06 May 2019
Walk past food stalls in Jakarta, down supermarket aisles in Hanoi or a modern restaurant hall in Shanghai and Ian Hanrahan says you can see the scope of the opportunity along in the amazing variety of such gourmet wonders.
“Take in both the volumes of food being consumed, as well as the changing types of food,” ANZ’s Head of Food, Beverage and Agribusiness Australia expands. “It gives you an incredible firsthand perspective of both the challenge and the opportunity.”
"We sit geographically on the cusp of South East Asia. Sixty per cent of the world’s population live in our time zone.” - Hanrahan
Australian food producers continue to benefit from Asia’s growth as demand for agricultural commodities remains largely buoyant. But now the market is being urged to think beyond the farm gate and look to value adding and brand building to win a greater share of an ever-expanding prize.
Hanrahan the sector is almost certain to enjoy continued strong demand from Asia, given the region’s burgeoning middle class population. But factors such as changes in consumer preferences and bolstered competition from other exporting nations mean there is little room for complacency.
“It’s a broad opportunity with well-understood demand dynamics,” he says. “We sit geographically on the cusp of South East Asia.”
“Sixty per cent of the world’s population live in our time zone and these populations are continuing to grow rapidly and are increasing their spending power.”
ANZ estimates the current value of Australian agricultural output at $A61 billion, about three-quarters of which is exported.
“We think as a base case scenario the industry will reach $A89 billion by 2030, a 40 per cent increase on today’s level,” Hanrahan says.
“It sounds ambitious but industry output has grown 35 per cent in the last decade, so we believe it can grow by a further 40 per cent if we get the settings right.
“Under an aggressive-case scenario where productivity improvements and the impact of technology exceed our current expectations it is possible we could see industry output hit $A100 billion in this timeframe.”
One imperative is consumers need to be confident about the origin and quality of Australian food: “Australia plays well with its strong international reputation for food safety and provenance,” Hanrahan says.
“We are starting to see the difference where some people are taking advantage of the opportunity, through areas such as new technologies and enhanced marketing, while others are yet to capitalise on this.”
Among the successes Hanrahan singles out is the diverse horticulture sector – now Australia’s fourth biggest soft commodity export by value – and the cotton industry.
The latter’s efforts have resulted in an especially strong foothold in China, where it has a strong reputation for quality despite recent production challenges as a result of the drought.
“The meat industry continues to be a key Australian exporter,” according to Hanrahan. “In particular, sheep meat exporters have done a good job to get the message out about the quality of their produce in a competitive market, while our beef exports maintain a global reputation for being a premium product.”
Just like the sheer diversity of Asian cuisines and food cultures, the most appropriate business model is endlessly variable.
“Some customers have developed processing capacity offshore, some have developed in-house sales capabilities while others have formed agency relationships and are investing in these parties,” Hanrahan.
“There are no right or wrong ways to go about it.”
With an exposure to the food and agribusiness sector dating back 184 years, ANZ has been willing to support companies that follow the cross-border value chain into either upstream or downstream activities, from agricultural production through to storage, processing, distribution and ultimately retail.
“Going beyond the domestic value chain is not for the faint hearted but a lot of our food and beverage customers have done it and done it well,” Hanrahan says.
“Our support does not end in Australia or New Zealand. We can support these customers all the way through to end consumers in other markets. For example, the bank has established South-East Asian banking arrangements with a large food company to support their global supply chain business in the Greater Mekong (Vietnam, Cambodia, Laos, Thailand and Myanmar) and we are also now financing a multinational fast moving consumer goods (FMCG) customer in a seventh Asia-Pacific country.”
“We have also established local financing support for a drinks manufacturer in both PNG and Indonesia and recently assisted a food retailer to incorporate their new business operations in China.”
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
06 May 2019
16 Apr 2019