Free trade agreements with Japan and Korea
Australian food and beverage businesses stand to gain significant opportunities from the free trade agreements with Japan and Korea, but how well are they geared for increased export into new markets?
- Australian food & beverage businesses will now be more attractive to foreign investors
- Innovation will be key to facilitate growth opportunities
- Beware of the risks, businesses must seek advice to understand new markets before they enter
Tony Pititto, Food & Beverage Industry Growth adviser, Grant Thornton Australia says mid-sized businesses in the sector will become attractive to foreign investors seeking opportunities on the back of free trade agreements with Japan and Korea. These investors can provide the industry with much needed capital to facilitate further growth.
“There is a significant need to capitalise on this opportunity presented by the free trade agreements with Japan and Korea for greater exposure to export to new markets in order to combat the difficult conditions created in our local market by the dominance of major retailers. 71% of industry participants have indicated retailer dominance as their top concern*,” says Mr Pititto.
While the free trade agreements with Japan and Korea provide significant opportunity for our agribusiness producers to increase exports and expand in new markets, the industry must be aware of the key considerations and risks to ensure our local food and beverage businesses are best positioned to maximise the growth opportunities before they invest in expansion, according to Mr Pititto.
“Product innovation and investment in infrastructure and new technology will be key to facilitating the growth opportunities for our local food and beverage businesses provided by the new free trade agreements with Japan and Korea.
“Our local businesses need to understand their customers in these new markets and invest in product innovation to meet their needs. If they fail to innovate, they won’t be well positioned to successfully grow in these new markets.
“We’re seeing small signs of growth in product sales come from exports, yet insufficient Government support for product innovation and development is stifling the growth of our food and beverage companies, who expect average export sales to be 21.5% of total product sales over the next two years*.
“The Federal Government can further enable this growth opportunity by providing Australian companies with the right tax incentives to increase the level of product development and innovation and encourage these export opportunities in the upcoming Federal Budget.
“Right now Australian companies’ median spend on R&D just 1% of sales or half the amount spent by their North American counterparts*.”
“The growth, and particularly export growth, of our local food and beverage businesses is in the hands of the Government. We need to see the State Governments to take Mr Hockey up on his offer to encourage innovation and exports in the upcoming Federal Budget.” Please don’t hesitate to contact me if you would like me to put you directly in touch with Tony Pititto.
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Notes: *According the Australian insights from the global study conducted by Grant Thornton on the food and beverage industry: Hunger for growth: food and Beverage looks into the future.
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