The latest Australian Food and Grocery Council (AFGC) report paints a bleak outlook for the current state of food manufacturing.
The report Competitiveness and Sustainable Growth Report, prepared by KPMG on behalf of the AFGC, collected data from suppliers from the last four years.
AFGC head, Gary Dawson, explained that while the Council had "plenty of anecdotal evidence of how tough the market conditions have become for food and grocery suppliers, this report provides the hard data to assess market trends and chart a way forward for this critical industry".
One of the key findings of the report is that profitability of Australian food and grocery suppliers has fallen nearly a third, dropping by 28% from 2010 to 2012, and is now well below international levels.
It also found that while supermarkets have seen an increased turnover, Australian suppliers revenues are dropping as imports spike.
Trade spend has fallen as well, due in part to reductions in marketing and, importantly, R&D.
However, food and beverage manufacturers are investing in their own production lines in an effort to boost efficiency and productivity.
"The overall picture is one of suppliers having to adjust rapidly to the shift in market conditions by investing in improvements to manufacturing systems to boost productivity and reduce labour and energy costs, and the funding of retail price promotions to try and maintain volume,: Dawson said.
"Looking forward the ability of the Australian food and grocery manufacturing industry to increase its competitiveness and win export opportunities will require a continued focus on cost containment and capacity rationalisation, greater collaboration with retailers to drive growth and share the benefits of supply chain efficiencies, and a rebalancing of trade spend to boost brand building and innovation," he said