Quality needs to be the market edge
Infant formula in China may seem far removed from the Australian grains industry, but it is a prime target for a $50 million expansion of GrainCorp’s oilseed crushing and refining facility at Numurkah, Victoria.
Speaking at the Australian Grains Industry Conference in Melbourne at the end of July, GrainCorp CEO Mark Palmquist said the oilseed investment reflected the changing profile of customers in Asia. It also builds on Australia’s reputation as a preferred supplier for quality grain, and for high levels of product traceability.
Mr Palmquist said with increasing urbanisation and an expanding middle class in China, parents there are highly demanding, seeking any edge they can for their children, and are prepared to pay for it.
In the case of infant formula, this translates to any potential health or developmental advantage a product can generate. Infant formula contains up to 25 per cent vegetable oil, providing essential fats for infant growth.
Mr Palmquist said that following the melamine contamination of infant formula in China in 2008, food safety was a high priority, and Australia was well placed to meet food-safety concerns due to the high level of transparency in its production and processing systems.
“We need to create a quality advantage that customers want to pay for,” Mr Palmquist said.
His message was reinforced by Greg Harvey, CEO of the international flour miller Interflour, who told the conference Australia could not hope to keep competing on quantity.
He explained that while flour demand in South-East Asia was expected to increase by seven per cent a year to 2020, Australian farm productivity was only increasing by an average of one per cent a year, making it impossible to maintain current market share. Geographic advantages were also being eroded as freight costs fell, along with falling oil prices and larger bulk grain vessels.
With an established reputation as a reliable, high-quality supplier, Australia could target niche markets, Mr Harvey said.
And while the need to encourage foreign investment in Australian agribusiness was a hot topic of discussion at the conference, Mr Harvey said it was not a one-way prospect. Australian growers should also consider investing in supply-chain and processing facilities in Asia. This would help secure a larger share of the end-use value of their grain product.
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