According to Euromonitor, retail sales in the packaged food market in Australia are expected to reach US$44.5 billion in 2022. That represents a growth rate of 16.3% or US$6.2 billion since 2018. By the year 2026 the retail sales in the packaged
food market in Australia is expected to reach US$52.4 billion, a growth rate of 17.7% and US$7.8 billion from 2022.
High growth products in the forecast include:
- Ready meals
- Baby Food
- Ice cream and frozen desserts
- Savory snacks
- Dairy Products (Ex. Cheese)
- Edible oils
- Cheese
- Baked Goods
FAS Canberra reports that health, wellness, and the environment continue to be key purchasing factors for Australian consumers. Portion sizes are increasingly important as consumers want quality over quantity, and they expect packaging to be informative
and environmentally responsible. The value of food and liquor retailing in Australia rose by 5%in 2020 to US$133 billion. Supermarket and grocery expenditures continue to account for the bulk of food retailing purchases with a share of
66%.
The value of Australian consumer oriented (i.e., snack foods, breakfast cereals, meat and poultry, dairy, eggs and products, fresh fruit and vegetables, processed fruit and vegetables, fruit and vegetable juices, nuts, wine, beer,
nursery products, pet food, etc.), fish, and seafood imports totaled US$10.4 billion in 2020. The U.S. accounted for US$1.2 billion or 11% of Australia’s total food related imports. Most of Australia’s imports in these sectors
are sourced from New Zealand – the U.S. is the second largest supplier.
Consumer aspirations, both personal and social, along with product developments by suppliers and retailers, continue to be important influences on shopping choices.
For example – Sustainability: Consumers support products and brands that address concerns for better environmental outcomes. Food producers and retailers have made considerable investments into sustainability platforms. Waste reduction:
Consumers desire to reduce household food waste. Integrity of food production systems: Consumers have supported products positioned to resonate with them (such as free-range egg, poultry, and meat products). Healthy eating: The high profile
given to obesity has increased the awareness of managing portion sizes.
Woolworths is an Australian-owned company that has been trading since the 1920s. Woolworths is the number one player in the grocery sector with a 37% value share
of the market in 2020. Cole’s supermarkets are part of Wesfarmers Limited and are the second largest player in the grocery sector with a 28% value share in 2020. ALDI Stores Supermarkets Pty Ltd, the German based international discount
food retailer which began trading in Australia in 2001, is the only grocery discounter in Australia and continues to increase its market share (10.5% in 2020). Metcash Trading Limited Australasia ranks fourth in supermarkets in value terms (7%
in 2020). Metcash is Australia’s largest grocery wholesaler and is a leading marketing and distribution company operating in the food, and other fast-moving consumer goods, categories. There are no hypermarkets in Australia, with no investment
made by retailers to develop the channel since a failed attempt by Coles in the 1990s.
The supermarkets industry is one of the most fiercely competitive sectors in Australia with the rapid growth of German-owned ALDI over the past five
years significantly altering the industry. Supermarkets and grocery stores continue to maintain most of the retail food market share, at around 66%. The market share of cafés, restaurants and takeaway food outlets is around 21%, reflecting
consumers’ continued desire for convenience. Other food retailers, such as butchers and bakeries, remain relatively stable with around 5% market share.
Private label in Australia tends to be more prominent in the grocery channel.
ALDI’s private-label strategy has been so successful in Australia that it has changed the perception that Australians had of the quality of private-label brands. Leading supermarket operators, Coles and Woolworths, are increasing their
range of private-label products each year. Growing satisfaction with private label products has resulted in many consumers sticking with those products even during periods of positive consumer sentiment when they would have previously switched
back to branded products.
Convenience stores in Australia are facing growing competition from smaller-sized supermarkets. Best exemplified by the Woolworths Metro and Coles Local formats, these smaller outlets are increasingly found
in busy inner city locations and densely populated suburban areas. Like convenience stores, they target time pressed consumers who tend to shop more frequently, but buy fewer items at a time. Crucially, however, smaller supermarkets generally
offer lower prices, while some also serve as “click and collect” points for online customers.
Euromonitor reports that during the pandemic, the concept of unattended self-service grocery store in shipping-container-size drew
a lot of attention. The concept was developed by small, local producers to sell their own products and in 2021 was adapted by long-standing brands Billa and Unimarkt who both opened a handful of such stores. The typical selling space is
around 11 sqm with a range of around 200 products. The concept aims to ensure supply in rural areas where it is difficult to run a classic store economically. Under certain conditions it can be run 24/7 which is a major advantage in the
face of Austria’s very restricted opening hours. Due to the lack of relevant branch networks, existing examples have not yet qualified to be classified as convenience stores and therefore have not been contributing to category sales.
However, assuming continuing expansion and more investment by established brands, the concept could potentially reshape the channel in the forecast period and lead to better sales prospect.
In spring 2021, Rewe publicly announced the intention
to give the control of several its Billa supermarkets to independent, local traders. This idea is nothing new since the Spar, Adeg, and Nah & Frisch brands have been using this model in Austria for decades and is one of the reasons why a
portion of Spar outlets are considered convenience stores. The local traders usually have a say in terms of suppliers, product range, and store design. However, more importantly to the owners, they give the stores more regional flavor
and credibility within the community. Given the increasing consumer appreciation for local manufacturers and products, this has allowed Spar to significantly outperform Billa in recent years. Rewe’s plans for implementing this new business
model are still very vague but could potentially lead to the presence of Billa in convenience stores. Such an entry would certainly aid category prospects, similarly to Unimarkt’s new franchise concept.
Best Prospects:
FAS Canberra that prospects are excellent for organic and natural ingredients as well as consumer-ready processed foods and beverages. Findings from a recent survey show that Australian consumers are adopting a back-to-basics mindset, focusing
on simple ingredients and fewer artificial or processed foods. The types of products consumers are demanding include all natural; no artificial colors; low sugar/sugar free; no artificial flavors; and low fat/fat-free. U.S. exporters who
are able to incorporate ingredients and preparation methods that improve the nutritional profile of products will be strongly positioned to succeed in this market. It should be noted that although consumers are trying to eat healthier, they
have not completely ruled out buying confectionery products.
