Price Determination in the Australian Food Industry A Report

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© Commonwealth of Australia 2004 This work is copyright. The Copyright Act 1968 permits fair dealing for study, research, news reporting, criticism or review. Selected passages, tables or diagrams may be reproduced for such purposes provided acknowledgment of the source is included. Major extracts or the entire document may not be reproduced by any process without the written permission of the Executive Manager, Food and Agriculture Business, Australian Government Department of Agriculture, Fisheries and Forestry, GPO Box 858, Canberra ACT 2601. ISBN 0 642 539073 This publication should be cited as: Spencer, S 2004, Price Determination in the Australian Food Industry, A report, Australian Government Department of Agriculture, Fisheries and Forestry, Canberra. Design and formatting by Mirrabooka Marketing & Design Pty Ltd. Copy-editing by Roger Green, Bad Business. Price Determination in the Australian Food Industry A Report Other portfolio publications of possible interest include: ABARE 2003, Australian Food Statistics 2003, Australian Government Department of Agriculture, Fisheries and Forestry, Canberra. BRI Australia Pty Ltd 2003, The Australian Baking Industry: A Profile, Australian Government Department of Agriculture, Fisheries and Forestry, Canberra. Food News Bulletin, (published quarterly), produced by the Australian Government Department of Agriculture, Fisheries and Forestry, Canberra. Smith, P. and Jahan, N. 2003, Australian Food Processing Industries: Distribution of Employment, Australian Government Department of Agriculture, Fisheries and Forestry, Canberra. Disclaimer Views expressed in this publication are not necessarily the views of the Commonwealth. This publication is made available on the understanding that the Commonwealth is not thereby engaged in rendering professional advice. Before relying on material in this publication, users should independently verify the accuracy, currency, completeness and relevance of the information for their purposes and obtain any appropriate professional advice. References to non-Commonwealth organisations do not constitute endorsement by the Commonwealth of those organisations or any associated product or service. The Australian Government Department of Agriculture, Fisheries and Forestry seeks to publish its work to the highest professional standards. However, it cannot accept responsibility for any consequences arising from the use of information herein. Readers should rely on their own skill and judgment in applying any information for analysis to particular issues or circumstances. Cover images courtesy of the Australian Government Department of Agriculture, Fisheries and Forestry New Industries Development Program’s Made in Australia magazine and the photographers Nadine Shaw QLD, Alan Seaton NSW, Leigh Atkinson – ImageMakers ACT, Don Brice SA, James Rogers WA. ii
ACKNOWLEDGEMENTS The study into price determination in the Australian food industry was initiated by the Minister for Agriculture, Fisheries and Forestry, the Hon. Warren Truss MP in 2003. An external steering committee for the project comprised representatives of the Australian Food and Grocery Council, National Food Industry Strategy Ltd and National Farmers Federation. Internal portfolio reference group representitives from line areas and ABARE provided feedback on the draft report. Staff in the Food Policy and Communications Section of the Department’s Food and Agriculture Business Group managed the project. The project was conducted by Steve Spencer, Director of Whitehall Associates who wishes to acknowledge the assistance of the following people who provided consulting input and valued insight: Ewan Colquhoun of Macarthur Agribusiness, Rosemary Richards of Bowman Richards & Associates, Martin Kneebone of Retailworks and Professor Gordon MacAulay of the University of Sydney. Roger Green of Bad Business copy-edited the final report. Price Determination in the Australian Food Industry A Report iii
Page 1: Price Determination in the Australi
Page 6 and 7: FOOD AND AGRICULTURE BUSINESS GROUP
Page 8 and 9: FIGURES Price Determination in the
Page 10 and 11: Price Determination in the Australi
Page 14 and 15: • The current focus of retail cha
Page 16 and 17: • assertions as to market power i
Page 18 and 19: Overview - main drivers of prices i
Page 22 and 23: Food lines The analysis of food pro
Page 24 and 25: Figure 1. Overview of the approach
Page 26 and 27: Figure 2. Corporate profitability I
Page 28 and 29: Figure 4. Major drivers of prices a
Page 30 and 31: 5.3 The greater influence of prevai
Page 32 and 33: DAIRY - PACKAGED MILK Overview of t
Page 34 and 35: Figure 10. Whole milk, 2 litre, sup
Page 36 and 37: Prices through the chain Our analys
Page 38 and 39: Figure 16. Natural cheddar cheese:
Page 40 and 41: Farmgate prices Farmgate prices are
Page 42 and 43: DAIRY - ANALYSIS OF PRICING OF DAIR
Page 44 and 45: Figure 25. Dairy butter and blend s
Page 46 and 47: ‘Step-ups’ are paid by several
Page 48 and 49: THE MEAT SECTOR Analysis of the det
Page 50 and 51: The approach taken The pricing anal
Page 52 and 53: The changing value chains - various
Page 54 and 55:
The approach taken Assumptions used
Page 56 and 57:
Figure 39. Lamb market sales, ’00
Page 58 and 59:
Figure 41. Lamb: Major drivers of p
Page 60 and 61:
Observations The price comparison s
Page 62 and 63:
Figure 46. Pork products, supply ch
Page 64 and 65:
Figure 48. Value and cost-adding fr
Page 66 and 67:
Supply chain management Wholesale m
Page 68 and 69:
Figure 51. Fresh vegetables: Major
Page 70 and 71:
FRESH HORTICULTURE - WHOLESALE MARK
Page 72 and 73:
FRESH HORTICULTURE - ANALYSIS OF PR
Page 74 and 75:
market access - in the United State
Page 76 and 77:
The industry’s product mix The ke
Page 78 and 79:
PROCESSED FRUIT AND VEGETABLES Anal
Page 80 and 81:
Figure 69. Frozen vegetables, peas,
Page 82 and 83:
PROCESSED PINEAPPLES - ANALYSIS OF
Page 84 and 85:
Figure 75. Fresh fruit, with juice,
Page 86 and 87:
GRAIN AND OILSEED PRODUCTS Analysis
Page 88 and 89:
Figure 79. Flour, 1kg, supply chain
Page 90 and 91:
Figure 82. Share of retail price of
Page 92 and 93:
OILSEEDS - OVERVIEW Background The
Page 94 and 95:
Figure 87. Oils and fats, supply ch
Page 96 and 97:
The amount represented by the retai
Page 98 and 99:
Industry risks The key area of risk
Page 100 and 101:
• The major cost faced by egg pro
Page 102 and 103:
Figure 96. Consumer price index, fo
Page 104 and 105:
• Many such operators have indica
Page 106 and 107:
SUGAR PRODUCTS Analysis of the dete
Page 108 and 109:
Figure 103. White sugar, 2kg, suppl
Page 110 and 111:
Projected export returns for the co
Page 112 and 113:
• Export prices are driven by glo
Page 114 and 115:
Retail prices • The average retai
Page 116 and 117:
Industry risk • The overall retur
Page 118 and 119:
4. The performance of Australian fo
Page 120 and 121:
THE PERFORMANCE OF AUSTRALIAN VERSU
Page 122 and 123:
THE PERFORMANCE OF GLOBAL BRAND MAN
Page 124 and 125:
THE PERFORMANCE OF PRIMARY MANUFACT
Page 126 and 127:
Our purpose in preparing this secti
Page 128 and 129:
GROCERY RETAIL - WHAT DETERMINES PR
Page 130 and 131:
The consumer trend towards eating o
Page 132 and 133:
GROCERY RETAIL - PERFORMANCE OF GRO
Page 134 and 135:
6. Issues for consideration ISSUES
Page 136 and 137:
PRODUCER INTEGRATION Does integrati
Page 138 and 139:
Industries have in several cases ta
Page 140 and 141:
Examples include: • 1 litre milk
Page 142 and 143:
Figure 132. Targeting the stomach H
Page 144 and 145:
MAJOR ADJUSTMENT - WHAT’S HAPPENI
Page 146 and 147:
THE IMPACT OF DROUGHT The sector Di
Page 148 and 149:
Price Determination in the Australi
Page 150 and 151:
Oczkowski, E, Murphy, T 1999, Influ
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Price Determination in the Australian Food Industry A Report

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