The Australian Government is manufacturing a new future for our nation. Manufacturing is critical to a modern Australian economy—a key part of almost every supply chain that adds significant value to all sectors. The Modern Manufacturing Strategy (MMS) is led by industry, for industry, to help our manufacturers scale-up, become more competitive and build more resilient supply chains. The Australian Government will be a strategic investor in this, notably through the 6 national manufacturing priority sectors, in order to drive productivity and create jobs for Australians, both now and for generations to come.
On 1 October 2020, the Australian Government announced a $1.5 billion investment in the MMS to help Australian manufacturers be more competitive, resilient and build scale in the global market. The 6 key areas are:
- Resources Technology & Critical Minerals Processing
- Food & Beverage
- Medical products
- Recycling & Clean Energy
Through the MMS, the Government wants to support projects from industry that will transform manufacturing in Australia. The Food and Beverage National Manufacturing Priority road map will help inform investment decisions that both Government and industry make over the next 10 years, to support projects that will:
- harness and grow the sector’s strengths and advantages
- provide innovative solutions to overcome constraints that limit value creation and that may prevent the sector achieving its full potential
- transform the sector by growing a high-value, reputable and dynamic food and beverage manufacturing industry.
The MMS outlines the whole-of-government agenda to help grow Australian manufacturing and ensure our manufacturers can harness global opportunities and achieve scale and competitiveness. It is built on 4 pillars.
Focusing on areas of advantage
The third pillar of the Strategy is to set National Manufacturing Priorities, develop road maps for action, and back projects through the Modern Manufacturing Initiative (MMI) which support the transformation of manufacturing in these sectors.
Road maps are being developed with industry to set out plans for both industry and Government to strengthen Australia’s manufacturing capability. The road maps have been led by industry taskforces to identify and set a future vision for priority areas with clear goals, opportunities and actions over the next 2, 5 and 10 years.
The road maps are designed to be dynamic. As the MMS is implemented, we will continue to work with industry to ensure the road map evolves over its life. This will take account of emerging opportunities and actions to support the sector to scale-up, become increasingly competitive and for businesses to integrate their commercial solutions with global supply chains and markets. See Road map in context for more details on the road map process.
Food and beverage related complementary strategies
The MMI aims to support manufacturers to more quickly bring their products to market and invest to scale their manufacturing operations in Australia. The road map will support industry to overcome late stage commercialisation barriers and help government identify high impact projects. The role of the MMI complements other government programs to support the development of the food and beverage manufacturing sector.
This road map will assist manufacturers to bring food and beverage products to market which complement these initiatives and deliver economic value and jobs for Australia:
- Ag2030: setting foundations for agricultural growth
- National Food Waste Strategy: halving Australia’s food waste by 2030
- FIAL Sector Competitiveness Plan 2020: 10-year vision and strategy for the industry
- National Waste Action Plan: targets and actions will guide investments and national efforts to 2030 and beyond
- CSIRO Food and Agribusiness roadmap: growth opportunities and what the sector needs to do to achieve them
- FIAL Capturing the Prize: A$200 billion opportunity in 2030 for the Australian food and agribusiness sector.
Other pillars of the Strategy
The MMS includes 3 other pillars which will also be important to focusing government investments to support the competitiveness and scale of Australian manufacturing.
Getting the economic conditions right (pillar 1)
The Australian Government is getting the economic conditions right for manufacturers, paving the way for growth and improved competitiveness in all sectors. Manufacturers need a pipeline of skilled workers as they transform and scale. The Government is investing $7 billion this financial year to keep apprentices in jobs, to help jobseekers re-skill and to promote vocational training. Reforms to higher education will boost the number of graduates in areas of employment growth, including in STEM. These policies are creating the jobs of the future and a pipeline of skilled workers to support new and emerging industries, including in manufacturing.
A gas-fired recovery will ensure Australian gas is working for businesses and manufacturers, with a 13-point plan and $49.8 million investment to unlock supply. This complements the Government’s initiatives to reduce electricity prices, boost liquid fuels security and invest in low emissions energy technology through Australia’s Technology Investment Roadmap.
The Government is harnessing opportunities from emerging technologies and building business digital capability, including growing Australian business’ cyber security resilience. Work to implement a Simplified Trade System will support Australia’s exporters and importers to invest and grow local jobs by making it easier for businesses to integrate into global supply chains.
Businesses are more likely to grow and attract investment when there are fewer barriers and they feel supported by a thriving business environment. That’s why the Government is committed to getting the economic conditions right and creating collaborative environments which encourage the domestic and international market to invest; and partner with business, research organisations and state and territory governments.
The Government is focused on making and sustaining jobs through the JobMaker scheme. Our temporary full expensing of eligible depreciable assets and temporary loss carry back refundable tax offset measures will unlock investment and expand the productive capacity of the nation.
Making science and technology work for industry (pillar 2)
Australia’s science, research and innovation capabilities are critical enablers of transformation in manufacturing. There is clearly an opportunity to find ways to improve the uptake of technology, processes and practices, and digital operations by manufacturers. These enablers support business competitiveness and will have positive spill-overs across our economy.
This work will focus our industry, science and technology investments, including through the work of the CSIRO, to support our National Manufacturing Priorities. This will help our manufacturers supercharge their operations and harness emerging opportunities.
It will also complement Government actions to harness opportunities from emerging technologies, build business digital capability and grow the cyber security resilience of Australian business.
Building national resilience for a stronger economy (pillar 4)
The Supply Chain Resilience Initiative will strengthen Australia’s ability to access critical necessities, part of positioning Australia to respond to future supply chain disruptions to make us stronger and more resilient. It will build on government and industry efforts to rapidly address critical supply issues revealed during supply chain disruptions due to COVID-19.
Why the food and beverage manufacturing sector?
Australia has an international reputation for producing premium, safe and high-quality products. Close proximity to Asian markets and a reputation as a trusted exporter of premium goods has led to the food and beverage sector becoming the largest manufacturing sector for the Australian economy. Successful high value food and beverage manufacturing projects can also build better return for our farmers, and for our agriculture producers. The sector’s strong economic contribution and employment is supported by Australia’s high quality agricultural produce and production capabilities. It demonstrated resilience throughout the COVID 19 pandemic by being agile and through access to cutting-edge research and innovation expertise.
With the world’s population projected to reach 9.8 billion by 2050, there is increasing opportunity for Australia’s food and beverage manufacturers to access new consumers and markets by leveraging the sector’s reputation and capability. This road map outlines industry-led actions to increase food and beverage manufacturing activity over the next 10 years, with a focus on growing Australia’s on-shore manufacturing capacity, capabilities and expertise.
Strengths in food and beverage manufactured in Australia
Food and beverage manufacturing strengths:
- international reputation for clean, green and safe
- strong trade relations and trusted supplier
- access to high quality agricultural produce
- trusted regulatory system.
These strengths are enabled by:
- more collaboration
- access to diversified markets—export/online
- enhanced supply chain resilience.
What is food and beverage manufacturing?
For the purposes of this road map, food and beverage manufacturing covers businesses that undertake various stages of processing to transform agricultural produce into food and drink products. This includes processes ranging from basic preparation, preservation and packaging of raw ingredients, through to elaborately transformed foods and beverages. However, food and beverage manufacturing excludes food service retailing businesses and unprocessed food commodities.
The food and beverage manufacturing sector is made up of subsectors which are as diverse as the range of foods and drinks we consume on a daily basis. Firms within the sector undertake a wide variety of value adding activities, using agricultural inputs to produce food for consumption. Many of the firms interact as part of a complex integrated supply chain, in which agricultural inputs go through a series of processing stages before being suitable for distribution to consumers. For example, food manufacturing encompasses flour mills, which process wheat that is subsequently used by other food manufacturers in the production of bread and other baked goods. The sector also includes firms that process livestock to produce meat, which is directed both to consumers to be cooked at home, and also into other food manufacturing businesses that prepare ready to eat meals.
At a high level, the subsectors that make up food and beverage manufacturing, and examples of their value add products include:
- Grain mill and cereal products such as high protein pasta and on-the-go breakfast cereals
- Dairy products such as probiotic milk beverages and fortified yoghurts
- Meat products such as ready to eat meals, and frozen and marinated value-add meats
- Oil and fat products such as vegetable shortening and cultured butter
- Beverage products such as energy and sports drinks, plant based beverages, wine and premium spirits
- Bakery products such as gluten-free breads and biscuits, and fortified cereals
- Sugar and confectionary products such as sugar-free gum and protein nut bars
- Seafood products such as smoked or dried fish and canned tuna
- Fruit and vegetable products such as pre-packaged salads and fruit juice.
The food and beverage sector’s potential growth will rely on its ability to manufacture locally and export more high value goods to overseas markets which meet consumer and market demand. There are opportunities to bring food and beverage manufacturers including small to medium enterprises (SMEs) together to invest in research, translate this into commercial applications, and manage the development of new products for existing and emerging markets. While these activities may be out of reach of a single business, collectively through collaboration they may achieve the critical mass to pursue opportunities and share the benefits. This includes collaboration with the agriculture sector.
Feeding directly into food and beverage manufacturing is the Australian agriculture, fisheries and forestry sector. This sector aims to achieve $100 billion in farm gate output by 2030. Through delivering Ag2030, the Australian Government is setting the foundation for the agricultural sector to grow, ensuring Australian agricultural producers receive maximum returns for their hard work and are supported by vibrant rural and regional communities. Developing this road map is a key deliverable of Ag2030 to help grow onshore manufacturing options and capabilities; improve supply chains and increase demand for farm produce; and provide a clearer pathway to help producers earn a premium for what they produce.
This road map has been developed to support the Australian Government achieve its priorities, including Ag2030, focusing on the food and beverage manufacturing industry. Importantly, the road map will, for example:
- guide future Government and industry investment in food and beverage manufacturing projects
- identify key areas for investment to grow the local food and beverage manufacturing sector
- support Australia to develop an innovative, sustainable and globally recognised food and beverage manufacturing sector.
Industry structure: understanding the current food and beverage sector
In 2019-20, the food and beverage manufacturing sector generated $28.4 billion in gross value added, consisted of 14,400 businesses, and employed over 229,000 people.   In 2018-19, food and beverage manufacturing reported $112.7 billion total income. As the largest single manufacturing sector, food and beverage accounts for 27.9% of total manufacturing turnover.
The food and beverage sector manufactures a diverse range of products, broken down by subsector turnover. In 2018-19, meat and meat product manufacturing, beverage manufacturing and dairy product manufacturing accounted for 57% of the sector’s manufacturing turnover. These 3 subsectors are where Australia has a manufacturing advantage. For example the dairy industry has advanced its manufacturing capability into highly transformed product categories, establishing a foothold in the international market for high-quality milk-powder products, such as infant formula.
Australia has vibrant and highly successful beverage manufacturing subsectors. Australia’s wine industry is of world-renown, and recent years have seen rapid expansion within the brewing industry with the proliferation of successful small-scale boutique beer and cider breweries. Australia’s craft spirit industry has also been highly successful, with Tasmanian whisky establishing a global following.
As consumer and market needs continue to change, there are increasing opportunities for companies across all the food and beverage manufacturing subsectors to produce highly tailored and individualised food products. They can appeal to specific tastes, nutritional needs and avoid allergens.
Food and beverage manufacturing subsector turnover 2018-2019 
The chart shows the sales and service income by sub sector for food and beverage manufacturing for 2018-19:
- Total food and beverage manufacturing: $110.3 billion
- Total food manufacturing: $93.3 billion
- Meat and meat product manufacturing: $30.3 billion
- Seafood processing: $0.9 billion
- Dairy product manufacturing: $15.0 billion
- Fruit and vegetable processing: $5.5 billion
- Oil and fat manufacturing: $2.5 billion
- Grain mill and cereal product manufacturing: $7.0 billion
- Bakery product manufacturing: $8.7 billion
- Sugar and confectionary manufacturing: $8.9 billion
- Other food product manufacturing: $14.6 billion
- Total beverage manufacturing: $17.1 billion
Food and beverage manufacturers are spread across Australia’s many state and territories, with many larger organisations operating in regional communities. They enjoy a positive relationship with regional communities by providing direct employment and helping boost and sustain local economies. With this existing scale, success, and geographic coverage, the food and beverage sector is well placed to deliver long-term transformational outcomes for the Australian economy.
Structurally, Australia’s food and beverage manufacturing sector is unique as it is mostly made up of SMEs, with 37% (5,248 businesses) non-employing, and 50% (7,001 businesses) employing between one and 19 staff. Alongside this is over 100 different subsectors servicing consumer and market demand. The larger enterprises employing over 20 staff account for 13% (1,795 businesses) of the sector.
It is estimated 5% of businesses that earn over $10 million are responsible for 54% of the industry’s turnover. The majority of these larger organisations are multinational companies that continue to choose Australia as one of their bases for manufacturing operations. For example, Nestle, Mars Wrigley and Coca-Cola Amatil have manufacturing facilities in Australia. These organisations play an important role in the success of the sector, as they bring the capital and capability to achieve scale in their operations, and in doing so bring jobs and economic stimulus to Australia. They also undertake their own research and investment on a global basis and provide that to local affiliates in Australia as appropriate. Over the next decade, it will be important to modernise and retain these larger organisations, many of whom will help build industry scale.
Inputs which feed into food and beverage manufacturing are derived from Australia’s high quality and reliable agriculture, fisheries and forestry sector. This includes a range of crop and livestock products. The gross value of agricultural, fisheries and forestry production has increased by 7% in the past 20 years in real terms (adjusted for consumer price inflation), from approximately $62 billion in 2000–01 to $67 billion in 2019–20. In 2019-20, the agricultural sector accounted for 11% of goods and services exports.
In 2017-18, food and beverage exports were $33.2 billion, representing 8.7% of all Australian merchandise exports. Exports have grown in recent years and there is the potential for further export growth in already strong industries such as meat, dairy and wine; but also in other opportunities as identified by Food Innovation Australia Limited (FIAL) and CSIRO.  Over the coming decades, trade—both domestic and export—will continue to be an important driver for continued growth.
In terms of research and innovation, in 2017-18, Business Expenditure on Research and Development for food and beverage manufacturers was approximately $490 million. The majority of research and development (R&D) undertaken in food and beverage is by the larger enterprises. Compared to other manufacturing sectors, food and beverage R&D is relatively low. It accounts for only 11% of expenditure within the manufacturing industry, despite being the largest employer within the manufacturing sectors. Increasing business level spending on R&D within food and beverage manufacturing is expected to increase opportunities to commercialise innovation. It will also enhance Australia’s international competitiveness in delivering novel products that appeal to consumers’ changing needs.
FIAL’s Sector Competitiveness Plan 2020 identified 2 categories of how businesses in the food and beverage sector perceive growth:
- ‘Businesses of Today’ referring to those that are generally less growth-oriented, maintain market share and don’t tend to be involved in overseas markets. As a result, they tend to rely heavily on downstream processors or exporters to manage access to supply chains and markets.
- ‘Businesses of Tomorrow’ referring to those actively pursuing new markets and are more likely to take risks in doing so. They tend to be directly connected to their end markets and invest to build their skills and knowledge.
With these categories in mind, FIAL found that in food and agribusiness, Businesses of Today are dominating the landscape in Australia. This creates a challenge for the sector to enable collaboration and encourage growth. The sector has potential to seek opportunities and innovate to shift from Businesses of Today to Businesses of Tomorrow.
The food and beverage manufacturing industry is agile and well positioned to embrace new and emerging technologies and future trends. Through government and industry investment, together we can remain competitive and meet evolving consumer and market demands.
Leveraging existing strengths
Australia’s food and beverage sector has a reputation for being clean, green and safe. This is due to access to high-quality inputs from domestic agricultural producers, supported by strong food production regulations.
Maintaining Australia’s competitive and comparative advantage will require food and beverage manufacturers to understand global consumer preferences and trends in dietary patterns. Food businesses are innovating to meet consumer needs, while meeting rigorous standards of food safety; and they will need to be supported by a flexible regulatory environment. They will also need to be supported by smart and emerging technologies. These technologies can help enhance and customise products based on consumer preferences, improve traceability, and transparency across the food supply chain.
Australia’s strengths and areas of competitive advantage and strategic interest for food and beverage manufacturing include:
- an international reputation for clean, green and safe food and beverage products
- strong trade relations through close proximity to emerging markets and reputation as trusted supplier
- access to high quality and reliable agricultural produce through competitive and advanced agriculture sector
- our trusted regulatory system.
Meeting future needs
A thriving, modern food and beverage manufacturing sector is essential to ensuring Australia’s ongoing resilience in the face of future disruptions.
To achieve this, the sector must optimise its modern manufacturing capabilities and create more value added products that meet consumer and market demand. The sector will need to undertake transformative innovation to meet best-practice production standards. This includes adopting advanced technologies, traceability, and transactional and compliance solutions. By adopting these technologies manufacturers will become more competitive and move up the smile curve.
Value adding can come in many different formats. For example, it can include improved packaging to ensure short shelf-life products get to the end consumer intact, or the development of new strains of barley to improve the shelf life of beer. It can involve transformation of base-level products into premium and ready to eat meals that are more convenient for consumers. Value can also be added through developing a reputation for quality and safety and through marketing and branding by businesses.
The sector will also need:
- to adopt, adapt and develop smart and emerging technologies
- higher levels of skill to implement and operate new technologies
- increased investment to deliver more sustainable production and packaging
- better access to and sharing of food and beverage sector data
- increased investment into food and beverage manufacturing, both from greater domestic investment and foreign investment
- continued opportunities to export new and emerging value added products across the supply chain and improved opportunities to diversify markets
- better collaboration across the agriculture sector, the food and beverage manufacturing sector, research and government.
Barriers to scale
In its current state, some of the key barriers to food and beverage manufacturing achieving scale are:
- technology and data sharing due to the high cost of adopting smart technologies
- inconsistent availability of data
- lack of data and information sharing
- underutilisation of domestic inputs
- lack of collaboration and integration due to integration gaps within industry and global supply chains
- low rates of industry collaboration and coordination.
Technology and data sharing
In Australia, supply chains and manufacturing processes are increasingly being digitised. Feedback from industry stakeholders is that the high costs of adopting smart technologies is a barrier to scaling. Technology can provide firms with:
- real-time insights into their supply chains
- decision support through Artificial Intelligence (AI)
- data analytics for proactive decisions
- the ability to adjust manufacturing in real-time through the use of Internet of Things (IoT), technologies and automation.
This is particularly important when shocks—such as the COVID-19 pandemic—occur. Employing Industry 4.0 principles and adopting new technology also presents opportunities to reimagine the way the food and beverage sector operates in Australia and help to enable greater innovation and manufacturing onshore. Successful adoption could increase productivity, lower costs and improve Australia’s competitiveness in domestic and export markets.
In terms of data, industry stakeholders have listed the inconsistent availability of data and lack of sharing between suppliers and retailers as difficulties in helping the supply chain understand requirements and consumer tastes. With many SMEs who produce for local and niche markets, these businesses often lack access to market intelligence and information channels to understand potential emerging smart technologies which could transform their manufacturing processes.
Underutilisation of domestic inputs
Australia has a strong reputation for producing high quality and safe foods which drives domestic and international demand for Australian products. But Australia does not produce exports in isolation. For example, Australia’s food and beverage manufacturing and agriculture sectors are both downstream and upstream of various industries in global value chains. Looking in particular at Australia’s agricultural exports, these are underpinned by imports, with around 10% of total gross value of trade made up of foreign value added. That amounted to around US$4 billion of foreign value in 2014. The opportunity for the food and beverage sector is for better utilisation of Australian ingredients and agricultural inputs to manufacture higher value-add products onshore that meet consumer and market demand. These premium goods, once exported, will attract higher margins for Australia’s food and beverage producers and manufacturers.
Collaboration and integration
Industry integration has been raised during stakeholder consultation as a barrier to scale, given the diverse business types and large proportion of SMEs making up the sector. Feedback suggests components of the sector work in isolation from each other, often in the same market and across supply chains. This was reiterated by the Business Council of Australia who note there has often been an adversarial, rather than collaborative, relationship within the supply chain. This leads to duplication of efforts, resources and undermines the opportunity for a collaborative environment, greater efficiency and productivity.
The food and beverage sector must look to how it can pool resources to make a collaborative model at a sufficiently large scale, and aligned with a long-term vision. For example, firms could collaborate through clusters to optimise their collective use of infrastructure such as manufacturing equipment and machinery, transport and other inputs. However, innovative approaches to operating must be managed within appropriate competition laws. If the food and beverage sector doesn’t make smart investments, there is a risk firms will either reduce the scale of their operations or move offshore.
Improving industry integration and collaboration could help food and beverage manufacturers lift their engagement capabilities internationally. This has been cited during stakeholder consultations as another barrier to scale. FIAL notes as a leading food-exporting nation, Australian food and beverage manufacturers need to develop a clearer understanding of the global marketplace and the intricate machinations that control supply if it is to improve export growth
To limit barriers to scale, the food and beverage sector must have the right skills and expertise to draw on. This could include aligning the tertiary education system output to industry needs, and providing the right incentives to potential workers to create high-paying, high-skilled Australian jobs. Innovation requires continued engagement internationally, as well as an ongoing commitment to open movement of talented people into and across Australia.
Collaboration across whole of government was also raised as a barrier. Policy responsibility for agriculture and food and beverage manufacturing are undertaken by different departments and jurisdictions. Stakeholder feedback suggests the proliferation of services can make it hard for some businesses to know where to start seeking assistance, commenting on the need for more integrated and coordinated public policy.
Stakeholders acknowledge the sector is supported by a strong food regulatory system, yet there are opportunities to improve its efficiency. This can be done by achieving greater consistency across each jurisdiction’s application, and enhancing the regulatory system’s ability to adapt to industry changes.
Government and industry need to work together to identify opportunities to scale-up Australia’s food and beverage manufacturing capability and outputs. This can be achieved by working together to improve skills and expertise, investing strategically in projects that will transform the sector to become more sustainable and competitive, and by embracing new and emerging technologies.
5 ABS Labour Force, Australia, Detailed, Quarterly, May 2020 ↵
11 ABS analysis by EQ Economics via the AFGC 2021 ↵
14 ABS International Trade in Goods and Services, Australia, 2019-20 ↵
15 FIAL is the Food and Agribusiness Growth Centre under the Australian Government Industry Growth Centres Initiative. Through part of an industry-led process the Industry Growth Centres Initiative aims to drive innovation, productivity and competitiveness. ↵
16 FIAL, 2020, Capturing the Prize: The A$200 billion opportunity in 2030 for the Australian food and agribusiness sector; Oct; CSIRO 2017, Food and Agribusiness – A Roadmap for unlocking value-adding growth and opportunities for Australia, July ↵
17 Note that this figure does not include industry levies paid by firms, which go towards research and development undertaken by industry organisations on behalf of firms. ↵
18 ABS, Catalogue 8104.0 Research and Development, Businesses, Australia 2017-18 ↵
20 The smile curve is a visual representation of value added along a production cycle. The curve demonstrates the greatest value along the cycle is from early stage research and development and post-production activities. Source: Office of the Chief Economist 2018, Industry Insights: Globalising Australia, June ↵
21 Business Council of Australia 2015, Building Australia’s Comparative Advantages: A 21st Century Agrifood Sector, December ↵
22 KPMG 2020, AgriFood Supply Chain Resilience: Leveraging digital and data to enhance the resilience of Australia’s AgriFood sector, a report for the Food Agility CRC—Mission Food for Life, July ↵
23 Greenville 2019, ABARES Insights: Snapshot of Australia’s place in global agriculture and food value chains, September ↵
24 Business Council of Australia 2015, Building Australia’s Comparative Advantages: A 21st Century Agrifood Sector, December ↵