Food & Beverage

Managing through uncertainty:  Food and beverage industry in transition

The global food and beverage industry suffered during the recession and the global malaise that followed. And while measured growth again appears to be the norm in many markets, challenges persist. High commodity prices continue to impact profitability. Consumer spending remains sluggish and limits the ability of food and beverage companies to raise their prices.

Food for Thought:  Industry CEO survey report

Grant Thornton in partnership with Monash University and with the cooperation of the Australia Food and Grocery Council are pleased to release our research report:  "Food for Thought". Our research has revealed an industry in relatively healthy shape, but on the cusp of substantial change. There is broad optimism about the future, tempered with a realisation that mergers and acquisitions are likely to refashion the industry landscape.

Focus on:  Food & Beverage

The food and beverage sector did not escape the financial turmoil of the past 12 months, although some sub-sectors suffered more than others. As credit dried up and consumers tightened their belts, higher end restaurant sales plummeted, but the subsequent increase in people eating at home has been a boon for supermarkets.

At the farm gate access to capital, labour skills, specialised plant and equipment and good growing conditions are critical to the successful operation of Agribusiness companies.  Post farm gate securing sources of supply, changing consumer needs and the dominance of major retailers are critical to the success of manufacturers and wholesalers.

External influences
Growers are very susceptible to general economic and weather conditions. Seasonal conditions can produce large swings in fortunes. Reduced supply conditions can cause hardship for some farmers whilst farmers with adequate product will enjoy strong prices.

As supply is constrained pressure on maintaining margins increases along the supply chain as competition forces retailers to minimise price increases. An increase in supply has the opposite effect.
 
Trends
In recent times the growers have been hit with severe drought and floods which has resulted in reduced output at the farm gate.

Processors are constantly on the lookout for consumer trends i.e. environmental, organics and health trends.

At retail the majors enjoy strong buying power and continue to focus on rationalising suppliers, increasing the availability of house brands and imported products wherever possible.

Common issues
The reliance on internal and external debt finance means growers commonly face issues such as family ownership and succession, access to working capital and longer term finance and asset values based on long term assets.

Post farm gate retailers are rationalising the numbers of suppliers and securing increasing sources of supply e.g. through mergers and acquisition, is critical.

Services required by our food and beverage clients often include:

• Cash flow and forecasting
• Succession planning and estate planning
• Management assessment
• Mergers and acquisition advice
• Audit and tax compliance
• Valuation

In addition to this, we often advise our clients on specific tax issues that must not be overlooked, such as:

• Tax planning opportunities
• R&D concessions
• Fuel tax rebates
• GST and CGT
• Government grant eligibility
• Ideal group structuring

How can Grant Thornton help?
Grant Thornton has significant experience in the food and beverage sector from the farm gate through to processing and retail.  We are auditors and tax advisors to many public and privately owned entities.

We are also members of the Agribusiness Association as well as sponsors of the Risk Management Award at the NAB Monash University Agribusiness Awards and are a member of the judging panel.
Our experience means that we can readily identify the critical issues affecting your business and then quickly provide specific solutions.

For more information, please contact:

Tony Pittito
Industry Leader - Food & Beverage
T  +61 3 8663 6204
M  +61 414 340 658
E  tony.pititto@au.gt.com

Further reading from Grant Thornton Australia

Grant Thornton Australia's Food & Beverage credentials

Further reading from Grant Thornton International

Fast facts on food processing (Grant Thornton US) 

Targeting Growth:  Challenges and opportunities for the UK Food & Beverage sector (Grant Thornton UK)