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With limited growth potential at home Australia eyes Pacific export markets.

With Limited Growth Potential at Home, Australia Eyes Pacific Export Markets

That's not to say a solid frozen food business has not been built domestically. But with only 17 million mouths to feed down under, Asia is where the expansion opportunities lie.

While up-to-date figures are impossible to come by, there seems little doubt that the widespread world recession is affecting the Australian frozen food industry both domestically and in terms of export trade. But perhaps more so in the latter than the former.

The retail market was valued at an estimated $507.7 million in 1989, according to the Australian Trade Commission. Dominated by peas, vegetables accounted for almost half of frozen food sales at $247 million. Other major categories were: savoury pastry, $84 million; convenience meals, $69 million; unbaked pastry, $22.4 million; fruit pies, $22.2 million; desserts, $20.6 million; beefburgers/hamburgers, $18.1 million; Chinese snacks, $15.5 million; cakes, $8.9 million. (See Australian Retail Frozen Food Trade: Estimated Market Shares in 1989)

It seems clear that the industry is in a state of flux. Julie Taylor, a spokesperson for Tripax Engineering Co., a leading supplier of equipment to processors, told Quick Frozen Foods International that product lines are changing along with greater consumer demand for healthy products that are convenient and quick to prepare. "While frozen peas and bean sales are still there, the real growth is in prepared dinners, pizzas, and pies."

She continued: "The market for frozen foods in Australasia remains relatively small. But, unlike our northern counterparts, the socio-economic and cultural differences in Australasia is vast. The major suppliers of frozen foods in Australia and New Zealand are still geared toward the European portion of the total population, which is small by comparison with their Asian neighbors.

With only 17 million inhabitants, Australia must increasingly look to export markets -- especially those in the rapidly growing Asia-Pacific region. And with clouds hovering over the once robust beef trade, greater diversification into value-added sectors is being pushed by organizations such as the Victoria Office of Trade and Investment. It has identified frozen bread products and pre-mixed frozen doughs for biscuits, cookies and pastries as niche items that can be competitively exported.

Meanwhile, as the popularity of french fries and like products rises down under, the country's potato growers are not benefitting from it lately. In the face of cheap imports, they agreed to a 17% cut in prices from $215 to $178 per ton last year in hopes of preventing the Edgell-Birdseye factory in Manjimup from shutting down. It was followed by an offer from plant employees to take a 10% reduction in pay.

As the Potato Growers Association demanded government protection against imports, unions were considering slapping black-bans on 15 containers of frozen chips from Holland sitting on the docks at Fremantle.

But all of the above is really "small potatoes" compared to the economic impact felt by large cutbacks in meat exports. The beef glut in Japan brought a request for voluntary volume controls from Seiji Shimada, managing director of Nitchiku (Australia) Pty. Ltd., a Brisbane-based exporter. He frankly commented:

"Oversupply is giving rise to unexpectedly tough business conditions in Japan. Beef is being sold at lower prices than imported cost, and this is directly affecting the Australian industry in the form of lower prices.

"The beef industry needs to confront critical decisions on the supply and marketing of beef exports if it is to survive in Japan's complex consumer market . . . The psychology of the Japanese market doesn't mean that when beef is more available the consumer will buy more. Demand may be more related to desire rather than supply."

And if developments in Japan weren't bad enough, the negative impact of drought in Queensland coupled with a loss of up to $100 million in sales to the United States added to the pain.

Under pressure from Washington, Australia reluctantly agreed to restrain meat exports to the USA to 337,020 tons in 1991. The agreed quota was well below the 1990 level of 365,000 tons worth over $1 billion to Australian producers. Indeed, last year's original target had been set at 360,000 tons.

Problems began in September when officials in Washington advised their counterparts in Canberra that if Australian exports were not curtailed, global meat shipments to the USA during 1991 would exceed a quota of 598,000 tons.

The upshot was that export abattoirs producing for the USA market had to decide between the costly option of continuing to pack and put the meat in cold storage, or to slow down output and await a pick-up in demand.

"It's just another burden to bear," commented David Palmer, executive director of the Cattle Council of Australia (CCA). "The question is how many burdens can be tolerated."

EEC Dumping Concern

Nonetheless, the Council forecasts a bright future for beef exports to Japan and Korea. But there is one provision. First the problem of a 900,000 ton stockpile of European beef -- which is growing at a rate of 50,000 tons per month -- must be resolved.

"Our main fear is that the EEC might dump this beef onto our Asian markets," said Ed Wright, CCA chairman.

Meanwhile, he is pleased with Australian beef promotions in Japan, and sees the industry as well placed to fill an eventual escalation of demand.

50% Rise Possible

"Beef exports to Japan could rise 50% in five years to 290,000 tons," commented Wright. "Sales to Korea jumped 65% last year to 84,000 tons and could top 100,000 tons this year."

It was pointed out that 60 supermarket chains in Japan have become involved in "Aussie Beef" promotions. Some 3,000 stores are now offering the product line, with a further 3,000 supermarkets prepared to engage in promotional activity.

"Australia and the USA will fill the expanded market," said Wright. "Australia currently has an advantage in the landing of chilled beef which is highly favored. I do not know how long we will keep this advantage."

On another matter, the chairman said that domestic fears that primary producers would swing into beef production appear to have been for naught as the latest figures show that cattle numbers built up last year by only four-tenths of one percent.

"The Australian cattle herd is now 24 million head. This is 25% down on the 1975 peak, although we now produce more beef than was the case in 1975 due to successful breeding and feeding programs," advised Wright.

Economic Recession or Not, Full Speed Ahead for Tripax

Australia's food equipment industry has not been immune to the ongoing recession, as many packers continue to hold back on capital expenditures. However, Tripax Engineering Co. reports good sales figures nonetheless.

Situated in Bayswater, Victoria, Tripax has been building equipment for the food industry for over 25 years. A wholly owned subsidiary of Jorgensen Engineering A/S (Denmark) since 1975, it has branched out considerably from the founding business of making specialized equipment for vegetable processing.

Today, Tripax's range covers preparation lines for vegetables and fruits, frozen vegetable lines, conveying systems, processing machinery, canning, and the preparation and processing of seafood. Other specific applications include the production of cereals, french fried potatoes, baked goods and snacks.

Among the company's clients are the Petersville Group, Heinz, McCain, Wattie Frozen Foods, Safcol, and Uncle Toby's. Main export markets are New Zealand and the People's Republic of China.

A good deal of Tripax's success comes from the advantages of being a small company, Quick Frozen Foods International was told. Relations with customers can be kept on a personal level. Very often engineering and production staff who design and manufacture the equipment work directly with customers. New projects or changes can be efficiently confronted and dealt with because of a simplified communications flow.

$2 Billion in Food Imports Alarms Domestic Producers

The rhetoric of trade protectionism is being heard in Australia as the nation's agricultural sector struggles to compete against food imports valued at some $2 billion last year. Frozen products have been targeted in particular, as the opposition government is pushing for the introduction of anti-dumping legislation and stricter food product labeling designed to clearly spell out country of origin.

Among the imported foods that have gained respectable market shares down under are french fries and pork from Canada, New Zealand dairy products, and fruit juice from Chile. Low priced fries have reportedly hurt potato makers across the country.

"By allowing the importation of these types of products the government is virtually turning a blind eye while producers and processors are teetering on the brink of collapse," charged Paul Omodei, spokesman on agriculture for the opposition party.

Tasmanians Win Start-up Grant; Gourmet Sales Are Their Oyster

Forty South Seafoods, a group of five Tasmanian entrepreneurs, has been awarded a $20,000 grant by the National Enterprise Workshop to put gourmet frozen oysters on the market in Australia.

Headed by Peter O'Donoghue, Forty South had spent six months planning a business strategy for the oyster operation when it received the grant. The company plans to market packs of half a dozen oysters each in Mornay, Kilpatrick, Florentine and Natural styles in packaging suitable for either grilling or microwaving.

The group has already signed up a number of Tasmanian oyster farmers and planned a production facility. "By harvesting, processing, stylishly packaging and marketing this prime product ourselves, we could avoid the negative effects of inadequate handling by others," O'Donoghue said.

The National Enterprise Workshop, founded 12 years ago, has aided more than 50 new businesses over the years, thus helping generate 500 new jobs and $27 million in new sales.

Australian Retail Frozen Food Trade: Estimated Market Shares in 1989

Vegetables $247 million

Segment Shares
Peas 41%
Beans 19%
Corn Cobs 10%
Vegetable Mixes 9%
Mixed 5%
Carrots 3%
Corn Kernels 3%
Other 10%

Market Shares
Petersville 33%
McCain 17%
House brands 40%
Other 10%
Savoury Pastry $84 million
Herbert Adams 22.4%
Wedgewood 22.0%
Big Ben 31.6%
Woolworths 7.5%
Buttercup 7.4%
Farmland (Coles) 5.7%
Franklins 3.7%
Black & Gold 3.0%
Sargent's 2.1%
Other 12.6%
Ready Meals $69 million
Nestle 48%
McCain 26%
Griffs 13%
Kraft 5%
Other 8%

Pastry $22.4 million
Pampas 75.9%
Sara Lee 3.0%
I & J 2.8%
Other 18.3%
Fruit Pies $22.2 million
Nanna's 47.8%
Sara Lee 16.1%
House brands/Generic 22.1%
Others 14.0%
Desserts $20.6 million
Sara Lee 74.0%
House brands/Generic 25.0%
Others 1.0%

Hamburgers $18.1 million
Birdseye 24.3%
I & J 24.0%
Barons Table 14.7%
Other 37.0%

Snacks $15.5 million
Ho Mai/Golden Wok 60%
Marathon 30%
Other 10%
Cakes $8.9 million
Sara Lee 91.7%
Other 8.3%
COPYRIGHT 1992 E.W. Williams Publications, Inc.
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Title Annotation:includes related articles
Publication:Quick Frozen Foods International
Article Type:Industry Overview
Date:Jan 1, 1992
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