Price Determination in the Australian Food Industry A Report

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Figure 87. Oils and fats, supply chain map Farmer Primary Process Secondary Process Market Logistics Retail Brand Ownership/ Management Export Markets Farmer Crusher Refiner/ Marketer Chain Retailers Consumer harvest/transport/ store • Around 2.5–3 million tonnes of oilseeds produced annually. • Canola winter crop grown in southern and western Australia. • Other oilseeds mostly summer grown and predominantly in northern New South Wales and Queensland. • Main drivers of price are global commodity prices. • There are seven crushers, however, one has 85% market share. There are two players servicing the mainstream refiners and a number of smaller ones producing niche commodities or servicing non-grocery markets. • Yield varies by seed type – high oil varieties have around 40% oil: 60% meal and low oil varieties have 20% oil:80% meal. • However, oil is in most cases the economic driver. Wholesalers • There are five refiners in Australia, although two have 90% of capacity. These players – Goodman Fielder and Unilever – are the predominant suppliers to the retail market along with imports. • These players purchase crude oil from crushers and recover around 95%. Other Retailers Food Service/ Commercial • There is little sale of consumer pack oil into food service, yet sales of spreads into this sector includes retail pack sizes for ease of use in sandwich preparation. • Major supermarkets account for majority of retail sales. • Branded product is about 50% of retail pack sales of oil. OILS AND FATS RETAIL MARKET The Australian retail market Price Determination in the Australian Food Industry A Report The margarine segment has been undergoing a period of decline while the cooking oil segment has been growing, although this is primarily in the olive oil segment. Value and volume of grocery sales of spreads and oils Margarine Blends Butter Cooking Oil 2000 2002 2002 2002 Value $m 266 63 61 218 Volume 83,193t 14,221t 14,402t 527 M litres Note: the above figures only represent the grocery trade of major supermarket groups and do not capture sales through independents, convenience stores and food service. For example, total margarine production is around 150,000 tonnes. Source: Australian Oilseeds Federation The retail yellow spreads market is declining at around 3 per cent per annum. Within the yellow spreads segment, butter is seeing a rise in popularity. While margarine use is declining, it still accounts for 66 per cent of the total spreads market. Generics have won a greater share of the market as consumers recognise that the quality is comparable. Polyunsaturated margarines continue to dominate the segment with 63.4 per cent of margarine sales. Monounsaturated margarines account for 29.2 per cent of margarine sales. While the number of households consuming margarine remains constant, the oil content of vegetable oil spreads has dropped with the move to low-fat products and the use of other ingredients (including dairy fat in blends). Spreads offering unique positioning – for example, cholesterol lowering – and olive oil have been introduced in an attempt to reinvigorate the market. 82
Bottled oils are also seeing growth. Olive oil accounts for most of this, growing by around 10 per cent per annum and representing 37 per cent of the total market. Non-olive oil use is declining by 4.5 per cent per annum. Private label product accounts for around 50 per cent of total sales. The premium-priced segment is mostly canola (but would also include sunflower and specialty oils) and trades at a significant premium to the blended vegetable oil category. Monola (lowlinolenic canola) has done well but is heavily supported with marketing. Olive oil continues to increase, primarily driven by a strong marketing image. Canola oil dominates this category accounting for 26 per cent of the total segment by volume and is a major ingredient in the blended vegetable oils category, which accounts for 29.6 per cent by volume. The shares of all categories are shown below. However, as a single oil category, olive oil has grown significantly to now hold 30 per cent of the segment by volume and almost half by value. Figure 88. Market mix of cooking oils, 2002 speciality 4% sunflower 7% spray oil 2% olive 30% canola 26% blended vegetable 31% Source: Australian Oilseeds Federation In terms of trends in individual oil types, there has been: • a significant increase in canola oil consumption (up from 14 per cent in 1987 to almost 60 per cent today); • growth in specialty oils such as peanut and sesame oil; • substantial growth in olive oil consumption with extra virgin and extra light olive oils driving growth; and • a decline in soybean oil consumption linked with trans fatty acid and genetic modification issues. COOKING OIL AND MARGARINE – ANALYSIS OF PRICING Retail pricing Represented below is our analysis of the share of the current returns for each major sector engaged in the oils and fats value chain as it relates to bottled cooking oil (note that the farmgate to wholesale component includes both primary and secondary processing). Figure 89. Share of retail price of cooking oil, 750ml bottle % 100 80 60 40 20 0 Source: Industry sources retail wholesale/marketer primary processor farmgate Price Determination in the Australian Food Industry A Report 83
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Price Determination in the Australi
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© Commonwealth of Australia 2004 T
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FOOD AND AGRICULTURE BUSINESS GROUP
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FIGURES Price Determination in the
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• The current focus of retail cha
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• assertions as to market power i
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Overview - main drivers of prices i
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Food lines The analysis of food pro
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Figure 1. Overview of the approach
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Figure 2. Corporate profitability I
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Figure 4. Major drivers of prices a
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5.3 The greater influence of prevai
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DAIRY - PACKAGED MILK Overview of t
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Figure 10. Whole milk, 2 litre, sup
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Prices through the chain Our analys
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Figure 16. Natural cheddar cheese:
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Farmgate prices Farmgate prices are
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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 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
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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
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MAJOR ADJUSTMENT - WHAT’S HAPPENI
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THE IMPACT OF DROUGHT The sector Di
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Oczkowski, E, Murphy, T 1999, Influ
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Price Determination in the Australian Food Industry A Report

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