The seventh annual Global Food Forum, held in Sydney on 20 March, was not only a wonderful opportunity to hear from and interact with some of the key players in the Australian food & agribusiness sector, but also highlighted some of the successes that have been achieved by the sector, as well as the key opportunities and challenges going forward. M&A Senior Associate Mark Vanderneut attended the conference.
While the conference agenda was broad and varied, we’ve harvested five key takeaways.
Look for opportunities to value-add and think laterally
Australia has had a fantastic long-term record with producing commodities. According to the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES), farm production reached a record high of A$65 billion in 2016-17. While that is certainly something to be celebrated, a number of speakers expressed the view that if we are to achieve the National Farmers’ Federation’s (NFF) goal of growing the sector to A$100 billion by 2030, there needs to be an increase in the amount of value-adding that occurs in Australia. The conference heard from business owners that have been able to increase revenue and profits by processing their own farm production.
There is a range of options available to take advantage of the value-adding approach. At the ABARES Outlook 2019 conference held on 5-6 March in Canberra, it was emphasised that trade is no longer just bilateral, but involves a ‘network’ of global value chains. Therefore, when assessing these options you need to think laterally.
Opportunities and challenges in the new Asian century
Asia provides the main source of opportunities that can be pursued with value-added products and commodities. However, it was observed that:
- selecting the rights partner(s), and then having the appropriate incentives and oversight, is critical;
- for some markets in Asia the infrastructure required to import certain products from Australia, such as cold chain distribution facilities, are yet to be adequately developed; and
- competition from other countries seeking to grow their own trade with these markets is continuing to heat up.
One point that was raised at this year’s conference, as was the case in previous years, is the potential of “brand Australia” to be better developed to achieve some of the same success that has been achieved in New Zealand. But the consensus was that participants in the sector should not wait for that to occur, but rather they should develop their own brand. This is particularly so for commodity products where a brand differentiator can be created to help achieve a better bargaining position. As one speaker put it, “if you can brand water, there is no reason you can’t brand cotton”.
The need for more capital
As has been a catch-cry for a number of years, more capital is needed in the sector to take advantage of the available opportunities. In this regard:
- although bank lending to the sector received coverage during the recent Financial Services Royal Commission, it must be remembered that debt itself is not a universally suitable tool to solve all funding requirements; and
- while Australian superannuation funds, with more than $2.7 trillion in assets, seem like the obvious choice for sourcing capital, the sector needs to adapt its pitch to these funds to better address their specific objectives and requirement so that mutually beneficial relationships can be developed.
Australia is falling behind in investing in AgTech
A recent study by The United States Studies Centre found that in the United States AgTech investment was at $5.80 per capita, and in Canada was $4.22 per capita. In contrast, the amount in Australia was only $0.12 per capita. Therefore, while there is an ever increasing buzz as to how AgTech can help shape the future of the sector, it looks like there is still a way to go.
Agility and changing market tastes – snacking on insects?
For businesses that are able to develop organisational agility, they will be able to better foresee and respond to changing taste buds and eating behaviours. For example, the conference was able to hear:
- from a farmer that has developed an edible insect farm – edible insects have environmental benefits as they require less water to produce a kilogram of protein compared to cattle and sheep farming; and
- about the growth in snacking as the traditional three main meals a day falls out of favour.