Every year we spend time interviewing our clients to better understand their businesses and what concerns them most. This includes the significant number of clients we serve in the food and beverage sector, which continues to be a dynamic market with significant opportunities for growth both within Australia and overseas.
In FY18 our clients in the food and beverage sector revealed their top three concerns were related to risk and regulation, operations, and talent management.
While at face level this isn’t dissimilar to what we’ve heard from clients in other sectors (risk and regulation being the number one issue across the board, thanks to political uncertainty and increased regulatory requirements), the specific nature of these concerns is aligned to the unique attributes of the food and beverage sector.
When it comes to operations for example, food and beverage client concerns included rising energy costs, challenges of technology adoption, and managing an environment rife with M&A (merger and acquisition) activity.
Food and beverage manufacturers, who typically have high energy consumption requirements, have been subject to rising energy costs that have in turn impacted profitability. The continuing diversification in the energy sector – including alternative sources of energy – over the next five years may help ease at least some of the pain.
Automation also presents challenges for food and beverage clients. While digital transformation is easier to adopt for data entry work, or within distribution warehouses (if you haven’t seen footage of the robots at the Alibaba warehouse then I highly recommend you Google), automation adoption by the food and beverage sector is slower for various reasons, including variability of raw materials and sanitation requirements. Industry 4.0 is, however, providing the required ‘industrial revolution’, and governments (state and commonwealth) continue to focus policy in support of industry investment in advanced manufacturing technology.
Our Business to Government team has successfully identified and secured government co-funding for a number of exciting food and beverage plant investments in FY18.
Finally managing growth and market position is particularly challenging, given the food and beverage sector has been one of the most active sectors in terms of M&A in Australia. We’re seeing consolidation and growth within Australia as a primary driver, with numerous clients targeting offshore opportunities once scale and efficiencies have been achieved.
Australia’s reputation for quality food and beverages, both in bulk and premium produce, means there is plenty of appetite for Australian goods – particularly from our Asian neighbours, who in 2017 accounted for 63% of our food and beverage exports.
Our advice for any of our clients in the sector looking at M&A is to get your house in order. Ensure your corporate structure is simplified, your tax structure is efficient and you have the right people in the right jobs. We can certainly advise you on all of this, as well as the best ways to enter new international markets, or leverage government funding support.
Thank you to all of the clients that we have interviewed in FY18. If you have any questions about the trends impacting the food and beverage sector, or how we can support your growth strategy, please feel free to drop me a line.