The Australian Food and Grocery Council (AFCG) is calling on state and federal governments to relieve financial pressure as energy costs are set to soar by almost 300 per cent in 2023.
The peak body representing businesses that manufacture essential food and grocery items for the domestic and international markets, The AFCG said the massive jump in gas and electricity prices combined with residual COVID-19 impacts, regional flooding and the war in Ukraine could spell disaster for its members.
Tanya Barden, CEO of AFCG, said it’s time to take action and cap soaring energy prices before it’s too late for many businesses.
“The vast majority of food and grocery manufacturers purchase gas on the retail market rather than the wholesale market and so consideration must be given to making the code of conduct governing gas supply agreements mandatory and extending it, along with price caps, to cover retail pricing.
“While wholesale price caps are important, manufacturers are exposed to retail pricing and they are incurring huge increases in the cost of gas that undermine the long-term future of Australia’s largest manufacturing industry,” she said.
Theo Foukkare, CEO of the Australian Association of Convenience Stores (AACS), said the outlook is similarly bleak from a retail point of view.
“Soaring energy prices are continuing to affect the broader retail industry, especially in the petrol and convenience space.
“I’m talking to members large and small regularly, and they are advising me that their energy bills are increasing by as much as 100 per cent this year, and forecast to continue growing in 2023,” he said.
Moving into 2023, Foukkare says it’s unsustainable for retailers to keep absorbing the rise in operational costs. He said, unfortunately, consumers will eventually have to bear some of these increases.
“Support from state and federal governments is critical to assist in keeping inflation down and bring stability and confidence back,” he said.
Michael Perich, CEO of major Australian food and beverage processor Noumi, which employs almost 600 people and makes popular products including Milklab and Australia’s Own, said intervention is needed to avoid passing increased costs onto consumers.
“We are currently facing an unprecedented and unsustainable four-fold increase in our contracted gas prices,” he said. “It’s no exaggeration to describe this as a national energy crisis.”
Mr Perich said without help Australian manufacturers won’t be able to compete in Asian markets, where energy prices have not risen as sharply.
“The energy crisis is making Australian food processors uncompetitive in international markets,” he said.
Steve Nicholson, Director and acting CEO, ANZ, of The Sorbent Paper Company, expressed a similar sentiment regarding Sorbent’s Melbourne-based operations.
“The Sorbent range of tissue products are all manufactured locally and we are very concerned about the impact of energy costs.
“Our gas costs will increase by 300 per cent in 2023 and with forecast electricity costs looking to increase by similar amount in 2024, this will place an enormous cost strain for commercially viable local production,” said Nicholson.
Barden said food and grocery manufacturing is Australia’s biggest manufacturing sector and a significant contributor to the national economy and regional employment.
“These businesses have sustained Australia and kept supermarket shelves full throughout the disruption and cost increases resulting from the COVID-19 pandemic, natural disasters and the war in Ukraine.
“We know from the federal budget that gas prices are forecast to continue rising by 20 per cent a year over the next two years and for businesses already under immense pressure, such increases are unsustainable,” she said.