Stable retailing and fierce competition of fresh produce in Australia

Despite rising national fruit and vegetable consumption, industry retailers have faced difficult trading conditions over the past five years. The fierce price competition from the major Australian retail chains has constrained industry revenue growth over the period. However, rising demand for higher value products, such as organics has provided some support for industry operators. Industry revenue is expected to slightly decline about 0,8% annually over the last five years through to $4.5 billion in 2024. This trend includes an expected drop of 2.7% last year. Recent declines have been driven by ballooning cost-of-living pressures that have seen consumers, particularly those in lower income brackets, curtail spending on premium products.

Higher purchase costs

Industry purchase costs have increased over the past five years, as fruit and vegetable prices at the farmgate level have risen. In particular, bushfires and the COVID-19 pandemic disrupted harvests in 2019-20, while Hurricane Niran damaged farmlands in March 2021, which caused fruit and vegetable prices to jump. Rising competition from the supermarkets and grocery stores industry has limited industry operators' ability to pass on cost increases to consumers in full, which has reduced industry profitability over the past decade. Many operators have become unprofitable and exited the industry over the period, causing industry enterprise numbers to decline. Cost of living pressures are projected to suppress growth in consumption of fruit and vegetables, limiting industry revenue growth.

Coles and Woolworths expand offering

Meanwhile, pressure from the major supermarkets is forecast to remain intense, particularly as Woolworths and Coles continue expanding their range of organic and premium fruit and vegetable options. Industry profitability is likely to fall further over the next five years, with many underperforming companies projected to leave the industry. Overall, industry revenue is forecasted to rise a: IFPA Australia.

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