AUSTRALIA has traditionally maintained a healthy domestic fruit and vegetable processing industry, with 84% of all products consumed locally.
Consumption of processed fruit and vegetables is on the increase, although a number of factors managed to contribute to a decline of 10% in industry turnover during the 2002-3 financial year.
The Australian market is very competitive. IBISWorld estimates that domestic demand has been increasing at an annualised rate of 4.2%.
Australian processors are also facing stiff competition from imports, with Australian Bureau of Statistics (ABS) figures showing $990.1million worth of fruit and vegetables was imported in 2002-3.
Until the 2002-3 turnaround, fruit and vegetable processors enjoyed a period of expansion. The major factor contributing to the recent loss was prolonged drought and its associated water shortages. The water shortages meant reduced harvests and therefore processing at many Australian plants.
Small to medium processors were most affected, as intense industry competition meant retail prices could not be increased to reflect the lower supplies.
Queensland success story and fourth-largest fruit and vegetable processor, Golden Circle, has gone into damage control following its net after-tax loss of $31.1million for the 2003 calendar year.
A new chief executive, Robin Ferris, was appointed in December 2003 to “restore Golden Circle’s profit in 2004 and reposition the company to take advantage of opportunities for future growth”.
Ferris attributes the 2003 financial loss to several major factors, including: severe drought; SARS; write-down of The Original Juice Co. goodwill; redundancy and restructuring costs; write-down of inventory and surplus assets and higher consulting and financial advisory costs.
The rescue plan to restore profit in 2004 includes: price increases across the Golden Circle product range; a review of sales and marketing expenditures; more efficient alignment of production and staffing requirement; and improved operational planning.
“We have no alternative but to take action to reduce costs in the pineapple industry and across our entire business if we are to lift overall returns to growers and shareholders,” Ferris said.
He believes that the pineapple industry will undergo transformation in the next two to five years. He sees fewer, but larger, growers supplying high quality fruit at an economically sustainable price.
In contrast, SPC Ardmona is enjoying the effects of merging the two businesses in January 2002.
The company posted a 19.2% increase in earnings before tax for the 2003 calendar year. Earnings rose from $29.2million in 2002 to $34.8 million on the back of a 7.8% increase in revenue, which rose to $487.8million.
SPC Ardmona attributes its success in revenue growth to domestic sales, with good growth in the fruit and tomato categories.