Is the meat pie Australia's national food? Considering the strength of our wheat and dairy sectors, the flour and butter in the pastry may be the world's best. And the meat? Top quality beef, with the whole thing accompanied tomato sauce grown from Australian fruit. There's no beef about it, Australia's global reputation punches well above its weight in the food and beverage sector. This industry accounted for $28 billion in exports last year, according to figures released by the Australian Bureau of Agricultural and Resource Economics. And that's just the stuff we grow. Add food and grocery manufacturing and the figure is closer to $50 billion, the Australian Food and Grocery Council (AFGC) reveals in its report State of the Industry. "The importance of our reputation can't be understated," says Stuart Castricum, manager of export advisers at Austrade, specialising in the food and beverage sector. "Products such as grain and meat and dairy all enjoy a reputation for quality and reliability of service internationally." According to Castricum, Australia is the world's second largest beef, sheep meat and barley exporter, the fourth largest wine, dairy and sugar exporter and the world's fifth largest wheat exporter, which "gives you a context about our reputation as exporters as well as deliverers of food and beverage", he says. By association, value-add products from these categories also enjoy a good reputation. "Countries familiar with Australia regard us as being a source of high quality produce," agrees Ian Harrison, chief executive of the Australian Made, Australian Grown (AMAG) campaign. "Our environment is recognised as clean and green, and our standards for food preparation, from growing to the production line, are recognised as being very high." He notes our strengths in the dairy sector, particularly in Asian markets, as well as a solid reputation for quality wine and beer.
This is good news for new exporters, who can leverage Australia's positive reputation in this industry. And it isn't just the quality for which we're renowned, says Castricum, "more importantly it's the rigour of the process behind it, the food safety aspects". Before would-be exporters get too excited though, Castricum recommends they consolidate their domestic business first because this "underpins their ability to launch into export in a measured way", he says. "They have to do their homework and need to determine the full cost to market through the supply chain. They also need to have clear and definite business practices dealing with the terms of trade and make sure their customers are clear about their ability to supply and deliver." Further, new exporters need to be perfectionists, especially for their first sale. "Do it right the first time when launching to market because second chances are rare," he says. "Never promise what you can't deliver." Fortunately there's a lot of government support for food and beverage exporters at state and territory level, as well as from the Federal Government. This enables new food and beverage exporters to take advantage of trade show opportunities and industry missions. For example, AMAG and the Federal Government for the past six years have run a number of promotional activities in the Americas, Asia and the Middle East to boost recognition for Australian product as quality product. "We've even been able to go as far as providing financial support to assist our licensees to participate in some of those events," says Harrison. "The question is whether export efforts will be assisted by being recognised as Australian. The answer is it is favourable in most marketplaces."
More established exporters also have a task on their hands. Once you have a profile, the key is to keep it in front of the customer by getting fresh-ideas, that is. "Come up with new products and new versions of products," Castricum suggests. "Exporters have to work to defend their established markets and keep that relationship going. There's always someone around the corner who wants to offer customers something else; exporters need to keep that profile and attention. New product development and innovation is crucial to keeping relevant in a changing world." In the less developed markets it's all very well to leverage Australia's reputation for quality but in the more mature markets it's really about refining your marketing and focusing on your unique selling proposition. For fresh product exporters this could be as simple as providing fruit or vegetables to Northern Hemisphere markets in their 'off' season. Truffle growers in Australia, for example, have benefited from having an alternate season as this enables gourmet restaurants in Europe to serve fresh truffles all year round. Australian native products and produce are also at a fledgling stage. Harrison says that due to our size and higher price point we need to take up a premium niche. "We should not seek to be the lowest priced product on the shelf because we can't be," he says. "While we don't have the price point or capability to supply a market as huge as China, for example, once you seek the people who are prepared to pay for a higher quality product or produce in that market, it offers a very real opportunity for exporters."
For advanced exporters, the ideas shouldn't stop at new products. Innovation in packaging is also a key factor and can definitely boost a business' unique selling proposition. Food processing company Donny Boy Fresh Food, has award-winning juice Preshafruit as part of its offering. Preshafruit juice uses cold high pressure processing that preserves more nutrients, flavour, colour and texture than traditional cooking, heating or chemical extraction methods. This would appeal to the export market for both the superior quality and the longer shelf life this extraction process provides. It's also wise for exporters at this level to keep on the pulse of new market opportunities, says Castricum, and the markets aren't just emerging ones. "Exporters need to explore the potential to expand across industries. If they're supplying to a supermarket perhaps they could look at hotels." The business model may also need reconsideration. "Investment opportunities come in various forms," he notes. "To expand and grow in their market they need to consider expanding their business in a range of opportunities, including things like joint ventures, partnerships, opening an office overseas or even shared knowledge opportunities that increase their profile and exposure to new technologies and innovation."
Non-food or beverage exporters
According to the AFGC, the food industry comprises 38 percent of Australian manufacturing, indicating its overlap with other sectors. While Australia has limited capacity to export food or beverage related equipment, there are some markets that require specialist machinery, such as the agricultural sector. Similarly, we have specialised skills and knowledge in areas such as water management, which we have exported to markets as mature as the USA. Castricum suggests even horticultural exports, such as selling a hardy breed of rice that requires less water, as a possibility. "R&D becomes really important, that's why our CRCs [Cooperative Research Centres] and the CSIRO [Commonwealth Scientific & Industrial Research Organisation] are world leading organisations," he says. Related exports also include hospitality education and training, for example sommelier training conducted in Australia, which then has the follow-on effect of familiarising overseas students with Australian wine. And for completely unrelated sectors, using Australian food and beverage when hosting events is always an option; it has the dual effect of leveraging our reputation for quality and automatically giving the event an Australian theme.
Castricum sees Australia's price point as a challenge for exporters, firstly due to currency fluctuations on the foreign exchange market, but also because our cost of production is higher than many of our competitors, which are either subsidised or from emerging economies where labour costs are low. He doesn't believe that will continue in the long term: "As standards of living increase for your export markets, so too does their cost of labour." Freight (see Fresh Freight box) and documentation should also be key considerations for exporters, says Ross Gluer, general manager of the International division at TNT: "In the USA, for example, you have to have FDA [Food & Drug Administration] approval and an approval number every time you export." Difficult goods such as wine may be subject to additional taxes or tariffs in certain markets, and some markets won't take certain products. "You have to be absolutely across the documentation, which is incredibly complex," says Gluer. "Find someone who knows exactly what paperwork is required, all your permits. Then deal with a freight provider that has a guaranteed supply chain, and get insurance coverage. If you lose your cargo, you lose your reputation."
Urbanisation will be a key trend that will affect the food and beverage market. In some cases, urbanisation in emerging countries may mean loss of agricultural land, which will reduce competition and simultaneously increase demand as consumers become wealthier and more able to pay for Australian product. "The future for Australia's food and beverage products can only grow and improve. Agricultural lands aren't going to grow, they'll be under pressure. Australia is well placed to take advantage of that," says Castricum. "We have a changing and growing world population whose appetite isn't diminishing. Exporters should also note the trend towards healthier and more environmentally friendly foods. Our unpolluted environment and strong environmental controls enable us to maintain green credibility, which "positions Australia well to respond to the demand for healthy foods," Castricum says. "It's important Australia companies keep abreast of emerging trends in these offshore markets and keep investing in innovation across the supply chain."
The quest for fresh food is universal, and one that customers around the world look to Australian exporters to provide. One of the obvious challenges is the distance to market, which makes packaging and freight two of the most important considerations for food and beverage exporters. Ross Gluer, general manager in the International division at TNT, says exporters need to find a provider specialising in the freight they’re moving to ensure the supply chain has the proper infrastructure: wine needs temperature and humidity control while livestock requires certain travelling conditions to ensure animal health and safety. "Find someone who has that entire supply chain worked out so they take responsibility from the moment they receive it until it's delivered," he says. Len Phillips, business development manager for Australia and Pacific Islands at seafreight provider Maersk, says it's imperative cargo is handled with care from start to finish, from the time the produce is picked, meat slaughtered or wine bottled to when the end consumer picks it up off a shelf on the other side of the world, to prevent damage and spoilage. "Make sure it has the correct packaging. Refrigeration and airflow is only as good as the packaging that the cargo is in," he says. "No matter how good the refrigeration is onboard, it's not going to repair damage." Another key consideration is the time to market and "what impact that will have on the product", adds Gluer. Airfreight is the most common option for premium product with a short life-"for example seafood where you have days or sometimes hours"-but it comes at a price. "When you're doing your margins you have to know the end-to-end cost, including transport, duties and tax. Most freight runs between 4-7 percent of the value of the product. In high-value perishables that could be 20 percent." Sea freight is a good alternative if you know your product's shelf life. "All products age at different rates. Some of them are more robust than others, but we are working on ways that allow a type of suspended animation to get the cargo to market," says Phillips. "The key is to make sure it's what the consumer expects and the retailers and wholesalers at the end have a product that's not going to go off in a couple of days after arriving [so] they can go and sell it and the consumer can take it as a safe product." That's why you shouldn't skimp on adequate packaging. "You may be putting your entire shipment at risk," says Gluer. "The packaging has to be up there in terms of protecting it and presenting it: it's your brand at the end of the day, so it has to arrive in pristine condition."
"Speed is the essence," says Simon Williams, sales and marketing director of South State, the source of ready-to-drink alcoholic beverages for more than 30 countries, referring to how quickly beverage exporters need to penetrate a market. It equally describes the journey of a new product; South State can turn a concept into a saleable drink in six weeks, as accessible to market as the beverages it produces. Tough domestic competition from the big breweries prompted South State to focus on export 15 years ago. Now exports count for 99 percent of its overall sales. The five-person business began exporting to the UK where the ready-to-drink category was burgeoning, and was soon unable to meet demand. Today, it licenses manufacturers in Europe, the USA and Japan and supplies other countries from its operations in South Australia. South State used the services of Austrade to find suitable partners and licensees in new markets, and had the Export Finance and Insurance Corporation (EFIC) provide finance to help it expand "rapidly and aggressively" into markets that were otherwise "almost cost prohibitive", explains Williams. "You have to have the whole package-the product, the package, the finance, the distributor-in place. People do it when they're not prepared and fall over." South State also astutely identifies trends in the market, choosing targets with a taste for ready-to-drink beverages but primed for variety. It produces trendy flavours such as a low-alcohol green tea. "It's all about innovation and keeping up with trends outside the alcohol industry as well," says Williams. He nominates language barriers and logistics as a challenge for the business. With 16 brands in a few dozen countries "it's becoming more challenging every day managing each brand and each country", he says. "It may be as simple as an additive allowed in Japan that's not allowed in Taiwan." But overall Williams believes the company understands each market's quirks and so the promotional mix needed to make sales happen. "This is a very image-driven market and so we put a lot of work into developing brands that appeal. We evolve those brands and designs to keep the products fresh," he says. And it helps that the sector is virtually recession-proof: "People drink when they're happy and they drink when they're sad." South State has just entered the Indian market and is scoping out China and South Africa. "We've seen competitors, massive breweries here in Australia, being burnt in China so we're taking a different approach, we're learning from their mistakes," he says. "South Africa is another market we're keeping a close eye on-it's going to go places in three to five years. It's exciting times."
Austrade Food Overview: www.austrade.gov.au/Food-and-beverage/default.aspx Australian Food & Grocery Council: www.afgc.org.au Australian Quarantine & Inspection Service: www.daff.gov.au/aqis Australian Wine & Brandy Corporation: www.wineaustralia.com Dairy Australia: www.dairyaustralia.com.au Department of Agriculture, Fisheries and Forestry: www.daff.gov.au DFAT Food Facts: www.dfat.gov.au/facts/foodindustry.html Food & Beverage Australia Limited: www.fabal.com.au Food Standards Australia New Zealand: www.foodstandards.gov.au Horticulture Australia: www.horticulture.com.au Meat & Livestock Australia: www.mla.com.au National Aquaculture Council: www.australian-aquacultureportal.com