Due to client demand we have been taking a closer look at the Australian market and found some great business opportunities for food and drink brands there. The economy is strong and health and wellness play a major role in consumer habits. As such innovative food and drink companies may find huge potential in the market. Thanks to our collaborator Jayne for providing us with the content for this blog and the photos! Read on if you want to know more about this market place and the opportunities for your brand there….
The Australian Retail Market
The Australian economy is strong and growing and the market presents an excellent opportunity for UK exporters. The value of food and alcohol retailing in Australia grew by 3% in 2017 to reach £71 billion.
The retail sector is dominated by 4 main retailers:
Woolworths, Coles, Metcash and Aldi, which account for 80% of the market.
In 2017 Woolworth’s regained the crown as market leader from Coles for the first time in over 7 years. Metcash is the country’s largest grocery wholesaler and its retail brands include IGA, Supa IGA (supermarkets), and IGA Express (convenience stores).
Aldi is expanding rapidly with 500 stores and broadening its appeal to attract more affluent consumers. According to IRI, 68% of Australian households now shop at Aldi, up from 56% in 2015. This figure is nearing 75% across Australian’s eastern seaboard states. However, Aldi shoppers allocate only 20% of spend to Aldi and 35% to Woolworths and 29% to Coles.
The entrance of Aldi as well as Costco has made the market more competitive and with the added pressure of the forthcoming launches of Amazon and Kaufland, market leaders are reviewing their offering with a particular focus on private label, fresh, convenience formats and online shopping.
The online offering is still playing catch up compared to the UK but is becoming more prominent with Coles Online recording double digit growth in the past year.
How about Private label in Australia?
There has also been a shift in Private label. This sector is still relatively underdeveloped in Australia but “copycat” and “venture” brands have become more prominent and economy sub-brands with the retailer’s name are being phased out. More premium and specialist brands are also being developed as well as mid-tier private labels.
The Independent sector is also significant with the Metcash supported IGA retail banner as well as strong regional players such as Drakes (SA and Queensland) and Harris Farms (NSW).
Department store David Jones has also been revamping its premium foodhalls and has announced plans to roll out standalone foodstores over the next few years, the first being in Melbourne this year. Private label is also key focus.
Current and arising trends in the market
Consumers born overseas are driving retail growth. Australia’s high immigration rate means that retailers have to constantly review ranges to meet consumer demand for specific demographics. Also, an aging population offers huge potential for FMCG marketeers.
Health, wellness, and the environment continue to be major focuses among Australian consumers and as a result the healthy eating and free from categories are booming as is sports nutrition.
Traditional snack categories such as confectionery, sweet biscuits and snack bars are set to record modest growth, with consumers instead embracing other packaged foods as a healthy on-the-go snack.
In line with increasing concerns about health and wellness, consumers are seeking better quality and healthier ingredients in their packaged food products, with snacking products being no exception. There are also adopting “flexitarian” lifestyles where they are consciously choosing to have less meat in their diets with “meat free” days and are seeking alternative sources of protein. Changing lifestyle trends and a steady rise in average incomes in Australia have also driven demand for fish and seafood, offering a premium alternative to meat as a rich protein source. This said, convenience continues to be a main driver for many consumers leading them to look to packaged food. This has constrained growth of fresh food especially as consumers looking for meat alternatives are buying meat substitutes, tracked under packaged food.
Health and wellness also remains a key issue defining the soft drinks industry in Australia. While all major manufacturers offer low and sugar-free drinks to alleviate these concerns, many consumers remain concerned about the safety of artificial sweeteners so products with natural sweeteners are seeing significant growth.
We find potential opportunities especially for
- Free From products
- Vegan products
- Organic, healthy and natural products
- Alternative sources of protein
- Snacking products in particular healthy options
- Premium soft drinks
- Premium spirits
Considerations and Doing Business in Australia
Australia is a significant producer of a wide variety of agricultural products and buying local is on the rise. There is a real focus on “Made/Grown in Australia” labelling and marketing therefore needs to be a strong USP for imported products. Portion sizes are increasingly important too as consumers want quality over quantity and they expect packaging to be informative and environmentally responsible. There is also the need to offer innovative food products to break into what is a highly competitive retail food sector as most categories already have substantial market leaders.
Logistics and distribution are key factors due to the enormous scale of the country. The climatic and industrial environment varies as do market conditions, particularly between States. A good partner with national coverage is therefore vital in order to maximise sales. Many Australian companies are now attempting to provide a nationwide distribution network, either with interstate warehousing and distribution or by alliance with other distributors. There are also strict quarantine regulations with regard to fresh produce, meat and dairy products so it is key for all parties to understand the relevant procedures and requirements.
The commercial environment in Australia is regarded as exceptionally friendly and an attractive place to do business. Australian’s are open to giving new products and ideas a try. Apart from a very strict quarantine regime it offers few barriers to entry, a familiar legal and corporate framework, and a sophisticated yet straightforward business culture.
Want us to carry out an in depth analysis of your category and the market opportunities for you in Australia? Contact us here.
Here’s what is on shelves at the moment in Australia: