Home > Australian foodservice industry to continue growing: BIS Shrapnel’s survey

Australian foodservice industry to continue growing: BIS Shrapnel’s survey

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While healthy eating and food allergies are providing new product opportunities for foodservice manufacturers and distributors, the industry will struggle with several economic factors in 2008, according to a provider of industry research, analysis and forecasting services in Australia, BIS Shrapnel.

However, the forecaster notes foodservice is one of the first industries to recover following tough economic times and despite several challenges, foodservice has grown strongly during the past three years and will continue expanding if operators, manufacturers and distributors take advantage of the new areas of business available.

BIS Shrapnel’s Australian Foodservice 2007 report states Australian palettes have matured significantly in the past 20 years and eating out has remained very affordable when compared with other mature foodservice markets around the world.

BIS Shrapnel estimates the foodservice industry is now worth approximately $35 billion in consumer prices, and forecasts the sector will have a compound annual growth of 6.8% between 2007 and 2012 (in current prices).

The commercial foodservice sector has 60,972 outlets operating in the space, while the institutional sector has 15,238 outlets.

BIS Shrapnel Food and Beverages Unit Manager, Sissel Rosengren, believes one of the biggest opportunities for growth for food manufacturers and distributors is in the institutional sector.

“Institutional outlets are being largely ignored. Although this segment is the smaller of the two sectors, demand is set to grow extremely strongly as the baby boomers age and move into nursing homes and require hospital care.

“Private hospitals and aged care facilities, for instance, are very customer-focused. Baby boomers have a more sophisticated palette than previous generations and higher expectations, for which the institutional sector will have to cater.”

In the commercial sector, BIS Shrapnel believes the growth will come from the full service restaurant, café and hotel channels.

The breakfast segment is also still growing strongly and the healthy eating changes in menus in clubs and quick service restaurants (QSRs) are also providing supply opportunities for manufacturers and distributors, according to Rosengren.

Gluten-free products are in high demand across most product categories and each channel requires options from their suppliers to cater for the growing number of Celiac customers.

Rosengren believes the entry barrier to the foodservice industry is much lower than the retail sector where manufacturers are often fighting for shelf space.

“Food manufacturers and distributors should be thinking foodservice, not retail,” said Rosengren.

“Given eating out is now a way of life for many generations and socio-economic groups in Australia, consumers are in many cases pushing fast-food outlets, restaurants and cafés to offer a greater range of healthy eating options and ‘free-from’ foods.

“Operators are turning to suppliers to meet this demand, and in the instance of gluten-free and lactose-free products, in many cases distributors are unable to meet these requests.”

Demand for Australian-made or regional produce from foodservice operators is very strong in some areas of the country.

However the BIS Shrapnel survey found operators would like to buy it, but feel when it comes to the crunch it’s not often possible to obtain Australian-made fresh or dried produce.

This is even the case for chefs -- though Rosengren notes five-star chefs are the exception, and will go to great lengths to source regional and Australian-made/grown products.

The Australian Foodservice 2007 report indicates there has been little change in the use of the internet for ordering during the past five years, with only 18% of survey respondents indicating they used the internet or email for all or part of their ordering.

“The internet is used for food ordering mainly in high volume outlets. For many foodservice operators, ordering is still very much ‘back of the envelope’. Most foodservice operators prefer to develop a personal relationship with suppliers,” said Rosengren.

“On the whole, foodservice operators rely on magazines, its peers, exhibitions and competitors to find out about new products and source ideas for menus -- rather than researching on the internet.”

While the industry has withstood a number of challenges, there are a number of issues the foodservice industry will need to monitor in 2008:

Interest rate rises – although interest rates are not biting a large majority of Australian households yet, food spending is a very discretionary part of personal spending and inflation in the food sector is currently around 3.5% -- this is the highest it has been in five years. BIS Shrapnel expects foodservice operators will start to feel the pinch mid next year as further interest rate rises dent consumer confidence.

The drought – the drought is having a large impact on food prices and availability of product and this is expected to worsen during 2008.

BIS Shrapnel says every channel and every outlet is being affected by the drought and warns foodservice manufacturers and operators will be forced to pass on more price rises to consumers in the next 12 months.

Skilled labour shortages – this is impacting foodservice operators both front and back of house, but in some regions more than others, i.e. Western Australia.

Despite these economic concerns, with good management and foresight, BIS Shrapnel believes the outlook for the foodservice industry is very bright.

Australia is an affluent society and has a rising number of two income households and therefore more propensity to eat out.

“BIS Shrapnel’s survey of the foodservice sector shows confidence is very high at the moment -- despite the drought, skilled labour shortages and interest rate rises -- food manufacturers and foodservice operators still on the whole believe there are many more opportunities in the market and much more growth to come,” said Rosengren.

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