Australian food and agriculture businesses are, if you excuse the pun, at a fork in the road.
Opportunities within Australia are limited, and companies must look to export markets for growth.
But these markets - particularly in Asia - are not straightforward.
Issues such as food fraud, changing consumer behaviours and rapid developments in technology have changed the playing field irrevocably.
And the challenges are complex: no single business or food category will solve them on their own.
Australian agribusinesses, which have a proud tradition of independent innovation and resilience, now more than ever need to collaborate.
They must work together to find sustainable ways to re-establish trust, satisfy the customer and protect brand Australia in a dynamic and competitive international marketplace.
Twenty years ago, trust wasn’t on the radar of business leaders. Today, it’s a radically different story: almost two-thirds of Australia’s CEOs are concerned about the lack of trust in business, up from 57% last year.
When it comes to food, however, trust is even more important. Tampering, substitution or contamination that leads to people being harmed can completely undo a company.
Australia is somewhat unique in that it enjoys a food supply chain that is largely safe, secure and reliable.
But in overseas markets – the ones we need to tap for growth – the situation is very different: the incidence of food fraud is high, and consumer trust is low.
In China, for example, there’s a vibrant market for second-hand milk powder tins and vitamin jars, which fraudsters fill with inferior goods and pass them off as genuine brands. Customers are alert to these sorts of issues and highly suspicious of their food.
Conditions exist in many developing markets which provide not just an opportunity and incentive to commit fraud of this kind, but also provide those individuals with what they believe to be a rational means to an end. Australian food exports must become wiser to these threats. Already, the cost of food fraud globally is estimated to be $50 billion.
It’s important that companies think about the issue of food fraud beyond just that of food safety, which is a minimum standard that won’t in and of itself guarantee success. Rather, think about whether you can keep all your promises about your product: where it was grown, how it was grown, who packaged it, the method of delivery from paddock to plate - essentially giving the end consumer any information about the truth of their food that they wish to know or never thought they could know. In today’s movement to a more open and distributed economy, with the trust vacuum we are grappling, it strikes us as being even more relevant now than ever before.
But trust is much broader than the question ‘is it safe to eat?’.
It’s fair to say that emerging markets like China and Indonesia want the kind of food that Australia can produce: clean, green and premium quality.
But there’s a lot more to meeting customer needs than delivering on these three attributes. The fact is that most Australian food producers could do more to understand their international customers and what exactly they want to eat. The tastes and habits of a middle-class family in Qingdao, a sub-provincial city in China with a population almost half that of Australia, and what’s popular in Beijing may be very different to what customers in the north-west of the country want. Then there’s Vietnam, Indonesia and Korea, all of which have regional variations as well.
To make matters more complicated, these preferences, driven by technology and trade, are continually changing. In fact, almost eight out of ten Australian CEOs say they’re concerned about the impact of changing consumer behaviour on their company’s growth prospects.
If agriculture exists to feed people what they want to eat, then Australian agribusinesses looking to be successful in these emerging markets need to overachieve in understanding customers better and in much more dynamic ways than our competitors.
It is encouraging to see that the number one activity Australian CEOs are planning in order to capitalise on new opportunities is customer experience, understanding customers is the first step, bolstering the customer experience is next.
It also means rethinking the ‘commodity mentality’ that is prevalent in agriculture. Australia is simply not a big enough player, globally, to win the high volume, low cost commodity game.
Even the grade differentials that producers think are special, such as premium grades of beef, grain and dairy, are less relevant today and no longer sufficient to ensure success.
Companies that don’t put the customer’s tummy - however fickle - at the heart of their business will risk losing their market share.
Caption: Can humans and machines work together to provide confidence to customers?
Technology is an important piece of the puzzle in tackling food fraud and protecting the efforts companies make to deliver the product that consumers want and expect.
From isotropic traceability to distributed trust ledgers to artificial intelligence and augmented reality, we now have the means to bring a much greater level of transparency and visibility to food supply chains and provide more confidence to customers all around the world.
For example, a distributor in China could use their mobile phone to scan a package of Australian meat and, using today’s technology, find out information about the farm it came from as well as how long it’s been in transit and the different parties that have handled the product.
Using augmented reality, a consumer in Singapore could wave their phone past a bottle of milk in a supermarket and see photos and data about the cows and the farm where it came from.
Australia has a strong track record of using technology to improve farm productivity as well as food quality and safety. But businesses need to take things to the next level to address issues such as food fraud, which are destroying trust in international markets and undermining the competitive advantages they work so hard to create.
The challenges facing Australian food and agriculture companies aiming to grow and succeed in international markets are by no means insurmountable. Other countries are overcoming them and we can too.
Our findings show the start of positive signs with Aust CEOs thinking about markets outside our borders, with 59 per cent naming an Asian country as their top offshore market.
But they are bigger than any one business or any one category to solve on their own. This means that businesses need to collaborate more to develop solutions that work for the sector as a whole.
The downside risks of failing to act are significant. First, Australia will lose (even more) control over the food we produce once it leaves our shores. Second, we may have to accept protocols and standards developed by others, including competitors.
State and Federal governments, as well as industry groups, are important and need to be part of the conversation: a coordinated, national approach is long overdue.
But business cannot or should not wait for this to happen. It’s in their interest to start working together now.
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