Price Determination in the Australian Food Industry A Report
Price Determination in the Australian Food Industry A Report
Price Determination in the Australian Food Industry A Report
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Figure 51. Fresh vegetables: Major drivers of prices and costs<br />
The fresh vegetable category is highly diverse <strong>in</strong> terms of <strong>the</strong> product groups, scale of enterprises <strong>in</strong> farm production and <strong>the</strong><br />
extent of <strong>in</strong>tegration that exists through <strong>the</strong> cha<strong>in</strong>. The sector is strongly driven by <strong>the</strong> competition at retail level between<br />
major supermarkets and o<strong>the</strong>r outlets for a share of <strong>the</strong> consumer dollar.<br />
1. Farm production factors<br />
• Production volume highly volatile<br />
and seasonal which has a major<br />
bear<strong>in</strong>g on <strong>the</strong> volumes com<strong>in</strong>g to<br />
market, result<strong>in</strong>g <strong>in</strong> large<br />
fluctuations <strong>in</strong> wholesale and retail<br />
prices.<br />
• High perishability and limited shelf<br />
life of product requires timely<br />
access to market once crops are<br />
planted and pick<strong>in</strong>g time<br />
committed.<br />
2. Value-cha<strong>in</strong> <strong>in</strong>tegration<br />
• Increas<strong>in</strong>g <strong>in</strong>tegration of grow<strong>in</strong>g/pack<strong>in</strong>g<br />
and brand market<strong>in</strong>g activities by larger<br />
growers.<br />
• Increas<strong>in</strong>g <strong>in</strong>cidence of direct supply by<br />
<strong>in</strong>tegrated growers/packers to cha<strong>in</strong><br />
retailers, provid<strong>in</strong>g stable pric<strong>in</strong>g <strong>in</strong> order<br />
to secure long l<strong>in</strong>es of consistent quality<br />
product.<br />
• Increas<strong>in</strong>g scale efficiency of growers and<br />
pack<strong>in</strong>g houses.<br />
• Pressure on wholesale/agency<br />
enterprises through growth <strong>in</strong> direct<br />
supply bus<strong>in</strong>ess.<br />
3. The market<strong>in</strong>g approach<br />
• Increas<strong>in</strong>g brand<strong>in</strong>g of product by<br />
grower/packer has impact on<br />
market access to more stable<br />
returns at retail and wholesale.<br />
• Increased use of fresh food retail<br />
<strong>the</strong>mes and systems by major cha<strong>in</strong><br />
retailers as a po<strong>in</strong>t of differentiation<br />
has driven strong supply and quality<br />
management discipl<strong>in</strong>es back<br />
through <strong>the</strong> value cha<strong>in</strong> to suppliers<br />
and logistics systems.<br />
• Limited brand<strong>in</strong>g of fresh food at<br />
po<strong>in</strong>t of retail sale.<br />
Farm production Pack<strong>in</strong>g Wholesal<strong>in</strong>g Retail<br />
<strong>Food</strong> service<br />
<strong>Price</strong> <strong>Determ<strong>in</strong>ation</strong> <strong>in</strong> <strong>the</strong> <strong>Australian</strong> <strong>Food</strong> <strong>Industry</strong> A <strong>Report</strong><br />
4. Regulation and<br />
compliance<br />
• Increas<strong>in</strong>g costs of<br />
do<strong>in</strong>g bus<strong>in</strong>ess <strong>in</strong> farm<br />
enterprises to meet<br />
environmental, product<br />
<strong>in</strong>tegrity and food<br />
safety demands.<br />
• Meet<strong>in</strong>g ethical and<br />
product <strong>in</strong>tegrity<br />
demands.<br />
5. Trade impacts<br />
• Limited <strong>in</strong>fluence of exports<br />
on domestic market<br />
dynamics, as volumes are<br />
generally m<strong>in</strong>or only.<br />
• Export volumes are<br />
<strong>in</strong>creas<strong>in</strong>g <strong>in</strong> scale but<br />
based on market w<strong>in</strong>dows<br />
<strong>in</strong>to premium fresh markets<br />
<strong>in</strong> Asian cities.<br />
• Limited overall <strong>in</strong>fluence of<br />
imports or prevail<strong>in</strong>g<br />
commodity prices.<br />
6. Technology and <strong>in</strong>novation<br />
• Increas<strong>in</strong>g capital <strong>in</strong>tensity <strong>in</strong> largescale<br />
production and <strong>in</strong> pack<strong>in</strong>g house<br />
efficiency is chang<strong>in</strong>g operat<strong>in</strong>g cost<br />
structures.<br />
• Limited transparency of market prices<br />
and costs through <strong>the</strong> wholesale<br />
market sector.<br />
• Greater <strong>in</strong>vestment <strong>in</strong> <strong>in</strong>novation to<br />
improve production consistency and<br />
quality, varietal performance and<br />
handl<strong>in</strong>g efficiencies <strong>in</strong> harvest<strong>in</strong>g,<br />
grad<strong>in</strong>g and pack<strong>in</strong>g.<br />
• Innovation <strong>in</strong> m<strong>in</strong>imal process<strong>in</strong>g and<br />
pre-preparation of fresh vegetables for<br />
more convenient end use <strong>in</strong> home and<br />
food service.<br />
7. Retail market dynamics<br />
• Strong competition at<br />
retail level between major<br />
cha<strong>in</strong>s and between<br />
cha<strong>in</strong>s and o<strong>the</strong>r forms of<br />
convenience and<br />
specialty retail.<br />
• Greater demand for<br />
convenience and lifestyle<br />
solutions <strong>in</strong> meals and<br />
food preparation.<br />
• Greater preference for<br />
consistency of product<br />
availability and quality <strong>in</strong><br />
retail presentation.<br />
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