The Australian retail sector continues to be a market of interest for international food and drink manufacturers targeting growth, in this blog we highlight some of the opportunities, the changing landscape and the approaches needed to be successful in the market.
Australia with its population of ~26m people, in a country approximately 2.5 times the size of Europe has a Grocery Retail Market estimated to be worth AUD $199B or US $131B and growing year on year. 2 Major Retailers Coles Group and Woolworths represent over 2/3rds of the market whilst other significant players include Aldi Australia, Costco and the independent sector generally supported via Metcash the largest Food distributor. Whilst not covered in detail in this blog, there are also significant opportunities into Food Service with national leading operators including PFD or Superior Foods, hospitality via ALH or institutional providers such as Compass or Sodexo.
Branded Growth Opportunity
The current market dynamics and pressure on supply chain costs have created a challenging environment locally for food manufacturers struggling with labour costs, input costs and growth outlook, whilst creating an opportunity for international manufacturers that already benefit from high international demand, a lower cost base and see Australia as a market to further increase demand for established brands. We are increasingly seeing international companies supply branded goods from their main facilities before adopting a contract manufacturing strategy in or closer to Australia as part of a strategic growth plan. The growing demand for international cuisines is unlocking multiple locations within retail for consideration, Foods of the World or international foods or the traditional grocery aisle alongside competing local brands and Private Label. This reinforces the value of understanding the market prior to engaging the buyers to truly understand the category dynamics, the competitive outlook and where you can achieve the greatest growth.
Private Label Growth Opportunity
Australian consumers are continuing to find the cost of groceries a challenge, as such Coles and Woolworths have both accelerated the growth of Private Label or retailer owned brands. With value playing an important role in affordability a rebrand of the value offer is driving customer engagement.
The growth opportunity for international businesses here is through the ability to compete in global sourcing tenders, delivering value into commodity products such as rice, dried pasta, canned goods or frozen lines.
The growth in At Home eating as consumers eat out less during these challenging times, opting to spend more on premium foods purchased in retail for preparing at home is leading to the growth in retailer owned premium brands. Coles Finest, their premium tier expanding by over 70 lines last year and a strategic area of growth for this year.
With the cross-category brand easily recognisable by consumers, they are offering a higher tier food range that ultimately helps consumers save money whilst enjoying restaurant style food or ingredients at home. High priority categories include red meat, sausages, olive oils, preserves, chocolate, bread and pastas. This strategy creates an opportunity for food and drink manufacturers capable of producing high volume premium products.
Understanding the manufacturing landscape in Australia a number of Food and Drink companies operate a dual strategy producing a branded range then through clear product differentiation accessing the benefits of Private Label volume and its growth to drive efficiencies through their process. Whilst this approach differs in many cases from that in the UK as an example or the USA it does create a wider value opportunity for companies to consider.
High Growth Categories include: –
The Australian retail landscape creates 2 clear strategic approaches for companies targeting the market with an established brand or product portfolio.
How can you benefit from the Australian retail opportunities?
Prof Consulting Group are in-market specialist advisors for a growing number of international trade agencies; if you are looking for help to win in the Australian market let’s talk.
