.
This is a challenge to the industry, which is faced with a consumer who opts for gluten-free for lifestyle, not health reasons. This tied in neatly, he said, with confusion that can arise from nutritional labeling and how it can influence consumption.
Cobb said the industry has a strong reputation for a clean and “green” product, but glyphosate and other contaminates risk damaging this reputation. He said some reports suggest there may be a link between gluten intolerance and herbicide treatments.
On the opportunity side, Cobb said flour millers should focus on manufacturing best practice to reduce waste, improve marketing, utilize their workforce and to deliver product to the customer as quickly as possible.
While some consumers are moving away from gluten-free products, Cobb said others are moving toward products such as sourdough that promote digestive health. He cited this as a niche product that could be used to meet consumer demand for a health product.
Ending his presentation, Cobb said the success of flour milling depends on continual innovation, differentiation and ensuring Australia’s best is the world’s best.
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Growing Asian middle class
Speaking on behalf of the Australian Food and Grocery Council, Michael Rogers discussed an emerging theme between two consumers – an Australian consumer concerned about economic security and balancing the household budget, and a growing Asian middle class, which demands a premium product.
“The Chinese consumer is often willing to pay four or five or 10 times the retail price that an Australian consumer would pay for vitamins, infant formula or fresh milk, and does not take food quality, safety or sourcing for granted,” Rogers explained.
It seems Australian millers, and food processors more broadly, need to look at ways to add value to their products to capture this valuable market rather than be the dominate supplier.
“Australia’s best chance of success is likely to be in premium, high-value products, not in attempting to be the food bowl for the broader region,” Rogers said.
Pointing to significant figures in the Australian Food and Grocery Council’s State of the Industry 2015 report, Rogers highlighted growth in 2014-15. Exports of processed food and beverages rose 28% from A$20 billion ($14.7 billion) to A$26 billion ($19.1 billion), and the trade surplus in processed food and beverage items rose 80% from A$6 billion to A$10 billion.
Opportunity, Rogers explained, will not lie with an Australian consumer who wants a low-cost product, but instead will be in the export market. He explained the building blocks for export growth were improved market access through tariff reductions, a lower Australian dollar and an emphasis on removing non-tariff barriers.
It isn’t all smooth sailing for exporters, warned Rogers, as they will need to understand what consumers in Indonesia, Korea and China want and are willing to pay a premium for. In a sense, it suggests processors can’t rely on simply exporting excess product and assume it will be bought.
“That means a big shift in thinking for Australian producers and processors – from simply exporting our surplus to whoever will buy it, to actively seeking to understand what consumers in China and elsewhere want, what they’re willing to pay a premium for, and actively catering to that preference,” Rogers said.
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Adding value is critical
During a panel discussion, Angus Gidley-Baird, Rabobank, said Australia must add value if it is to compete with low-cost production countries such as Brazil. Gidley-Baird referenced Australia’s environmental credentials as a selling point and said the processor must come up with ideas that added value on these credentials.
“Whether it’s traceability or whether it’s environmental, how can you tap into those characteristics and extract more value out of them?” he said.
That sentiment that was echoed by Tim Hart, managing director of Ridley’s Corporation, who said it was also important to understand what your consumer values and develop a product that meets it.
“We’ve got to be really clear on what they value. As we get fewer resources, the differentiation will get even greater,” he said.
Hart used the example of organic food. As demand increases, the resources that produce it are stretched and the price the consumer pays increases.
Those comments were echoed by Tobin Gorey, director of agri-strategy at the Commonwealth Bank, who spoke of the enormous task of capturing the boom. He explained there was a time lag between income growth and accumulated spending power.
As more people shift into affluence, the demand for more and premium food will grow. Gorey said the road ahead for the dining boom would be long and bumpy, and that it would take time for the benefits of the boom to flow through to millers and food processors.
“Supply and demand rarely expand in sync. Along the way, markets will experience overshoots and undershoots with big swings inevitable,” Gorey said.
Underscoring the dining boom, which Gorey explained as more people earning more income that they spend on more and better food, is the expansion of foods.
“The dining boom bookmark is a large expansion of nutrients, feed and dairy with an ongoing increasing livestock supply,” he said.
This is something that is not easily achieved, because it is not simply a question of using more land and water. With these resources already heavily utilized, instead there’s a need for greater productivity. There could, however, be opportunities for Australian millers and food processors should they innovate.
Gorey notes that large investors are returning to agribusiness after decades, and creative minds are focusing on the issues constraining agricultural production and turning this into opportunities to invest in new ways of doing things.
He explained agribusiness would need to improve on how things were done now and find entirely new ways to do things in the future.
Gorey used the concept of high-rise farming as an example of innovation. High-rise farming is building a farm in a structure that’s more vertical than horizontal.
“For a long time we have been using land better, but we cannot produce more arable land. What about building an arable environment?” Gorey asked.
As it stands now, feed is doing the heavy lifting in the boom, because it’s the raw ingredient that creates more protein. Gorey said livestock feeding will continue to grow as flocks, droves and herds expand. He points out, however, that world feed supply is comfortably meeting demand, but Australia is a season behind due to dry seasons and droughts.
Feed demand is putting pressure on the traditional view that a premium is paid for milling grades. Increasing demand, along with demand for other grains and agricultural commodities such as pulses, cotton and almonds, are putting pressure on limited resources and tightening the gap between feed and milling prices.
“Price spreads between milling and feed grades have been narrow and will probably widen again as supply eases,” he said.
Gorey predicted farmers would target feed grades, because Australia needs more feed and that a tightening or switching of feed and milling premiums may be a way of doing this.
