Chocolate pricing

Mondelez boss calls for a more coordinated approach to making manufacturing a priority

If food manufacturing is the national priority, many say, a coordinated approach across jurisdictions, policies and incentives must be developed, says Mondelez International ANZ/Japan President Darren O’Brien.

speaking to The Australian World Food Forum, O’Brien said the impact of Covid on the supply chain had had a ripple effect around the world and opened people’s eyes to the importance of sovereign capacity .

The war in Ukraine, inflationary pressures and food shortages are putting immense pressure on the manufacturing sector.

Inflationary pressures

“We heard Steven Cain [Coles Group CEO] talk about price pressures resulting from food inflation, but we haven’t even begun to see what the potential pressures will be on the demand side.

“The latest inflation numbers we’ve seen – 5.1% – I suspect we’ll see that push into the double digits over the next two quarters. If the Reserve Bank continues to pursue its 2-3% range for inflation — and using interest rates is a very blunt way to deal with that — you’ll put the brakes on the economy,” O’Brien said.

The dominoes fall from there, with additional price pressures affecting demand, which then impacts job flow on demand effects

He said one of the things that will affect demand is increased price pressure, which is beginning to impact jobs, exacerbating skills shortages, labor shortages and workforce planning. workforce.

O’Brien spoke of the lack of policies and incentives to address labor and skills shortages in the agricultural sector, giving the example of the dairy farmers Mondelez works with in Tasmania to produce Cadbury chocolate.

“There are 46 dairy farmers in Tasmania supplying 130 million liters of milk a year for Cadbury chocolate. Their average age is 70,” he said.

“If we want to be a very successful food bowl domestically and for export, we also need to make sure we have people who are willing and incentivized to work in the agricultural sector.”

Is food manufacturing the priority we say it is?

In terms of food manufacturing, he said, while there is a lot of talk about its importance, one has to wonder if it is a priority; pointing out that there is a federal minister for agriculture, but not a minister for the food industry. Instead, it is filtered into many areas, including health and the environment, and then state jurisdictions must be considered.

“If you’re a company trying to take an end-to-end view, from farm to customer, you look at every element required. We don’t do that from an Australian food manufacturing perspective.

“We have ideas, many of them well-intentioned, policies floating around, whether on the manufacturing side or potentially agriculture or other incentives, but there is no coordinated approach. There is no end-to-end view,” he said.

He gave the example of CO2 emissions strategies. “It’s seen as an energy policy, no one is looking at it in terms of the wider implications and what it means for food manufacturing.”

Labeling requirements are an example of the difficulty of making food in Australia, he added.

“Allergen labeling requirements are expected to be in place by mid-2024, and there are currently discussions around sugar labelling.

“We have recycled labeling requirements for red cycle and other things on packaging, and then there’s a health star rating system from state governments.

“We have about a thousand SKUs in our business. Every time we touch a package, it costs us on average about $5,000. Thus, the change of each package costs 5 million dollars.

“If you have to do it five times because none of these different labeling strategies have been linked, or even looked at how to coordinate them or reduce costs, that’s $25 million, and we’re a single company.

“Now it’s $25 million that could otherwise be invested in modern manufacturing, investments, plant equipment, innovation, advertising.

“That’s what we have to look at.

“We need to stop talking about prioritizing food manufacturing suppliers and actually say, what does it take to win? What are policy settings? What is the end-to-end vision we need to have and how do we ensure that many well-meaning individual policies or frameworks can be brought together to provide an effective mechanism for us to grow, be efficient and sustainable?”

O’Brien said he was optimistic about the sector, having proven its resilience during the pandemic. Now is the time to capitalize on what has been learned.