6.2 fresh vegetables - stors
PART
B MCKINNA et al Pty Ltd Strategic Insights
PART B: KEY FINDINGS
5 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
SECTION
4
INDUSTRY
STAKEHOLDER RESEARCH METHODOLOGY
The industry stakeholder research involved a program of intense industry consultation covering a wide range of stakeholders throughout the supply chain. The program of consultation took the format of both one-on-one interviews, industry discussion groups and teleconferences with key stakeholders including: 1. Growers, packers and marketers of fresh and fresh-cut vegetable products. 2. Major processors who source or process vegetables from Tasmania. 3. The TFGA Vegetable Council. 4. Major input suppliers to the Tasmanian Vegetable Industry. 5. Other major food, beverage and tourism businesses and organisations. 6. Relevant government departments including DPIW, Office of the Premier and DED. 7. Category managers and key buyers of vegetable products for the major supermarkets. A schedule of contacts is appended to this report.
MCKINNA et al Pty Ltd Strategic Insights
4.1
6 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
4.2
HIGH LEVEL INDUSTRY THEMES
Based on the industry consultation process, four key recurring themes emerged, namely: 1. The Tasmanian Vegetable Industry is heavily reliant on the processing sector. 2. The industry’s global competitiveness is declining. 3. The long-term viability of the processing industry is in question. 4. Supermarket market power is a major issue.
1.
The Tasmanian Vegetable Industry is heavily reliant on the processing sector One of the major findings to come out of the program on industry stakeholder consultation is that the ‘history and culture’ of the Tasmanian processing industry is limiting industry development. There are significant opportunities in the fresh and fresh-cut markets; however, processor-growers do not feel comfortable about entering these markets.
2.
Industry’s global competitiveness is declining The Tasmanian Vegetable Industry is under pressure. Competitiveness is currently limited by: • Scale of operations. • Mixed farms (not specialised). • Over-capitalisation (equipment). • High land prices (barrier to business expansion and growth). • Seasonality • Freight and logistics.
MCKINNA et al Pty Ltd Strategic Insights
These themes are discussed below.
7 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Long-term viability of the processing industry is in question Throughout the program of consultation it became evident that there are grave doubts about the long-term viability of the processing industry. Of particular concern is that the current prices received by farmers are inadequate to fund their businesses. Moreover, processors themselves are facing increasing competition from imports which serve to devalue entire categories and put downward pressure on prices. The ramifications of the processing industry ultimately closing down are major, but this likelihood must be considered.
4.
Supermarket market power is a major issue The inordinate dominance of the two major supermarkets is putting great pressure on the Tasmanian Vegetable Industry. The key ramifications are: a. Supermarket private label programs kill proprietary brands; b. Supermarket power erodes prices; and c. Supermarket compliance requirements increase operating costs. Of particular significance is the recent re-launch of the supermarkets’ tiered private label programs and their aggressive attack on the market share of proprietary brands of processed vegetables. Another problem encountered by the Tasmanian Vegetable Industry in the fresh sector is the fact that some growers are too small to meet supermarket threshold levels, even in the home state. The major suppliers to supermarkets are currently having to source product from the mainland due to the limited season and category shortfalls.
MCKINNA et al Pty Ltd Strategic Insights
3.
8 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
MCKINNA et al Pty Ltd Strategic Insights
As discussed later in this report, this situation presents a key opportunity for the industry to improve supply of vegetables to its home state.
9 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
4.3 PROCESSOR-GROWER PERSPECTIVE The program of consultation with the Tasmanian processorgrowers who supply the major processors revealed that they feel under great pressure. The biggest concern is the ‘costprice squeeze’, i.e. selling prices are not keeping up with the increasing cost of production. This situation is eroding margins and hurting the industry. Processor-growers are distrustful of processors and their claims about their inability to increase farm-gate prices. Of greatest concern was the strong sentiment expressed by many processor-growers that if processors do not increase prices, they will be forced to exit the industry. The processor-growers are constrained in their ability to improve their returns. Tasmanian processor-growers are committed to mixed farming models based on crop rotation and opportunistic farming strategies. They therefore lack specialisation and a long-term market view. The small size of many farms is also impacting on competitiveness given the inability to achieve economies of scale. Compounding this issue are the high land prices relative to returns which discourage the necessary scale expansion.
In the main, these stakeholders recognised that there are future opportunities in the fresh sector, but do not feel comfortable about entering this market based on the following factors:
MCKINNA et al Pty Ltd Strategic Insights
Despite this, processor-growers are guardedly optimistic about the future of the processing sector, although recognise that change is inevitable.
10 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
• •
MCKINNA et al Pty Ltd Strategic Insights
• • •
Processors essentially ‘project manage’ for them. Processor-growers do not have established markets, supply chains or marketing expertise. Fresh does not fit with a mixed farming regime. Cost of freight. Barriers in dealing with major supermarkets.
11 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
4.4
PROCESSOR PERSPECTIVE
The key vegetable processors in Tasmanian are highly motivated to succeed with their Tasmanian operations. Key incentives here are: • The high level of sunk investment they have tied up in their Tasmanian facilities and processing operations; • That their supply chains are predominantly reliant on Tasmanian product; and • That they enjoy a stable workforce. The research also found that the processors have a strong commitment to Australian origin product as a marketing point against cheap imports.
In addition, processors are coming under increasing competitive pressure from imported products, particularly from New Zealand, China, Europe (allegedly dumped product), South East Asia and the United States (albeit a declining force).
MCKINNA et al Pty Ltd Strategic Insights
However, processors are under heavy margin pressure due to a number of key factors, namely: • Relative flatness in processed vegetable market. • Private label eroding margins on proprietary brands. • Cheap imports progressively taking market share both in retail and food service. • Retailers passing cost back down the supply chain by virtue of their market power. • Some difficulties in sourcing raw materials (e.g. 80,000+ tonnes shortfall of potatoes this year). This situation dampens processor confidence in investing in the industry.
12 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
A recent benchmarking study by ABARE (2006A) and internal research conducted by the processors themselves show that imports have significant cost advantages in terms of labour, inputs and freight. Imported products also have substantially lower raw material costs because of economies achieved through the increased scale of operations that overseas growers have; the fact that their growers are specialist rather than opportunistic farmers; and their better utilisation of capital.
MCKINNA et al Pty Ltd Strategic Insights
As a consequence, the ability of Australian processors to invest behind their brands is diminishing. The focus of Australian processors is on investing in automation to drive costs out of the business. Whilst committed to their Tasmanian operation, they are not optimistic about the longterm future.
13 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
4.5
FRESH/FRESH-CUT MARKETERS’ PERSPECTIVE
Based on the program of consultation, the outlook of the fresh supply chain (i.e. fresh-cut vegetable processors and fresh vegetable marketers) was somewhat more positive. Tasmania’s key fresh marketers have managed to achieve dominant supply status in their respective categories (e.g. potatoes, carrots, onions, lettuce, baby leaves/salad mixes) and most have now moved to national supplier status. Those stakeholders involved in fresh struggle to develop strong proprietary brands by virtue of the fact that almost all supermarket fresh vegetable products are being sold under private label brands. Despite this situation, those consulted were generally satisfied with their relationships with supermarkets having established a stable, positive position based on mutual dependence. As the major fresh vegetable companies grow they are being forced to establish production capabilities or supplier relationships on the mainland and in New Zealand to ensure volume and consistency of quality because of issues of seasonality, volume and weather conditions.
MCKINNA et al Pty Ltd Strategic Insights
In the main, this group was optimistic about the future and expressed confidence that businesses will grow and prosper.
14 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
4.6 SUPERMARKET PERSPECTIVE For Coles, Woolworths and IGA, fresh fruit and vegetables are a central platform of corporate growth strategies. All three supermarkets expressed a commitment to support Australian products within limitations of quality, availability and price.
Key findings to come out of the retailer consultation processes are identified as follows: • Supermarkets are frustrated that they are unable to supply Tasmanian stores with locally produced fruit and vegetables. This is largely because of the major category gaps and inconsistent supply from Tasmania. • Major supermarkets are heavily committed to driving their private label programs for fresh food because of the need for consistency and supply chain control. • Supermarkets are moving towards closed-loop supply chains and a reduced number of national suppliers. This locks smaller producers out of the supply chain. • Supermarkets hold a strong belief that the origin of food is secondary to the quality and performance characteristics of the product itself. • Supermarkets are happy to promote ‘Australian grown’ products but not prepared to promote produce from a particular state.
MCKINNA et al Pty Ltd Strategic Insights
Critically, both major supermarkets adhere to diversified sourcing strategies which means that they are unable to give allegiance to one particular region. The key rationalisations for sourcing diversification are seasonality issues, risk management (e.g. weather) and national supply requirements.
15 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Supermarkets acknowledge that Tasmania has a strong seasonal advantage and superior flavour in some products due to climatic factors.
MCKINNA et al Pty Ltd Strategic Insights
•
16 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
SECTION
5
THE TASMANIAN VEGETABLE INDUSTRY
• • •
Agriculture, fisheries and forestry account for 6% of the Tasmanian economy. Agriculture farm gate value $937.2 million. Vegetable farm gate value $164 million (⇓ 9%). Vegetable wholesale value $352 million (⇓ 7%).
• • •
Direct vegetable imports $4 million (steady). Imports via mainland estimated at $20 million. Direct vegetable exports $23 million (⇓ 30%).
•
Gross value of Tasmanian vegetable revenue $579 million net of direct imports (⇑ >1%).
• •
Number of vegetable growers - 640. Potatoes, onions, carrots, peas, broccoli and beans account for 88% of production. Tasmania highly reliant on supplying vegetable processing industry.
•
•
Sources: ABS, 2006; Tasmanian Vegetable Industry Scorecard 2004-05
MCKINNA et al Pty Ltd Strategic Insights
Industry Snapshot
17 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
5.1
OVERVIEW
The structure of the Tasmanian economy is a fairly indicative sample of the structure of the Australian economy as a whole. However, the agriculture, forestry and fishing sectors are larger than the national average at 6% compared with 3% of total factor income, forming an important component of the Tasmanian economy (TFGA & TAPC, 2005). Tasmanian agriculture, forestry and fisheries employ 15,500 people accounting for 8% of the state’s total employment (ABS, 2006A). Figure 1: Tasmanian employment by industry
The gross value of Tasmania’s agricultural production alone is $937.2 million which equates to approximately 2.6% of the total Australian production value. Key industries include dairy, beef and veal, wool, sheep meat and vegetables.
MCKINNA et al Pty Ltd Strategic Insights
Source: TFGA & TAPC, 2005
18 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Vegetable production accounts for 18% of the total value of Tasmanian agricultural production with a farm gate value of $164 million. Tasmania produces 8% of Australia’s vegetables from a grower base of more than 640 (DPIW & DED, 2005). The Tasmanian vegetable production value trends are provided below and a value chain for the Tasmanian Vegetable Industry is detailed on the following page. Figure 2: Gross value of Tasmanian Vegetable production
MCKINNA et al Pty Ltd Strategic Insights
Source: ABS, 2006B
19 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Figure 3: The Tasmanian vegetable value chain 2004-05 Exports $23 million Agricultural inputs
$123 million
Tasmanian vegetable production farm gate value
Packing and processing
$164 million
Net interstate trade $259 million
Domestic market $579 million
$352 million Retail and food service sales $301 million
Gross value $582 million ($579m net of imports)
Direct imports $4 million Source: Adapted from the Tasmanian Vegetable Industry Scorecard 2004-05, 2006
1
Net interstate trade plus exports less imports 20
MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
MCKINNA et al Pty Ltd Strategic Insights
In 2004-05, the gross value of Tasmanian revenues from vegetables was estimated to be $579 million (net of direct imports). The total net trade of the Tasmanian Vegetable Industry was $278 million1. This is in contrast to the national trend whereby Australia is now a net importer of vegetables.
However, the scorecard model does not account for product imported to the mainland and then transhipped to Tasmania. At the retail level, imported product is estimated to be worth $30 million (10% retail value). The Tasmanian Vegetable Industry has a strong domestic focus, with 93% of product being sold on the domestic market. 73% of production is marketed to the mainland which is by far the biggest market for Tasmanian vegetables. 20% of Tasmanian vegetables are sold within Tasmania. The Tasmanian Vegetable Industry is dominated by the processing sector, supplying the bulk of the frozen vegetable market (figure 4). Over 75% of Tasmanian vegetables are grown for processing (DPIW, 2005).
Source: DPIW, 2005; McKinna estimate 2007
MCKINNA et al Pty Ltd Strategic Insights
Figure 4: Tasmanian Vegetable Industry breakdown
21 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
5.2
KEY COMMODITIES
Key vegetable commodities produced in Tasmania include potatoes, onions, carrots, peas, broccoli and beans. These key commodities account for 88% of all vegetable production. Figure 5: Value of key Tasmanian vegetable commodities
Source: ABS, 2006B
Figure 6: Key commodities at a glance Trend $
Quantity (t)
⇑ 12% ⇑ 8%
Tas % Aust Prod’n 41% 14%
26,490
⇑ 8%
98%
26,956
52,830
Steady
17%
316,000
⇓ 29%
72,476
⇑ 11%
28%
256,000
Steady
320,823
⇓ 2%
25%
1,288,000
$5,786,683 $6,446,984
⇓ 7% ⇑ 8%
14,178 8,035
Peas
$10,718,606
⇓ 7%
Carrots
$22,889,647
⇑ 1%
Onions
$23,982,288
Potatoes
$75,534,003
Beans Broccoli
Trend (t)
Source: ABS, 2006B; ABS, 2006C
Potatoes are the highest value commodity produced with a farm gate value of $75.5 million. Tasmania produces 25% of Australia’s potatoes which account for 56% of the total value of Tasmanian vegetable production.
Aust. Prod’n (t) 34,626 55,911
MCKINNA et al Pty Ltd Strategic Insights
Gross $
22 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
It would be fair to say that potatoes are the backbone of the Tasmanian Vegetable Industry with interstate sales of processed potatoes amounting to $172 million in 2004-05, equating to 66% of all interstate vegetable sales. Potato production has remained relatively stable over the last three years at around 320,000 tonnes, coming down slightly from the 2001-02 peak of 350,000 tonnes. Potato prices have increased in recent years, moving from $192/t in 1999-00 to $235/t in 2004-05. However, this increase is more reflective of the increasing cost of production rather than improved gains to potato producers. Figure 7: Tasmanian potato production 2000 - 2005
Tasmania is also a key pea and bean producer accounting for 98% of and 41% of national production respectively. The vast majority of peas and beans are marketed to processors. No peas and beans are exported. The volume and value trends for peas and beans are detailed below.
MCKINNA et al Pty Ltd Strategic Insights
Source: ABS, 2006B; ABS, 2006C
23 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Figure 8: Tasmanian pea and bean production
Source: ABS, 2006B; ABS, 2006C
Onions are the state’s key export commodity accounting for 77% of Tasmanian vegetable exports and 15% of total farm gate value. Carrots are also a key commodity accounting for 15% of the total farm gate value. Carrot production has shown significant increases over the five-year period moving up 33%. Interestingly, only 11% of carrots are exported.
MCKINNA et al Pty Ltd Strategic Insights
Broccoli production has also increased, up 24% over the five years to 2004-05 to 8,034 tonnes. However, broccoli prices have been significantly depressed, moving from $1.49/kg in 1999-00 down to $0.80/kg in 2004-05.
24 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
5.3
PERFORMANCE
The top-line numbers presented in the Tasmanian Vegetable Industry Scorecards (2005; 2006) are reflective of an industry under pressure. Net trade of vegetables (i.e. net interstate trade plus exports less imports) dropped from $289 million to $278 million from 2003-04 to 2004-05. The gross value of vegetable production at the farm gate decreased by $15 million from $179 million to $164 million from 2003-04 to 2004-05.
However, despite the decline in value both at the farm gate and packer/processor level, the total net revenue from vegetable production increased by $5 million. This increase is largely attributable to the $20 million increase in Tasmanian supermarket and food service sales which compensated for the declines in all other areas. The increase in supermarket value can be attributed to increased sales of non-Tasmanian product and higher margin structures. Countering this trend is the increase in private label which is effectively devaluing the entire category.
MCKINNA et al Pty Ltd Strategic Insights
The key to this decline was the $10 million decrease in onion production value during this period despite an 11% increase in onion production volume. The value of packed and processed vegetables also declined by $25.6 million over the same period. Again, an $18 million decline in the value of packed and processed onions was a major contributor to this. The value of processed beans and peas also declined by $4 million during this period which impacted on the total value.
25 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
MCKINNA et al Pty Ltd Strategic Insights
Of particular concern to the state is the reduction in the value of exports, which decreased by $7.5 million from $30 million to $23 million, largely due to a $5.5 million decline in potato exports. A fall in exports would indicate either that Tasmania’s competitiveness in export markets is declining or that the returns from the domestic market are more attractive, or both.
26 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
SECTION
6
MARKET ASSESSMENT Market Snapshot • • • • • •
Fresh vegetable market retail value estimated at $3 billion. Fresh-cut retail market value $160 million (⇑ 20%). Frozen vegetable market retail value $460 million (⇑ 6%). Frozen vegetable market retail volume 139,465 tonnes (steady). Canned vegetable market retail value $290 million (⇑ 4.6%). Canned vegetable market retail volume 97,231 tonnes (steady)
MCKINNA et al Pty Ltd Strategic Insights
Sources: Aztec Synovate, 2007; Roy Morgan, 2007
27 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
6.1
VEGETABLE MARKET OVERVIEW
While the available data is limited, it is apparent that consumption of fresh, frozen and canned vegetables has remained relatively flat, although the value of these categories is increasing. According to ABARE (2006), the per capita consumption of vegetables is unlikely to increase over the short to medium term. ABS per capita vegetable and fruit consumption trends (1990-98) are provided below. Unfortunately, the ABS no longer publish consumption statistics and the data provided below is somewhat out of date. Figure 9: Per capita fruit and vegetable consumption
MCKINNA et al Pty Ltd Strategic Insights
Source: ABS, 2000
28 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
In the absence of up-to-date ABS data, household penetration data for fresh, frozen and canned vegetables has been sourced from Roy Morgan (2007). The data suggests that consumption of vegetables is marginally declining in all categories. Figure 10: Fresh, canned and frozen vegetable consumption 100
86.6
86.5
53.2
17.5
84.2
83.8
83.4
54.0
52.2
52.2
52.1
17.5
16.4
16.4
16.4
Jan03 - Dec03
Jan04 - Dec04
Jan05 - Dec05
80
% Popn 14+
60
40
20
0
Jan02 - Dec02
Fresh
Frozen
Jan06 - Dec06
Canned
RoyMorgan Single Source Australia: Jan 2002 - Dec 2006 Base: Total Population 14+
MCKINNA et al Pty Ltd Strategic Insights
Source: Roy Morgan, 2007
29 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
6.2 FRESH VEGETABLES We were unable to source category scan data for fresh produce due to supermarket commercial confidentially issues. It is estimated by ABARE (2006B) that half the volume of vegetables consumed in Australia are fresh. McKINNA et al estimate that the fresh vegetable market is worth $3 billion and that the value of the category is increasing at the hands of the drought prevalence of higher value products. This estimate has been achieved by factoring up the known value of a number of individual fresh categories (as obtained through industry consultation) and must be taken as a broad estimate only.
This data is in conflict with both the McKINNA et al consumer research (Volume 4 Consumer Insights) and other Roy Morgan (2007) research where consumers claimed to ‘buy more fresh or chilled vegetables than they used to’. When examining the Morgan household penetration findings, it is important to consider the impact of the growing food service sector on household consumption levels – it is likely that vegetable consumption, particularly in fresh, is increasing outside of the home. The second consideration is the classic case where what consumers say they do, and what they actually do can be very different. Often consumers talk ‘lean’ and eat ‘fat’.
MCKINNA et al Pty Ltd Strategic Insights
The results of the Roy Morgan consumer survey indicate that fresh vegetable consumption on a household penetration level is in greater decline than frozen and canned vegetables. The survey found that household penetration of vegetables was 83.4% in 2006 compared with 86.6% in 2002.
30 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
MCKINNA et al Pty Ltd Strategic Insights
Yet it is McKINNA et al’s assessment that the fresh sector is in fact growing faster than processed, with consumers indicating a preference for fresh and minimally processed foods across the board. This is backed by feedback from industry players in fresh who are reporting solid business.
31 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
6.3
FRESH-CUT VEGETABLES
The fresh-cut vegetable and salad segment has an estimated value of $160 million. The segment is the fastest growing space in the vegetable category having enjoyed growth rates of 20%+ per annum over the last 5 years, albeit from a small base. Fresh-cuts are expected to enjoy sustained growth for the next decade. In Australia fresh-cuts account for 5% of the fresh category; however, in the United States and United Kingdom, fresh-cuts account for 11% and 17% of the market respectively which would indicate that the Australia market is yet to reach maturity.
There are also a large numbers of relatively small fresh-cut operators who operate at a local or regional level. Typically, these businesses buy product from central markets or direct from growers, process it in suburban facilities and distribute mainly to local food service outlets. Potatoes constitute the bulk of their volume, although carrots, onions and various vegetable mixes are also important. It is impossible to accurately quantify the size of this market because of its fragmented nature, but it is conceivable that collectively this market could be in excess of $100 million per annum at wholesale value.
MCKINNA et al Pty Ltd Strategic Insights
Major players in the fresh-cut market include: • Salad Fresh (Convenience Foods). • One Harvest. • Houston’s Farm.
32 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
6.4
FROZEN VEGETABLES
Category overview The Australian frozen vegetable market has a retail value of $460 million (incl. potatoes) and has experienced value growth of 6% in 2007 compared with 0.8% in 2006. Critically, recent value growth in the category has not come from increased volume sales, with tonnages of frozen vegetables sold remaining steady during 2007. Value growth in the frozen vegetable sector is being driven by the impact of the drought and also by higher price pointed products. An increasing product range is evident by the growth in the number of active products over the last three years. The major vegetable processors have been investing heavily in innovation and marketing programs for convenience products such as microwavable vegetable mixes and value-added products with sauces.
MCKINNA et al Pty Ltd Strategic Insights
An offsetting factor is the growth of private label which typically has a lower price point, although the value of private label has been increasing faster than volume indicating increased prices.
33 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Figure 11: Australian frozen vegetable market value trends
Source: Aztec Synovate, 2007
Figure 12: Australian frozen vegetable market snapshot MAT to 22/05/05 Dollars (000s) Dollars (000s) Growth % YA Units (000s) Units (000s) Growth % YA Tonnes Tonnes Growth % YA Active Products Price ($/Kilo)
$466,631.6 N/A 189,872.7 N/A 139,722.6 N/A 646 $3.34
MAT to 21/05/06 $470,334.7 ⇑ 0.8% 191,156.1 ⇑ 0.7% 139,618.8 ⇓ -0.1 % 706 $3.37
MAT to 20/05/07 $498,625.5 ⇑ 6.0% 192,345.3 ⇑ 0.6% 139,564.3 0.0% 737 $3.57
Frozen vegetables experience seasonal fluctuations with demand being greater during the winter months than the summer months when a greater variety of fresh vegetables are available.
Key players Across the entire frozen vegetable category, McCain and Simplot hold equal leadership position with around 33% value share each.
MCKINNA et al Pty Ltd Strategic Insights
Source: Aztec Synovate, 2007
34 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Private label has moved aggressively into the frozen vegetable market achieving 20.5% value growth and 8.3% volume growth over the last year. Private label frozen vegetables are now worth $92 million (18.5%) and account for 26.5% of the total volume of frozen vegetables sold (3.7 million tonnes). Part of the private label supply comes from Australian processors but increasingly is being supplied by imports. Whereas the market leaders’ frozen vegetable products average $3.85/kg, private label products average $2.50/kg which gives them a significant advantage in the marketplace. As private label increases its market share, this has a devaluing effect on the entire category. The fact that the category value has grown by 6%, despite the devaluing effect of private label, is the result of upward pressure on price as a result of the drought and an increased offering of higher value, convenience and value-added products. Moreover, the price of private label product on a per kg basis has increased by 10% over the last year, reflecting the market conditions, which has served to offset the impact somewhat.
MCKINNA et al Pty Ltd Strategic Insights
A breakdown of the value and volume share trends of each of the key players is provided below.
35 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Figure 13: Frozen vegetable manufacturer and brand shares (value and volume) % Share of Total Frozen Vegetable Value
% Share of Total Frozen Vegetables Volume
MAT To 22/05/05
MAT To 21/05/06
MAT To 20/05/07
MAT To 22/05/05
MAT To 21/05/06
MAT To 20/05/07
Total McCain
35.5
33.5
33.7
33.2
31.7
31.4
Total Simplot
35.1
34.5
32.8
31.4
31.3
29.9
Total Watties Foods
6.6
7.6
8.5
5.7
6.0
6.9
Total Logan Farms P/L
5.7
5.6
4.7
5.4
5.2
4.4
Total Manassen Foods
1.6
1.6
0.7
0.8
0.8
0.4
Total Other Mfrs
1.1
1.0
1.1
0.6
0.5
0.5
Total Private Label
14.5
16.2
18.5
23.0
24.5
26.5
Source: Aztec Synovate, 2007
Segment overview The frozen vegetable market is dominated by potatoes and mixed vegetables, accounting for 65% of category value between them. Frozen peas are also an important category at 14%.
Source: Aztec Synovate, 2007
MCKINNA et al Pty Ltd Strategic Insights
Figure 14: Segment value shares MAT to 20/05/07
36 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Mixed vegetables are performing well with 10.6% value growth in 2007. Also performing well are frozen onions and Brussels sprouts. While most segments experienced value growth over the last year, only five categories experienced both value and volume growth, namely mixed vegetables, onions, cauliflower, brussel sprouts and rice. Consumption of potatoes has remained steady. Figure 15: Segment snapshot MAT to 20/05/07
Total Potato Total Mixed Veg Total Peas Total Beans Total Corn Cob Total Corn Kernels Total Spinach Total Broccoli Total Oven Roast Total Carrots Total Onions Total Cauliflower Total Broad Beans Total Brussels Sprouts Total Miscellaneous Total Rice
Dollars (000s) $160,972 $158,025 $72,153 $30,697 $17,960 $16,740 $9,698 $6,428 $5,928 $4,461 $3,754 $3,552 $3,303
Dollars (000s) Growth % YA ⇑ 7.3 ⇑ 10.6 ⇑ 2.2 ⇑ 5.1 ⇑ 4.3 ⇑ 0.2 ⇑ 5.9 ⇓ -6.9 ⇓ -12.1 ⇓ -1.9 ⇑ 10.5 ⇑ 6.2 ⇑ 1.5
$2,817 $1,456 $682 $-
Total Herbs
Units (000s) 56,567 57,438 33,007 14,441 5,720 6,896 6,063 2,345 1,402 2,351 1,506 1,555 1,316
Units (000s) Growth % YA ⇑ 1.8 ⇑ 6.9 ⇓ -5.7 ⇓ -2.0 ⇓ -1.0 ⇓ -7.0 ⇓ -2.2 ⇑ 0.9 ⇓ -11.1 ⇓ -7.2 ⇑ 10.3 ⇑ 8.6 ⇓ -0.6
⇑ 12.1 ⇓ -54.5 ⇑ 8.2
1,156 368 214
N/A
-
Tonnes 51,295 35,899 24,785 9,317 5,381 4,845 1,709 1,172 870 1,186 814 765 686
Tonnes Growth % YA 0.0 ⇑ 6.6 ⇓ -5.6 ⇓ -2.7 ⇓ -1.8 ⇓ -7.6 ⇑ 0.3 ⇑ 5.2 ⇓ -4.9 ⇓ -7.2 ⇑ 9.7 ⇑ 12.8 0.0
Price ($/Kilo) $3.14 $4.40 $2.91 $3.29 $3.34 $3.46 $5.67 $5.49 $6.82 $3.76 $4.61 $4.64 $4.81
⇑ 3.7 ⇓ -55.4 ⇑ 4.5
578 156 107
⇑ 3.7 ⇓ -55.5 ⇑ 4.5
$4.87 $9.36 $6.36
N/A
-
N/A
$-
MCKINNA et al Pty Ltd Strategic Insights
Source: Aztec Synovate, 2007
37 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
6.5
CANNED VEGETABLES
Category overview The Australian canned vegetable market has a retail value of $290 million. Similar to the frozen vegetable market, the canned vegetable market is relatively stagnant with modest value growth at 4.6% but steady volume growth in 2007. Figure 16: Australian canned vegetable market value trends
Source: Aztec Synovate, 2007
Dollars (000s)
MAT To 22/05/05 $265,532
MAT To 21/05/06 $276,884
MAT To 20/05/07 $289,721
Dollars (000s) Growth % YA
N/A
⇑ 4.3
⇑ 4.6
Units (000s)
230,815
237,025
237,972
Units (000s) Growth % YA
N/A
⇑ 2.7
⇑ 0.4
Tonnes
94,426
97,525
97,231
Tonnes Growth % YA
N/A
⇑ 3.3
⇓ -0.3
Active Products
857
916
935
Price ($/Kilo)
$2.81
$2.84
$2.98
Source: Aztec Synovate, 2007
MCKINNA et al Pty Ltd Strategic Insights
Figure 17: Australian canned vegetable market snapshot
38 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Key players In terms of value, Simplot is the market leader in canned vegetables with 30.8% value share, followed by private label with 25.4%. However, in terms of volume, the canned vegetable category is dominated by private label with a 33.2% share. Simplot’s canned vegetable business is valued at $89 million per annum compared with private label at $73 million. Private label has shown strong value growth at around 15% per annum. Figure 18: Canned vegetables key player market share % Share of Total Canned Vegetables Value MAT To MAT To MAT To 22/05/05 21/05/06 20/05/07 Total Simplot Total Golden Circle Ltd Total SPC Ardmona Total Unilever Total Riviana Foods Total Manassen Foods Total Valcorp Total Masterfoods Anz Total Dick Smith P/L Total Scott Mkting Group Total Other Mfrs Total Private Label
28.6 15.1 11.8 2.9 2.6 1.2 2.8 2.1 0.7 0.0 11.1 21.0
30.1 14.4 9.6 2.8 2.5 0.9 3.0 0.6 0.5 0.0 11.7 24.0
30.8 13.2 9.6 2.6 2.7 0.9 3.0 0.0 0.4 0.0 11.4 25.4
% Share of Total Canned Vegetable Volume MAT To MAT To MAT To 22/05/05 21/05/06 20/05/07 22.5 16.9 13.0 0.5 1.3 1.0 3.0 2.0 0.3 0.0 10.6 29.0
22.7 15.7 10.8 0.5 1.3 0.7 3.2 0.5 0.2 0.0 12.3 32.0
23.8 14.0 10.7 0.5 1.4 0.7 3.4 0.0 0.2 0.0 12.2 33.2
Source: Aztec Synovate, 2007
The canned vegetable segment is dominated by tomatoes, corn and beetroot which combined account for 57% of the category value. The standout sub-category in the canned vegetable category is dry seed beans with an average value growth of 25% over the last two years. Conversely, canned salad vegetables have been the poorest performing category with consumption declining 23.4%. Other categories have shown modest growth or decline over the last three years representing the flatness of the category overall.
MCKINNA et al Pty Ltd Strategic Insights
Segment overview
39 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Figure 19: Canned vegetable segment value shares MAT to 20/05/07
Source: Aztec Synovate, 2007
Total Tomatoes Total Corn Total Beetroot Total Wet Seed Beans Total Asparagus Total Peas Total Mush/Champ Total Potato Total Mixed Veg Total Dry Seed Beans Total String Beans Total Carrots Total Salad Veg Total Artichokes Total Cabbage Total Other Segment Total Capsicums Total Stir Fry Total Asian Veg
Dollars (000s) $77,658 $45,960 $42,254 $33,538 $21,405 $14,916 $14,586 $12,024 $8,657 $4,664 $3,756 $2,203 $2,077 $1,514 $1,232 $932 $906 $805 $634
Dollars (000s) Growth % YA 5.8 6.9 5.9 8.7 -3.4 0.3 2.9 10.4 3.5 22.2 -2.1 -0.7 -10.0 -9.6 -5.3 -2.3 1.4 -44.3 -21.1
Units (000s) 76,635 39,796 34,145 27,734 7,837 12,218 13,880 7,119 5,725 3,383 3,103 1,624 1,440 519 469 464 858 340 683
Source: Aztec Synovate, 2007
Units (000s) Growth % YA 0.7 1.0 -1.8 8.0 -5.4 -3.5 -0.8 4.9 0.7 23.0 -9.1 -5.1 -23.3 -9.9 -8.4 1.7 -3.1 -42.4 -22.7
Tonnes 34,487 14,002 17,855 10,717 2,979 3,969 3,867 2,317 2,219 1,421 1,081 705 629 192 223 177 107 136 149
Tonnes Growth % Price YA ($/Kilo) -0.6 2.25 1.8 3.28 -4.4 2.37 7.1 3.13 -3.9 7.19 0.3 3.76 -1.2 3.77 4.7 5.19 3.0 3.90 24.7 3.28 -8.4 3.48 -5.1 3.13 -23.4 3.30 -11.9 7.88 -8.5 5.53 3.5 5.26 -3.2 8.45 -42.4 5.91 -20.9 4.27
MCKINNA et al Pty Ltd Strategic Insights
Figure 20: Segment snapshot MAT to 20/05/07
40 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
6.6
OVERALL ASSESSMENT
Overall the market prospects for vegetables do not present any cause for optimism. The total category is trending up in value terms but is relatively flat in volume terms.
MCKINNA et al Pty Ltd Strategic Insights
Value growth is being driven by the impact of the drought and the growth of value-added and convenience products and fresh-cuts which have a higher average selling price. In overall terms, per capita consumption and household penetration levels appear to be stagnant. The growth of private label at the expense of proprietary brands is having a depressing effect on value because of typically lower unit selling prices.
41 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
SECTION
7
INTERNATIONAL TRADE IN VEGETABLES
Trade Snapshot
• • • • • • • • •
Australia is losing its position in key export markets to lower cost competitors. Australia is increasingly facing competition from imports in the domestic market. Imports account now for 10% of apparent vegetable consumption. Australia is now a net importer of vegetables. 1% of fresh vegetables are imported (⇑ 15%). 32% of frozen vegetables are imported (⇑ 12%). 52% of canned vegetables are imported. 60% of Australian exports are fresh vegetables. Export opportunities lie in niche, differentiated and/or value-added vegetable products. Export opportunities lie in new markets with low trade barriers such as the Middle East.
Sources: Aztec Synovate, 2007; Roy Morgan, 2007
MCKINNA et al Pty Ltd Strategic Insights
•
42 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
7.1
AUSTRALIA’S POSITION IN GLOBAL VEGETABLE TRADE
The Australian vegetable industry is facing extreme competition in the global marketplace. Not only has its position in traditional global markets been eroded, producers are now facing competition from imports in the domestic market. Australia is now a net importer of vegetables (ABS, 2006). Figure 21: Australian vegetable trade 2002 - 2005
Spain, the Netherlands, China and Mexico are the biggest net exporters of vegetables in the world. Together they account for 64% of worldwide net vegetable exports. The Netherlands is the world’s leading vegetable exporter but is only the 28th largest vegetable producer.
MCKINNA et al Pty Ltd Strategic Insights
Source: ABS, 2006
43 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Critically, Australia is no longer a key player in global vegetable trade. Australia is losing its position in key export markets to lower cost competitors. The following table, which shows Australia’s declining position in traditional Asian markets, is clear evidence of this. Figure 22: Australia’s exports to key Asian markets
Japan Singapore
Year to June 2002 ($ million) 45.5 34.0
Year to June 2005 ($ million) 36.3 19.7
Trend ⇑ or ⇓ ⇓ 24% ⇓ 72%
Malaysia South Korea Hong Kong Taiwan
49.0 7.5 15.0 11.0
15.9 7.3 6.8 4.9
⇓ 208% ⇓ 3% ⇓ 120% ⇓ 124%
Country
Source: AusVeg, 2006
Competition from fresh vegetable imports in the domestic market is currently negligible due to price, market access, and perishability barriers; however, this situation may change in the future. Imports of fresh vegetables typically fill a seasonal window of opportunity in the Australian market or supply categories where there is a gap in Australian production. It is estimated that around 99% of fresh vegetables sold through the major chains are Australian grown (ABARE, 2006B).
MCKINNA et al Pty Ltd Strategic Insights
In addition, Australia is increasingly facing competition from imports in the domestic market; imports now account for 10% of apparent vegetable consumption. In light of the strong competition from players such as New Zealand, China, South East Asia, South Africa and South American nations, and the relative cost disadvantage Australian producers face, this figure is likely to increase.
44 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
The market share of imported product in various fresh vegetable lines sold in Australian supermarkets is provided below. Figure 23: Origin of fresh vegetables in Australian supermarkets Segment
Australian %
Imported %
Potatoes Tomatoes
100 >99
0
B MCKINNA et al Pty Ltd Strategic Insights
PART B: KEY FINDINGS
5 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
SECTION
4
INDUSTRY
STAKEHOLDER RESEARCH METHODOLOGY
The industry stakeholder research involved a program of intense industry consultation covering a wide range of stakeholders throughout the supply chain. The program of consultation took the format of both one-on-one interviews, industry discussion groups and teleconferences with key stakeholders including: 1. Growers, packers and marketers of fresh and fresh-cut vegetable products. 2. Major processors who source or process vegetables from Tasmania. 3. The TFGA Vegetable Council. 4. Major input suppliers to the Tasmanian Vegetable Industry. 5. Other major food, beverage and tourism businesses and organisations. 6. Relevant government departments including DPIW, Office of the Premier and DED. 7. Category managers and key buyers of vegetable products for the major supermarkets. A schedule of contacts is appended to this report.
MCKINNA et al Pty Ltd Strategic Insights
4.1
6 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
4.2
HIGH LEVEL INDUSTRY THEMES
Based on the industry consultation process, four key recurring themes emerged, namely: 1. The Tasmanian Vegetable Industry is heavily reliant on the processing sector. 2. The industry’s global competitiveness is declining. 3. The long-term viability of the processing industry is in question. 4. Supermarket market power is a major issue.
1.
The Tasmanian Vegetable Industry is heavily reliant on the processing sector One of the major findings to come out of the program on industry stakeholder consultation is that the ‘history and culture’ of the Tasmanian processing industry is limiting industry development. There are significant opportunities in the fresh and fresh-cut markets; however, processor-growers do not feel comfortable about entering these markets.
2.
Industry’s global competitiveness is declining The Tasmanian Vegetable Industry is under pressure. Competitiveness is currently limited by: • Scale of operations. • Mixed farms (not specialised). • Over-capitalisation (equipment). • High land prices (barrier to business expansion and growth). • Seasonality • Freight and logistics.
MCKINNA et al Pty Ltd Strategic Insights
These themes are discussed below.
7 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Long-term viability of the processing industry is in question Throughout the program of consultation it became evident that there are grave doubts about the long-term viability of the processing industry. Of particular concern is that the current prices received by farmers are inadequate to fund their businesses. Moreover, processors themselves are facing increasing competition from imports which serve to devalue entire categories and put downward pressure on prices. The ramifications of the processing industry ultimately closing down are major, but this likelihood must be considered.
4.
Supermarket market power is a major issue The inordinate dominance of the two major supermarkets is putting great pressure on the Tasmanian Vegetable Industry. The key ramifications are: a. Supermarket private label programs kill proprietary brands; b. Supermarket power erodes prices; and c. Supermarket compliance requirements increase operating costs. Of particular significance is the recent re-launch of the supermarkets’ tiered private label programs and their aggressive attack on the market share of proprietary brands of processed vegetables. Another problem encountered by the Tasmanian Vegetable Industry in the fresh sector is the fact that some growers are too small to meet supermarket threshold levels, even in the home state. The major suppliers to supermarkets are currently having to source product from the mainland due to the limited season and category shortfalls.
MCKINNA et al Pty Ltd Strategic Insights
3.
8 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
MCKINNA et al Pty Ltd Strategic Insights
As discussed later in this report, this situation presents a key opportunity for the industry to improve supply of vegetables to its home state.
9 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
4.3 PROCESSOR-GROWER PERSPECTIVE The program of consultation with the Tasmanian processorgrowers who supply the major processors revealed that they feel under great pressure. The biggest concern is the ‘costprice squeeze’, i.e. selling prices are not keeping up with the increasing cost of production. This situation is eroding margins and hurting the industry. Processor-growers are distrustful of processors and their claims about their inability to increase farm-gate prices. Of greatest concern was the strong sentiment expressed by many processor-growers that if processors do not increase prices, they will be forced to exit the industry. The processor-growers are constrained in their ability to improve their returns. Tasmanian processor-growers are committed to mixed farming models based on crop rotation and opportunistic farming strategies. They therefore lack specialisation and a long-term market view. The small size of many farms is also impacting on competitiveness given the inability to achieve economies of scale. Compounding this issue are the high land prices relative to returns which discourage the necessary scale expansion.
In the main, these stakeholders recognised that there are future opportunities in the fresh sector, but do not feel comfortable about entering this market based on the following factors:
MCKINNA et al Pty Ltd Strategic Insights
Despite this, processor-growers are guardedly optimistic about the future of the processing sector, although recognise that change is inevitable.
10 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
• •
MCKINNA et al Pty Ltd Strategic Insights
• • •
Processors essentially ‘project manage’ for them. Processor-growers do not have established markets, supply chains or marketing expertise. Fresh does not fit with a mixed farming regime. Cost of freight. Barriers in dealing with major supermarkets.
11 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
4.4
PROCESSOR PERSPECTIVE
The key vegetable processors in Tasmanian are highly motivated to succeed with their Tasmanian operations. Key incentives here are: • The high level of sunk investment they have tied up in their Tasmanian facilities and processing operations; • That their supply chains are predominantly reliant on Tasmanian product; and • That they enjoy a stable workforce. The research also found that the processors have a strong commitment to Australian origin product as a marketing point against cheap imports.
In addition, processors are coming under increasing competitive pressure from imported products, particularly from New Zealand, China, Europe (allegedly dumped product), South East Asia and the United States (albeit a declining force).
MCKINNA et al Pty Ltd Strategic Insights
However, processors are under heavy margin pressure due to a number of key factors, namely: • Relative flatness in processed vegetable market. • Private label eroding margins on proprietary brands. • Cheap imports progressively taking market share both in retail and food service. • Retailers passing cost back down the supply chain by virtue of their market power. • Some difficulties in sourcing raw materials (e.g. 80,000+ tonnes shortfall of potatoes this year). This situation dampens processor confidence in investing in the industry.
12 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
A recent benchmarking study by ABARE (2006A) and internal research conducted by the processors themselves show that imports have significant cost advantages in terms of labour, inputs and freight. Imported products also have substantially lower raw material costs because of economies achieved through the increased scale of operations that overseas growers have; the fact that their growers are specialist rather than opportunistic farmers; and their better utilisation of capital.
MCKINNA et al Pty Ltd Strategic Insights
As a consequence, the ability of Australian processors to invest behind their brands is diminishing. The focus of Australian processors is on investing in automation to drive costs out of the business. Whilst committed to their Tasmanian operation, they are not optimistic about the longterm future.
13 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
4.5
FRESH/FRESH-CUT MARKETERS’ PERSPECTIVE
Based on the program of consultation, the outlook of the fresh supply chain (i.e. fresh-cut vegetable processors and fresh vegetable marketers) was somewhat more positive. Tasmania’s key fresh marketers have managed to achieve dominant supply status in their respective categories (e.g. potatoes, carrots, onions, lettuce, baby leaves/salad mixes) and most have now moved to national supplier status. Those stakeholders involved in fresh struggle to develop strong proprietary brands by virtue of the fact that almost all supermarket fresh vegetable products are being sold under private label brands. Despite this situation, those consulted were generally satisfied with their relationships with supermarkets having established a stable, positive position based on mutual dependence. As the major fresh vegetable companies grow they are being forced to establish production capabilities or supplier relationships on the mainland and in New Zealand to ensure volume and consistency of quality because of issues of seasonality, volume and weather conditions.
MCKINNA et al Pty Ltd Strategic Insights
In the main, this group was optimistic about the future and expressed confidence that businesses will grow and prosper.
14 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
4.6 SUPERMARKET PERSPECTIVE For Coles, Woolworths and IGA, fresh fruit and vegetables are a central platform of corporate growth strategies. All three supermarkets expressed a commitment to support Australian products within limitations of quality, availability and price.
Key findings to come out of the retailer consultation processes are identified as follows: • Supermarkets are frustrated that they are unable to supply Tasmanian stores with locally produced fruit and vegetables. This is largely because of the major category gaps and inconsistent supply from Tasmania. • Major supermarkets are heavily committed to driving their private label programs for fresh food because of the need for consistency and supply chain control. • Supermarkets are moving towards closed-loop supply chains and a reduced number of national suppliers. This locks smaller producers out of the supply chain. • Supermarkets hold a strong belief that the origin of food is secondary to the quality and performance characteristics of the product itself. • Supermarkets are happy to promote ‘Australian grown’ products but not prepared to promote produce from a particular state.
MCKINNA et al Pty Ltd Strategic Insights
Critically, both major supermarkets adhere to diversified sourcing strategies which means that they are unable to give allegiance to one particular region. The key rationalisations for sourcing diversification are seasonality issues, risk management (e.g. weather) and national supply requirements.
15 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Supermarkets acknowledge that Tasmania has a strong seasonal advantage and superior flavour in some products due to climatic factors.
MCKINNA et al Pty Ltd Strategic Insights
•
16 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
SECTION
5
THE TASMANIAN VEGETABLE INDUSTRY
• • •
Agriculture, fisheries and forestry account for 6% of the Tasmanian economy. Agriculture farm gate value $937.2 million. Vegetable farm gate value $164 million (⇓ 9%). Vegetable wholesale value $352 million (⇓ 7%).
• • •
Direct vegetable imports $4 million (steady). Imports via mainland estimated at $20 million. Direct vegetable exports $23 million (⇓ 30%).
•
Gross value of Tasmanian vegetable revenue $579 million net of direct imports (⇑ >1%).
• •
Number of vegetable growers - 640. Potatoes, onions, carrots, peas, broccoli and beans account for 88% of production. Tasmania highly reliant on supplying vegetable processing industry.
•
•
Sources: ABS, 2006; Tasmanian Vegetable Industry Scorecard 2004-05
MCKINNA et al Pty Ltd Strategic Insights
Industry Snapshot
17 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
5.1
OVERVIEW
The structure of the Tasmanian economy is a fairly indicative sample of the structure of the Australian economy as a whole. However, the agriculture, forestry and fishing sectors are larger than the national average at 6% compared with 3% of total factor income, forming an important component of the Tasmanian economy (TFGA & TAPC, 2005). Tasmanian agriculture, forestry and fisheries employ 15,500 people accounting for 8% of the state’s total employment (ABS, 2006A). Figure 1: Tasmanian employment by industry
The gross value of Tasmania’s agricultural production alone is $937.2 million which equates to approximately 2.6% of the total Australian production value. Key industries include dairy, beef and veal, wool, sheep meat and vegetables.
MCKINNA et al Pty Ltd Strategic Insights
Source: TFGA & TAPC, 2005
18 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Vegetable production accounts for 18% of the total value of Tasmanian agricultural production with a farm gate value of $164 million. Tasmania produces 8% of Australia’s vegetables from a grower base of more than 640 (DPIW & DED, 2005). The Tasmanian vegetable production value trends are provided below and a value chain for the Tasmanian Vegetable Industry is detailed on the following page. Figure 2: Gross value of Tasmanian Vegetable production
MCKINNA et al Pty Ltd Strategic Insights
Source: ABS, 2006B
19 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Figure 3: The Tasmanian vegetable value chain 2004-05 Exports $23 million Agricultural inputs
$123 million
Tasmanian vegetable production farm gate value
Packing and processing
$164 million
Net interstate trade $259 million
Domestic market $579 million
$352 million Retail and food service sales $301 million
Gross value $582 million ($579m net of imports)
Direct imports $4 million Source: Adapted from the Tasmanian Vegetable Industry Scorecard 2004-05, 2006
1
Net interstate trade plus exports less imports 20
MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
MCKINNA et al Pty Ltd Strategic Insights
In 2004-05, the gross value of Tasmanian revenues from vegetables was estimated to be $579 million (net of direct imports). The total net trade of the Tasmanian Vegetable Industry was $278 million1. This is in contrast to the national trend whereby Australia is now a net importer of vegetables.
However, the scorecard model does not account for product imported to the mainland and then transhipped to Tasmania. At the retail level, imported product is estimated to be worth $30 million (10% retail value). The Tasmanian Vegetable Industry has a strong domestic focus, with 93% of product being sold on the domestic market. 73% of production is marketed to the mainland which is by far the biggest market for Tasmanian vegetables. 20% of Tasmanian vegetables are sold within Tasmania. The Tasmanian Vegetable Industry is dominated by the processing sector, supplying the bulk of the frozen vegetable market (figure 4). Over 75% of Tasmanian vegetables are grown for processing (DPIW, 2005).
Source: DPIW, 2005; McKinna estimate 2007
MCKINNA et al Pty Ltd Strategic Insights
Figure 4: Tasmanian Vegetable Industry breakdown
21 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
5.2
KEY COMMODITIES
Key vegetable commodities produced in Tasmania include potatoes, onions, carrots, peas, broccoli and beans. These key commodities account for 88% of all vegetable production. Figure 5: Value of key Tasmanian vegetable commodities
Source: ABS, 2006B
Figure 6: Key commodities at a glance Trend $
Quantity (t)
⇑ 12% ⇑ 8%
Tas % Aust Prod’n 41% 14%
26,490
⇑ 8%
98%
26,956
52,830
Steady
17%
316,000
⇓ 29%
72,476
⇑ 11%
28%
256,000
Steady
320,823
⇓ 2%
25%
1,288,000
$5,786,683 $6,446,984
⇓ 7% ⇑ 8%
14,178 8,035
Peas
$10,718,606
⇓ 7%
Carrots
$22,889,647
⇑ 1%
Onions
$23,982,288
Potatoes
$75,534,003
Beans Broccoli
Trend (t)
Source: ABS, 2006B; ABS, 2006C
Potatoes are the highest value commodity produced with a farm gate value of $75.5 million. Tasmania produces 25% of Australia’s potatoes which account for 56% of the total value of Tasmanian vegetable production.
Aust. Prod’n (t) 34,626 55,911
MCKINNA et al Pty Ltd Strategic Insights
Gross $
22 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
It would be fair to say that potatoes are the backbone of the Tasmanian Vegetable Industry with interstate sales of processed potatoes amounting to $172 million in 2004-05, equating to 66% of all interstate vegetable sales. Potato production has remained relatively stable over the last three years at around 320,000 tonnes, coming down slightly from the 2001-02 peak of 350,000 tonnes. Potato prices have increased in recent years, moving from $192/t in 1999-00 to $235/t in 2004-05. However, this increase is more reflective of the increasing cost of production rather than improved gains to potato producers. Figure 7: Tasmanian potato production 2000 - 2005
Tasmania is also a key pea and bean producer accounting for 98% of and 41% of national production respectively. The vast majority of peas and beans are marketed to processors. No peas and beans are exported. The volume and value trends for peas and beans are detailed below.
MCKINNA et al Pty Ltd Strategic Insights
Source: ABS, 2006B; ABS, 2006C
23 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Figure 8: Tasmanian pea and bean production
Source: ABS, 2006B; ABS, 2006C
Onions are the state’s key export commodity accounting for 77% of Tasmanian vegetable exports and 15% of total farm gate value. Carrots are also a key commodity accounting for 15% of the total farm gate value. Carrot production has shown significant increases over the five-year period moving up 33%. Interestingly, only 11% of carrots are exported.
MCKINNA et al Pty Ltd Strategic Insights
Broccoli production has also increased, up 24% over the five years to 2004-05 to 8,034 tonnes. However, broccoli prices have been significantly depressed, moving from $1.49/kg in 1999-00 down to $0.80/kg in 2004-05.
24 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
5.3
PERFORMANCE
The top-line numbers presented in the Tasmanian Vegetable Industry Scorecards (2005; 2006) are reflective of an industry under pressure. Net trade of vegetables (i.e. net interstate trade plus exports less imports) dropped from $289 million to $278 million from 2003-04 to 2004-05. The gross value of vegetable production at the farm gate decreased by $15 million from $179 million to $164 million from 2003-04 to 2004-05.
However, despite the decline in value both at the farm gate and packer/processor level, the total net revenue from vegetable production increased by $5 million. This increase is largely attributable to the $20 million increase in Tasmanian supermarket and food service sales which compensated for the declines in all other areas. The increase in supermarket value can be attributed to increased sales of non-Tasmanian product and higher margin structures. Countering this trend is the increase in private label which is effectively devaluing the entire category.
MCKINNA et al Pty Ltd Strategic Insights
The key to this decline was the $10 million decrease in onion production value during this period despite an 11% increase in onion production volume. The value of packed and processed vegetables also declined by $25.6 million over the same period. Again, an $18 million decline in the value of packed and processed onions was a major contributor to this. The value of processed beans and peas also declined by $4 million during this period which impacted on the total value.
25 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
MCKINNA et al Pty Ltd Strategic Insights
Of particular concern to the state is the reduction in the value of exports, which decreased by $7.5 million from $30 million to $23 million, largely due to a $5.5 million decline in potato exports. A fall in exports would indicate either that Tasmania’s competitiveness in export markets is declining or that the returns from the domestic market are more attractive, or both.
26 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
SECTION
6
MARKET ASSESSMENT Market Snapshot • • • • • •
Fresh vegetable market retail value estimated at $3 billion. Fresh-cut retail market value $160 million (⇑ 20%). Frozen vegetable market retail value $460 million (⇑ 6%). Frozen vegetable market retail volume 139,465 tonnes (steady). Canned vegetable market retail value $290 million (⇑ 4.6%). Canned vegetable market retail volume 97,231 tonnes (steady)
MCKINNA et al Pty Ltd Strategic Insights
Sources: Aztec Synovate, 2007; Roy Morgan, 2007
27 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
6.1
VEGETABLE MARKET OVERVIEW
While the available data is limited, it is apparent that consumption of fresh, frozen and canned vegetables has remained relatively flat, although the value of these categories is increasing. According to ABARE (2006), the per capita consumption of vegetables is unlikely to increase over the short to medium term. ABS per capita vegetable and fruit consumption trends (1990-98) are provided below. Unfortunately, the ABS no longer publish consumption statistics and the data provided below is somewhat out of date. Figure 9: Per capita fruit and vegetable consumption
MCKINNA et al Pty Ltd Strategic Insights
Source: ABS, 2000
28 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
In the absence of up-to-date ABS data, household penetration data for fresh, frozen and canned vegetables has been sourced from Roy Morgan (2007). The data suggests that consumption of vegetables is marginally declining in all categories. Figure 10: Fresh, canned and frozen vegetable consumption 100
86.6
86.5
53.2
17.5
84.2
83.8
83.4
54.0
52.2
52.2
52.1
17.5
16.4
16.4
16.4
Jan03 - Dec03
Jan04 - Dec04
Jan05 - Dec05
80
% Popn 14+
60
40
20
0
Jan02 - Dec02
Fresh
Frozen
Jan06 - Dec06
Canned
RoyMorgan Single Source Australia: Jan 2002 - Dec 2006 Base: Total Population 14+
MCKINNA et al Pty Ltd Strategic Insights
Source: Roy Morgan, 2007
29 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
6.2 FRESH VEGETABLES We were unable to source category scan data for fresh produce due to supermarket commercial confidentially issues. It is estimated by ABARE (2006B) that half the volume of vegetables consumed in Australia are fresh. McKINNA et al estimate that the fresh vegetable market is worth $3 billion and that the value of the category is increasing at the hands of the drought prevalence of higher value products. This estimate has been achieved by factoring up the known value of a number of individual fresh categories (as obtained through industry consultation) and must be taken as a broad estimate only.
This data is in conflict with both the McKINNA et al consumer research (Volume 4 Consumer Insights) and other Roy Morgan (2007) research where consumers claimed to ‘buy more fresh or chilled vegetables than they used to’. When examining the Morgan household penetration findings, it is important to consider the impact of the growing food service sector on household consumption levels – it is likely that vegetable consumption, particularly in fresh, is increasing outside of the home. The second consideration is the classic case where what consumers say they do, and what they actually do can be very different. Often consumers talk ‘lean’ and eat ‘fat’.
MCKINNA et al Pty Ltd Strategic Insights
The results of the Roy Morgan consumer survey indicate that fresh vegetable consumption on a household penetration level is in greater decline than frozen and canned vegetables. The survey found that household penetration of vegetables was 83.4% in 2006 compared with 86.6% in 2002.
30 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
MCKINNA et al Pty Ltd Strategic Insights
Yet it is McKINNA et al’s assessment that the fresh sector is in fact growing faster than processed, with consumers indicating a preference for fresh and minimally processed foods across the board. This is backed by feedback from industry players in fresh who are reporting solid business.
31 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
6.3
FRESH-CUT VEGETABLES
The fresh-cut vegetable and salad segment has an estimated value of $160 million. The segment is the fastest growing space in the vegetable category having enjoyed growth rates of 20%+ per annum over the last 5 years, albeit from a small base. Fresh-cuts are expected to enjoy sustained growth for the next decade. In Australia fresh-cuts account for 5% of the fresh category; however, in the United States and United Kingdom, fresh-cuts account for 11% and 17% of the market respectively which would indicate that the Australia market is yet to reach maturity.
There are also a large numbers of relatively small fresh-cut operators who operate at a local or regional level. Typically, these businesses buy product from central markets or direct from growers, process it in suburban facilities and distribute mainly to local food service outlets. Potatoes constitute the bulk of their volume, although carrots, onions and various vegetable mixes are also important. It is impossible to accurately quantify the size of this market because of its fragmented nature, but it is conceivable that collectively this market could be in excess of $100 million per annum at wholesale value.
MCKINNA et al Pty Ltd Strategic Insights
Major players in the fresh-cut market include: • Salad Fresh (Convenience Foods). • One Harvest. • Houston’s Farm.
32 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
6.4
FROZEN VEGETABLES
Category overview The Australian frozen vegetable market has a retail value of $460 million (incl. potatoes) and has experienced value growth of 6% in 2007 compared with 0.8% in 2006. Critically, recent value growth in the category has not come from increased volume sales, with tonnages of frozen vegetables sold remaining steady during 2007. Value growth in the frozen vegetable sector is being driven by the impact of the drought and also by higher price pointed products. An increasing product range is evident by the growth in the number of active products over the last three years. The major vegetable processors have been investing heavily in innovation and marketing programs for convenience products such as microwavable vegetable mixes and value-added products with sauces.
MCKINNA et al Pty Ltd Strategic Insights
An offsetting factor is the growth of private label which typically has a lower price point, although the value of private label has been increasing faster than volume indicating increased prices.
33 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Figure 11: Australian frozen vegetable market value trends
Source: Aztec Synovate, 2007
Figure 12: Australian frozen vegetable market snapshot MAT to 22/05/05 Dollars (000s) Dollars (000s) Growth % YA Units (000s) Units (000s) Growth % YA Tonnes Tonnes Growth % YA Active Products Price ($/Kilo)
$466,631.6 N/A 189,872.7 N/A 139,722.6 N/A 646 $3.34
MAT to 21/05/06 $470,334.7 ⇑ 0.8% 191,156.1 ⇑ 0.7% 139,618.8 ⇓ -0.1 % 706 $3.37
MAT to 20/05/07 $498,625.5 ⇑ 6.0% 192,345.3 ⇑ 0.6% 139,564.3 0.0% 737 $3.57
Frozen vegetables experience seasonal fluctuations with demand being greater during the winter months than the summer months when a greater variety of fresh vegetables are available.
Key players Across the entire frozen vegetable category, McCain and Simplot hold equal leadership position with around 33% value share each.
MCKINNA et al Pty Ltd Strategic Insights
Source: Aztec Synovate, 2007
34 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Private label has moved aggressively into the frozen vegetable market achieving 20.5% value growth and 8.3% volume growth over the last year. Private label frozen vegetables are now worth $92 million (18.5%) and account for 26.5% of the total volume of frozen vegetables sold (3.7 million tonnes). Part of the private label supply comes from Australian processors but increasingly is being supplied by imports. Whereas the market leaders’ frozen vegetable products average $3.85/kg, private label products average $2.50/kg which gives them a significant advantage in the marketplace. As private label increases its market share, this has a devaluing effect on the entire category. The fact that the category value has grown by 6%, despite the devaluing effect of private label, is the result of upward pressure on price as a result of the drought and an increased offering of higher value, convenience and value-added products. Moreover, the price of private label product on a per kg basis has increased by 10% over the last year, reflecting the market conditions, which has served to offset the impact somewhat.
MCKINNA et al Pty Ltd Strategic Insights
A breakdown of the value and volume share trends of each of the key players is provided below.
35 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Figure 13: Frozen vegetable manufacturer and brand shares (value and volume) % Share of Total Frozen Vegetable Value
% Share of Total Frozen Vegetables Volume
MAT To 22/05/05
MAT To 21/05/06
MAT To 20/05/07
MAT To 22/05/05
MAT To 21/05/06
MAT To 20/05/07
Total McCain
35.5
33.5
33.7
33.2
31.7
31.4
Total Simplot
35.1
34.5
32.8
31.4
31.3
29.9
Total Watties Foods
6.6
7.6
8.5
5.7
6.0
6.9
Total Logan Farms P/L
5.7
5.6
4.7
5.4
5.2
4.4
Total Manassen Foods
1.6
1.6
0.7
0.8
0.8
0.4
Total Other Mfrs
1.1
1.0
1.1
0.6
0.5
0.5
Total Private Label
14.5
16.2
18.5
23.0
24.5
26.5
Source: Aztec Synovate, 2007
Segment overview The frozen vegetable market is dominated by potatoes and mixed vegetables, accounting for 65% of category value between them. Frozen peas are also an important category at 14%.
Source: Aztec Synovate, 2007
MCKINNA et al Pty Ltd Strategic Insights
Figure 14: Segment value shares MAT to 20/05/07
36 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Mixed vegetables are performing well with 10.6% value growth in 2007. Also performing well are frozen onions and Brussels sprouts. While most segments experienced value growth over the last year, only five categories experienced both value and volume growth, namely mixed vegetables, onions, cauliflower, brussel sprouts and rice. Consumption of potatoes has remained steady. Figure 15: Segment snapshot MAT to 20/05/07
Total Potato Total Mixed Veg Total Peas Total Beans Total Corn Cob Total Corn Kernels Total Spinach Total Broccoli Total Oven Roast Total Carrots Total Onions Total Cauliflower Total Broad Beans Total Brussels Sprouts Total Miscellaneous Total Rice
Dollars (000s) $160,972 $158,025 $72,153 $30,697 $17,960 $16,740 $9,698 $6,428 $5,928 $4,461 $3,754 $3,552 $3,303
Dollars (000s) Growth % YA ⇑ 7.3 ⇑ 10.6 ⇑ 2.2 ⇑ 5.1 ⇑ 4.3 ⇑ 0.2 ⇑ 5.9 ⇓ -6.9 ⇓ -12.1 ⇓ -1.9 ⇑ 10.5 ⇑ 6.2 ⇑ 1.5
$2,817 $1,456 $682 $-
Total Herbs
Units (000s) 56,567 57,438 33,007 14,441 5,720 6,896 6,063 2,345 1,402 2,351 1,506 1,555 1,316
Units (000s) Growth % YA ⇑ 1.8 ⇑ 6.9 ⇓ -5.7 ⇓ -2.0 ⇓ -1.0 ⇓ -7.0 ⇓ -2.2 ⇑ 0.9 ⇓ -11.1 ⇓ -7.2 ⇑ 10.3 ⇑ 8.6 ⇓ -0.6
⇑ 12.1 ⇓ -54.5 ⇑ 8.2
1,156 368 214
N/A
-
Tonnes 51,295 35,899 24,785 9,317 5,381 4,845 1,709 1,172 870 1,186 814 765 686
Tonnes Growth % YA 0.0 ⇑ 6.6 ⇓ -5.6 ⇓ -2.7 ⇓ -1.8 ⇓ -7.6 ⇑ 0.3 ⇑ 5.2 ⇓ -4.9 ⇓ -7.2 ⇑ 9.7 ⇑ 12.8 0.0
Price ($/Kilo) $3.14 $4.40 $2.91 $3.29 $3.34 $3.46 $5.67 $5.49 $6.82 $3.76 $4.61 $4.64 $4.81
⇑ 3.7 ⇓ -55.4 ⇑ 4.5
578 156 107
⇑ 3.7 ⇓ -55.5 ⇑ 4.5
$4.87 $9.36 $6.36
N/A
-
N/A
$-
MCKINNA et al Pty Ltd Strategic Insights
Source: Aztec Synovate, 2007
37 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
6.5
CANNED VEGETABLES
Category overview The Australian canned vegetable market has a retail value of $290 million. Similar to the frozen vegetable market, the canned vegetable market is relatively stagnant with modest value growth at 4.6% but steady volume growth in 2007. Figure 16: Australian canned vegetable market value trends
Source: Aztec Synovate, 2007
Dollars (000s)
MAT To 22/05/05 $265,532
MAT To 21/05/06 $276,884
MAT To 20/05/07 $289,721
Dollars (000s) Growth % YA
N/A
⇑ 4.3
⇑ 4.6
Units (000s)
230,815
237,025
237,972
Units (000s) Growth % YA
N/A
⇑ 2.7
⇑ 0.4
Tonnes
94,426
97,525
97,231
Tonnes Growth % YA
N/A
⇑ 3.3
⇓ -0.3
Active Products
857
916
935
Price ($/Kilo)
$2.81
$2.84
$2.98
Source: Aztec Synovate, 2007
MCKINNA et al Pty Ltd Strategic Insights
Figure 17: Australian canned vegetable market snapshot
38 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Key players In terms of value, Simplot is the market leader in canned vegetables with 30.8% value share, followed by private label with 25.4%. However, in terms of volume, the canned vegetable category is dominated by private label with a 33.2% share. Simplot’s canned vegetable business is valued at $89 million per annum compared with private label at $73 million. Private label has shown strong value growth at around 15% per annum. Figure 18: Canned vegetables key player market share % Share of Total Canned Vegetables Value MAT To MAT To MAT To 22/05/05 21/05/06 20/05/07 Total Simplot Total Golden Circle Ltd Total SPC Ardmona Total Unilever Total Riviana Foods Total Manassen Foods Total Valcorp Total Masterfoods Anz Total Dick Smith P/L Total Scott Mkting Group Total Other Mfrs Total Private Label
28.6 15.1 11.8 2.9 2.6 1.2 2.8 2.1 0.7 0.0 11.1 21.0
30.1 14.4 9.6 2.8 2.5 0.9 3.0 0.6 0.5 0.0 11.7 24.0
30.8 13.2 9.6 2.6 2.7 0.9 3.0 0.0 0.4 0.0 11.4 25.4
% Share of Total Canned Vegetable Volume MAT To MAT To MAT To 22/05/05 21/05/06 20/05/07 22.5 16.9 13.0 0.5 1.3 1.0 3.0 2.0 0.3 0.0 10.6 29.0
22.7 15.7 10.8 0.5 1.3 0.7 3.2 0.5 0.2 0.0 12.3 32.0
23.8 14.0 10.7 0.5 1.4 0.7 3.4 0.0 0.2 0.0 12.2 33.2
Source: Aztec Synovate, 2007
The canned vegetable segment is dominated by tomatoes, corn and beetroot which combined account for 57% of the category value. The standout sub-category in the canned vegetable category is dry seed beans with an average value growth of 25% over the last two years. Conversely, canned salad vegetables have been the poorest performing category with consumption declining 23.4%. Other categories have shown modest growth or decline over the last three years representing the flatness of the category overall.
MCKINNA et al Pty Ltd Strategic Insights
Segment overview
39 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Figure 19: Canned vegetable segment value shares MAT to 20/05/07
Source: Aztec Synovate, 2007
Total Tomatoes Total Corn Total Beetroot Total Wet Seed Beans Total Asparagus Total Peas Total Mush/Champ Total Potato Total Mixed Veg Total Dry Seed Beans Total String Beans Total Carrots Total Salad Veg Total Artichokes Total Cabbage Total Other Segment Total Capsicums Total Stir Fry Total Asian Veg
Dollars (000s) $77,658 $45,960 $42,254 $33,538 $21,405 $14,916 $14,586 $12,024 $8,657 $4,664 $3,756 $2,203 $2,077 $1,514 $1,232 $932 $906 $805 $634
Dollars (000s) Growth % YA 5.8 6.9 5.9 8.7 -3.4 0.3 2.9 10.4 3.5 22.2 -2.1 -0.7 -10.0 -9.6 -5.3 -2.3 1.4 -44.3 -21.1
Units (000s) 76,635 39,796 34,145 27,734 7,837 12,218 13,880 7,119 5,725 3,383 3,103 1,624 1,440 519 469 464 858 340 683
Source: Aztec Synovate, 2007
Units (000s) Growth % YA 0.7 1.0 -1.8 8.0 -5.4 -3.5 -0.8 4.9 0.7 23.0 -9.1 -5.1 -23.3 -9.9 -8.4 1.7 -3.1 -42.4 -22.7
Tonnes 34,487 14,002 17,855 10,717 2,979 3,969 3,867 2,317 2,219 1,421 1,081 705 629 192 223 177 107 136 149
Tonnes Growth % Price YA ($/Kilo) -0.6 2.25 1.8 3.28 -4.4 2.37 7.1 3.13 -3.9 7.19 0.3 3.76 -1.2 3.77 4.7 5.19 3.0 3.90 24.7 3.28 -8.4 3.48 -5.1 3.13 -23.4 3.30 -11.9 7.88 -8.5 5.53 3.5 5.26 -3.2 8.45 -42.4 5.91 -20.9 4.27
MCKINNA et al Pty Ltd Strategic Insights
Figure 20: Segment snapshot MAT to 20/05/07
40 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
6.6
OVERALL ASSESSMENT
Overall the market prospects for vegetables do not present any cause for optimism. The total category is trending up in value terms but is relatively flat in volume terms.
MCKINNA et al Pty Ltd Strategic Insights
Value growth is being driven by the impact of the drought and the growth of value-added and convenience products and fresh-cuts which have a higher average selling price. In overall terms, per capita consumption and household penetration levels appear to be stagnant. The growth of private label at the expense of proprietary brands is having a depressing effect on value because of typically lower unit selling prices.
41 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
SECTION
7
INTERNATIONAL TRADE IN VEGETABLES
Trade Snapshot
• • • • • • • • •
Australia is losing its position in key export markets to lower cost competitors. Australia is increasingly facing competition from imports in the domestic market. Imports account now for 10% of apparent vegetable consumption. Australia is now a net importer of vegetables. 1% of fresh vegetables are imported (⇑ 15%). 32% of frozen vegetables are imported (⇑ 12%). 52% of canned vegetables are imported. 60% of Australian exports are fresh vegetables. Export opportunities lie in niche, differentiated and/or value-added vegetable products. Export opportunities lie in new markets with low trade barriers such as the Middle East.
Sources: Aztec Synovate, 2007; Roy Morgan, 2007
MCKINNA et al Pty Ltd Strategic Insights
•
42 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
7.1
AUSTRALIA’S POSITION IN GLOBAL VEGETABLE TRADE
The Australian vegetable industry is facing extreme competition in the global marketplace. Not only has its position in traditional global markets been eroded, producers are now facing competition from imports in the domestic market. Australia is now a net importer of vegetables (ABS, 2006). Figure 21: Australian vegetable trade 2002 - 2005
Spain, the Netherlands, China and Mexico are the biggest net exporters of vegetables in the world. Together they account for 64% of worldwide net vegetable exports. The Netherlands is the world’s leading vegetable exporter but is only the 28th largest vegetable producer.
MCKINNA et al Pty Ltd Strategic Insights
Source: ABS, 2006
43 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
Critically, Australia is no longer a key player in global vegetable trade. Australia is losing its position in key export markets to lower cost competitors. The following table, which shows Australia’s declining position in traditional Asian markets, is clear evidence of this. Figure 22: Australia’s exports to key Asian markets
Japan Singapore
Year to June 2002 ($ million) 45.5 34.0
Year to June 2005 ($ million) 36.3 19.7
Trend ⇑ or ⇓ ⇓ 24% ⇓ 72%
Malaysia South Korea Hong Kong Taiwan
49.0 7.5 15.0 11.0
15.9 7.3 6.8 4.9
⇓ 208% ⇓ 3% ⇓ 120% ⇓ 124%
Country
Source: AusVeg, 2006
Competition from fresh vegetable imports in the domestic market is currently negligible due to price, market access, and perishability barriers; however, this situation may change in the future. Imports of fresh vegetables typically fill a seasonal window of opportunity in the Australian market or supply categories where there is a gap in Australian production. It is estimated that around 99% of fresh vegetables sold through the major chains are Australian grown (ABARE, 2006B).
MCKINNA et al Pty Ltd Strategic Insights
In addition, Australia is increasingly facing competition from imports in the domestic market; imports now account for 10% of apparent vegetable consumption. In light of the strong competition from players such as New Zealand, China, South East Asia, South Africa and South American nations, and the relative cost disadvantage Australian producers face, this figure is likely to increase.
44 MARKETING PLAN FOR THE TASMANIAN VEGETABLE INDUSTRY VOLUME 5: INDUSTRY & CATEGORY ANALYSIS
The market share of imported product in various fresh vegetable lines sold in Australian supermarkets is provided below. Figure 23: Origin of fresh vegetables in Australian supermarkets Segment
Australian %
Imported %
Potatoes Tomatoes
100 >99
0
