As the ‘country of origin’ labelling bandwagon hits the Hume Highway this week, everyone seems to have overlooked the underlying fundamental that has brought this issue to the forefront. Although the talk back callers around the nation’s airwaves would all like to blame the woes of our farmers on supermarkets or multinationals, the fact of the matter is that many of Australia’s agri-food industries have failed to remain competitive in what is now a global food arena.
There is a lot of sympathy out there for farmers. There has always been an act of faith that Australian food producers are amongst the most modern and efficient in the world. Despite declining exports, the farming community itself has taken further comfort in the belief that Australian produce is highly sought after because of the magical ‘clean and green’ factor. The great misconception is that produce from our sunny, unpolluted shores is cleaner and greener than everyone else’s and this differentiator is what sets us apart from the rest of the world – hence the country of origin labelling argument.
The reality is, that for the past five years, Australia has become increasingly less competitive in global food markets in the face of emerging competition from the likes of New Zealand, South Africa, South America and China. Australia used to be a dominant player in markets such as South East Asia and Europe; now we are conspicuous by our absence. The next inevitability is that agri-food companies in some sectors will struggle to defend their position in the domestic market as well. What we are seeing the Tasmania farmers fighting is just the beginning of this onslaught.
Farmers are incredulous about what is happening to them. For a long time it has become accepted in agricultural folklore that our ‘clean and green’ image is a point of competitive advantage and the key reason we succeed in global food markets. Every sulphur-crested cockatoo, on every power line in rural Australia, is screeching out “clean and green”. The reason this all comes as such a shock to farmers, is that the myth is perpetuated by governments. Most Federal and State food policies/strategies have Australia’s clean and green credentials as a central platform.
The belief prevails that Australia’s clean and green credentials will be enough to defend us in the highly competitive global food sector. But ‘clean and green’ is not a source of competitive advantage and it certainly does not give us leverage to command a price premium sufficient to absorb our significant cost disadvantage. In labour intensive food categories, Australia will never compete on price against new era competitors such as China and South Africa. Australia can only compete with differentiated and value added products. No matter how emotive the argument, when it comes to the crunch, consumers will not pay substantially more for ‘clean and green’ or ‘Australian’. What they will pay a premium for is a tangible point of difference such ‘sweeter flavour’ or other unique attributes. Each day Australia is losing market share because our product does not have a sufficient point of difference – ‘clean and green’ is not that point of difference!
Australia’s clean and green argument is fundamentally flawed on number of grounds. Firstly, the notion of clean and green predominantly relates to food safety and product integrity. Whilst consumers pay lip service to environmental sustainability, animal welfare and bio-ethics, overwhelmingly they buy food on quality and perceived value for money. They expect that their respective governments will ensure that the food on supermarket shelves will be safe and ethically produced.
Secondly, clean and green (read food safety) is now an essential ‘given’ in global trade. Predominantly, food around the world is sold through global supermarkets, which demand very high standards in terms of product safety and integrity. This is largely driven by fear of litigation and the threat of damage to their brands. The internationally accepted standards include Eurepgap, ISO, HACCP, SQF and versions of these. The standards required are essentially world’s best practice.
Increasingly, Eurepgap is emerging as the global standard and in time, is likely to become the universal scheme. Significantly, comparatively few Australian food companies are Eurepgap accredited, so if anything, we trail behind the rest of the world in terms of best practice and global compliance.
The third point, that is hardest to swallow, is that Australia is no cleaner and greener than anyone else. Whilst there is no doubt that Australia does have very good clean and green credentials, in a practical sense, these are no better than our competitors. Certainly there are valid claims that product coming out of China and other developing nations is of a lesser standard because of inadequate scrutiny over use of chemicals, water quality, etc. However, this food does not find its way into global supermarkets and will progressively recede as the new generation of university educated Chinese farmers improve practices.
While Australia persists in resting on its clean and green laurels we are falling behind in international standards and losing market share to the up and coming competitors who are giving consumers cheaper, differentiated products that meet their needs and preferences and are supported with effective and well funded marketing programs. Government has an obligation to provide a reality check to the food industry in Australia and expose the clean and green myth.
The Australian food industry has great potential to succeed in a highly competitive global market because of seasonal and geographic advantages. To do this, it needs to concentrate on finding true points of competitive advantage, of which there are many. The faster we dispel the ‘clean and green’ myth, the quicker we can focus on the real reasons for Australia’s declining global competitiveness in food.
 This article was previously published in the Financial Review Opinion Pages