WITH the Heinz factory at Girgarre having churned out its last drop of tomato sauce earlier this month, many farm leaders have been left wondering about the future of Australia’s food processing sector.
The decision to close the plant boiled down to a numbers of factors including the high Australian dollar, the cost of carbon tax, cheaper imported food products and overseas work rates, payroll tax and the dominance of the two major supermarkets.
But what exactly does this mean for the food processing sector, which employs more than 312,000 people across Australia?
And should the government be doing more to support the industry?
Victorian Farmers Federation (VFF) president Andrew Broad said the country was fast losing both ownership and capacity in regional areas when it came to food processing.
“We met with Heinz after they’d made the decision to close to gain an understanding of exactly where we were going wrong – and it’s not just one thing anymore, it’s a combination,” he said.
However, there were certain factors the government could address to alleviate the pressures facing processing companies, Mr Broad said.
“Heinz were paying up to $400,000 in pay roll tax,” he said. “That’s a huge disincentive for companies to employ people or expand their operations, so I think that needs to be reviewed.”
Linking employment circumstances to productivity to create a freer market would also help sustain food companies, he said.
Mr Broad also recommended the Government make secondary processors exempt from the costs of the carbon tax.
“The trend of food processing companies moving offshore should scare every Australian,” he said.
“Joe Ludwig is talking about the National Food Plan, but unless the Government addresses the concerns of processors soon, there won’t be much of a plan at all.”
According to a recent competitiveness study by KPMG published in the Australian Food and Grocery Council (AFGC) State of the Industry 2011 report, food and grocery manufacturing costs increased by more than 18 per cent between 2008-2010 in Australia.
This was heavily impacting on the industry’s profitability, growth and ability to innovate and create jobs.
The figure has alarmed AFGC chief executive Kate Carnell alarmed, who has urged all levels of Government to take action to reduce future plant closures and job cuts.
“The Government needs to provide tax incentives to enable business to take advantage of the high Australian dollar to invest in large-scale plant equipment upgrades to improve efficiency,” she said.
“To ensure a fairer trading environment, the Government should appoint a Supermarket Ombudsman, who would enforce a Fair Trading Code of Conduct.”
Ms Carnell said the recent study highlighted that failing to improve skills development, provide tax incentives for investment or create a level playing field in the highly-concentrated retail sector could result in up to 130,000 jobs being lost by 2020.
The fresh closure of the Heinz factory emphasised the pressures facing the processing sector, including the rising cost of labour, energy, water, transport and high commodity prices, she said.
However, it is not just cheaper overseas work rates that are enticing companies to shift overseas.
Australian manufacturers have found it increasingly difficult to compete with the invasion of imported food, including Italian tomatoes which consumers can pick up off the shelves for $1 a can.
The “imported” attack has left many Australian companies disillusioned and with few alternatives but to move their factories offshore.
In 2009-10 Australia actually imported more processed food than it exported.
The two major supermarkets Coles and Woolworths have also made no secret of their goal to push their cheap house-brands and stack shelves with products made from imported ingredients. A swag of Australian brands have already been swallowed up by foreign owners, including SPC, Golden Circle and Dairy Farmer.
And while it seems the Australian food processing sector has the odds stacked up against it from every angle, the good news is some independent supermarkets such as IGA have made a big move to support Australian food.
The company have been running a “shelf-taker” program with great success, which gives consumers the choice to buy Australian owned and made food.
Meanwhile, one positive outcome of the Heinz tomato sauce plant closure has been the rise of the Goulburn Valley Food Co-operative, which plans to set up a community-owned factory.
In a bold bid to fight the multi-nationals and buck the trend of foreign-owned companies taking over Australia, the group is preparing a proposal to buy the Heinz plant and reopen it.
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