June 2017

DISRUPTION – A CLICHE?

Yes, the word ‘disruption’ is used widely these days but that’s because change is all around us. The challenge is to be aware and be looking around for opportunities and threats. A range of actual and predicted disruption is below;

  • The energy company AGL reports that for them, disruption started in 1860, yes, 1860. The company was formed in 1837 to provide gas lighting to Sydney. The first gas lights were installed by 1841. Yet, within 19 years, in 1860, Brisbane had electric lights.
  • The ANZ Bank has appointed the former CEO of Google Australia as its Director of Digital Banking. She claims that within a few years only two of our ‘big four’ banks will survive and the gap will be filled by companies such as Apple and one or two of the new ‘fintech’ companies.
  • If the above comes to pass, Australia may be in trouble. Our biggest six companies are our big four banks, Rio Tinto and BHP Billington. All well established, in traditional industries. In the US, their top six are Apple, Amazon, Google, Microsoft, Facebook and Berkshire Hathaway. All are new and five are technology companies.   
  • Drones are now so common that at the start of the main Cradle Mountain walk in Tasmania there is a big sign saying ‘no drones please’. Oh, and Islamic State is using drones for observation.
  • A report in The Weekend Australian of 18-19 of February 2017 stated that Nestle, Procter and Gamble, Kraft, Heinz and Unilever were all having problems in coping with changing consumer trends and have falling sales.   
  • Bega will acquire Vegemite, ZOOSh mayonnaise and Bonox under the deal to buy most of Mondelez International’s Australia and New Zealand grocery and cheese business.    In addition to Vegemite and the other brands being undeniably iconic,  Bega are taking on very impressive people who will play an important role in growing the merged business. Bega will also get the right to use the Kraft brand under licence for products including peanut butter, nut spreads, processed cheese slices, parmesan and others, as well as Mondelez’s Port Melbourne site.
  • Coca Cola says it will move to be a ‘total beverage’ company, adding new products.    At the same time, reports say that its new Coke Life, with Stevia, has not been successful.
  • The retreat of the global company, p36, Australian Financial Review 3 February 2017.   An article from The Economist suggests that multinationals are seeing their profits shrink as a more fragmented and parochial capitalism takes hold.   The vision in the 1960s was that global companies run by global managers and globally owned would be the future, eg KFC, MacDonald’s.    However, both firms are seeing much slower growth as the world seems to be losing its taste for global businesses.    Companies such as Shell, Coca Cola and Unilever have been multinational for a long time but were often run as loose federations of national businesses.   The article says the global, vertically integrated firm is in retreat.    
  • Amazon has led to major falls in the value of US retail chains, eg Sears, from $27.8B to $1.1B, Macy’s, $24.2B to $11.0 and Borders had nearly 700 bookshops before they closed  in 2010, while the value of Amazon has grown from $17.5B to $355.9B

 

CHANGING FACE OF RETAIL

A US consultant writing for LinkedIn in April 2017 profiled the decline in retail operations in the USA, due to;

  • A major overinvestment in retail space.   He pointed out that the US has six times the retail area per person than Europe and Japan.
  • People are generally buying fewer goods.
  • People are spending more in restaurants.   In 2016, US citizens spent more at restaurants than grocery stores.
  • People are spending much more on travel.
  • Mall visits declined 50% over the decade.  Hundreds of shopping malls are being demolished.
  • Online shopping is rapidly becoming easier and safer.
  • Since October 2016, 89 000 people lost jobs in retail, more than employed in the whole US coal industry.

The Australian Financial Review of April 13-17 had an article on Amazon and Australia.   The debate continues on whether Amazon will be successful in Australia.    However, they have taken out 250 trademarks covering 30 classes of goods and services.     It is suggested that our retail sector will face a major new competitor, based on Amazon’s motto, ‘your margin is our opportunity’.     

On 28 April, News Corp had an article on Amazon coming to Australia, which quoted a former Amazon employee as saying that Amazon is actively searching for a large distribution and fulfilment centre in Australia, the first step to launching services here such as Amazon MarketPlace, Amazon Prime Now and eventually Amazon Pantry and Amazon Fresh.

Amazon does of course offer to small companies to sell their products.

New food products for Amazon style mail order products, even with Amazon’s famed rapid delivery, will presumably need to have good shelf life and special packaging.

FoodStream can assist with product and process development for such products.     Contact us on foodstream@foodstream.com.au.

CASE STUDY

In 2012, FoodStream Designed, Built and Commissioned a vegetable drying system for an Australian food company.

In 2017, FoodStream were asked to upgrade the system to provide for safer operation.     Further information follows.

FoodStream Engineers go to Great Heights and into Confined Spaces to Improve Safety

FoodStream were asked to upgrade a vegetable drying system to provide for safer operation. Additional items supplied were, access ports and hatches, a spark arrestor after the burner, an additional level of “light weight” access platforms with hinge up stairs and overhead safety harness attachment points. Also a cyclone separation system to collect any fines discharged from the dryer exhaust stream was designed and supplied by Sigrist Design (www.sigristdesign.com.au)  

The engineering design used 3-D modelling techniques, with manufacture spread across different fabricators to take advantage of their specialty facilities and to assist on-time delivery.  The parts were locally manufactured – Brisbane fabricators Precision Stainless Systems (www.precisionstainless.com.au) and Langford Metal Industries (www.langfordmetal.com.au) both played key roles in the project.  The Precision Stainless Team Carried out the site installation. All of the team needed to have competency for safe working at heights and confined spaces to carry out the installation.

FoodStream engineers worked closely with the combined team to deliver the solutions and continued on-site supervision in regional Australia during the 2017 drying season start-up.

To discuss how FoodStream Engineering can assist with Factory Design, Manufacture, Installation, Commissioning, Safety and Drying Technologies, use the contact form and we will contact you, or contact David Lewis- Phone +61 402054575 email: dlewis@foodstream.com.au

 

NEW FOOD R&D INFRASTRUCTURE

A new Cooperative Research Centre, the Food Agility CRC, has just been funded,     It has received funding of $50 million over 10 years matched with almost $162 million in cash and in-kind participant contributions to help Australia’s food industry grow its comparative advantage through digital transformation. It will develop ways of applying the agile culture and processes of the digital economy along the whole value chain for fresh and processed food.   See http://www.foodagility.com/.   

The University of Queensland has just launched its Food Science Innovation Precinct. It will give students access to world-class training, innovations and facilities, and will ultimately help food companies create more innovative products.   The Food Science Innovation Precinct has two state-of-the-art laboratories – a food-grade laboratory and an analytical laboratory for chemical and microbiological analysis.  See http://www.uq.edu.au/agriculture/uq-serves-up-new-food-science-innovation-precinct-168952.

More will be provided on both of these facilities as it becomes available.  

As useful as both of these facilities will be, there are many articles on innovation which stress that identifying the customer need is the key, not the technology involved.    At the same time, technology can open new ways of meeting an identified customer need.  

FoodStream can assist with thinking your way through this complex process.
Contact us on foodstream@foodstream.com.au.

2017 AUSTRALIAN GOVERNMENT BUDGET

While the budget had little new funding for the food industry and innovation, funding for major recent announcements on the food industry growth centre (https://fial.com.au/) and the comprehensive National Science and Innovation Strategy (https://www.innovation.gov.au/page/agenda) have been maintained.

Both these programs have an email newsletter and subscribers would find it useful to register for regular updates on assistance and any deadlines for applications.

FoodStream can assist with applications for assistance, contact us on foodstream@foodstream.com.au.

Issues which may be of interest include:

  • Asset write offs for businesses with a turnover of less than $10M.
  • Regulatory reform.
  • 457 visas.
  • R&D rebate savings
  • ‘One stop shop’ for free and fast dispute solutions

A number of tax changes for start-up companies have been implemented thus year.    As usual, with all and any legal, tax and financial issues, obtaining appropriate professional advice is essential.

A summary of infrastructure, farm and rural aspects of the budget follows:

Asset write-off extended

Small business owners with a turnover of less than $10M will be allowed an upfront tax deduction of up to $20 000.   

Regulatory Reform

A $300M program will assist the states to cut red tape through a national partnership on regulatory reform.

457 visas

Businesses that use foreign workers will have to pay a levy per worker into a Skilling Australia Fund.

  • Businesses with a turnover less than $10M pa will have to pay $1 200 per worker per year and
  • Those with a turnover of greater than $10M pa will pay $1 800 pa.

The aim is to train 300 000 Australians so that foreign workers will not be required.  

At the same time, the cost per 457 visa will increase from $1060 to $2400 and 200 occupations have been removed from the eligibility list.

Nothing has been seen about 451 visas, mainly aimed at backpackers etc.

R&D rebate savings

Savings of $1B over three years are planned via tightened regulations.

‘One stop shop’ for free and fast dispute solutions

A single industry funded body will give consumers access to fast, free binding dispute resolution on financial issues.

An Australian Financial Complaints Authority will be set up.  This will address consumer and small business financial complaints.  

This is in response to the Ramsay Review of the dispute resolution and complaints framework and legislation is planned by 1 July 2018.

Building The North with Almost $7b in Major Infrastructure

This infrastructure includes:

  • $5B in concessional loans for the Northern Australia Infrastructure Facility.
  • $600M for the Northern Australia Roads Program.
  • $200 for defence capability for the NT.
  • $170M in water projects, which includes
    • $130M for the Rookwood weir near Rockhampton.
    • $40M for 17 feasibility studies in WA, NT, Qld
  • $147M for the Townsville Eastern Access Rail Corridor.
  • $100M for the Beef Roads Program.
  • $100M for the Townsville stadium.
  • $75M for the CRC for Northern Australia.
  • $208M Cape York Road

$100m manufacturing package

This is aimed at Victoria and SA to assist with adjustment to the closure of car manufacturing.

New investment in advanced manufacturing and research infrastructure

Again, this is aimed at Victoria and SA to assist with adjustment to the closure of car manufacturing and on research infrastructure for astronomy.

Fund to help businesses and researchers go global

There are $280,000 in Priming Grants under the Global Connections Fund to enable 23 Australian researchers and 17 Australian small-to-medium enterprises (SMEs) to meet and collaborate with international partners to further develop their ideas.

Linking Australian SMEs with international researchers and also Australian researchers with SMEs internationally helps build industry-researcher engagement enabling broader exchange of ideas, access to world-class expertise, infrastructure and the global market.

The funding announced will support quite diverse projects, ranging from research into new methods of detecting throat cancers to helping develop overseas markets for new turf varieties and new solar energy and energy solutions.

The Turnbull Government established the Global Connections Fund, a component of the Global Innovation Strategy, because industry and researchers need mechanisms to be responsive and act quickly when opportunities for collaboration arise.

The fund has $4.9 million over four years to support joint work between Australian researchers and SMEs with global partners through two components, Priming Grants and Bridging Grants.

Priming grants are small grants of around $7,000 to enable Australian SMEs and Australia researchers to physically meet with their international partners and develop their collaborative ideas. Bridging grants are larger follow-on grants (up to $50,000).

The Global Connections Fund is administered by the Academy of Technology and Engineering (ATSE).

ATSE has called for Round 2 applications under the Bridging Grants initiative.

More information about the Global Connections Fund is available at: https://globalconnectionsfund.org.au/priming-grants

 

Growing Australia’s Agriculture

Key initiatives include;

  • A $4B Regional Investment Corporation, to streamline the $2B concessional loans program for farmers experiencing hardship and manage the $2B National Water Infrastructure Loan program.
  • Extending Landcare by $1B
  • Expanding concessional loans to farmers coming off the Farm Household Allowance.
  • $8M for water infrastructure in the Great Artesian Basin, especially capping bores and laying pipes to stop evaporation, as up to 95% of water had been wasted.

The above are in addition to the measures in response to the Agriculture White Paper.

Investing in Growth for our Regions

An investment of $75B in infrastructure is proposed, between 2017-18 to 2026-27.  This is a mix of road, rail, airport and water infrastructure.   This includes the:

  • Melbourne to Brisbane rail, for $8.4B
  • $500M for rail upgrades for Victoria.
  • Roads to Recovery, $4.4B
  • Black Spot program, $685M
  • $4B Regional Investment Corporation, to streamline the $2B concessional loans program for farmers experiencing hardship and manage the $2B National Water Infrastructure Loan program.
  • National Water Infrastructure Development Fund, $500M
  • National Water Infrastructure Loan Facility, $2B
  • Regional Growth Fund, $200M to support projects across rural, regional and remote Australia
  • A $272M fund to drive major transformational projects of more than $10M to unlock opportunity and potential in the regions.
  • Stronger Communities Program, to support small capital projects in local communities.
  • Regional Jobs and Investment Package, $220m over four years to diversify regional economies, stimulate economic growth and deliver sustainable employment in ten regions.
  • Resumed the indexation of Financial Assistance Grants to councils with an extra $836M over four years.
  • Mobile Black Spot program for telecommunications, having provided 140 new base stations to date with 250 to be live by 30 June 2017.
  • Regional NBN rollout already 75% completed or under construction with the Sky Muster II satellite live and the fixed wireless rollout to be completed by the end of 2018.

TWO IMPORTANT REGULATORY CHANGES

New Country of Origin Labelling starts on 1 July 2018 and mandatory allergen labelling are current issues.   

For information of the Country of Origin labelling see http://www.foodlabels.industry.gov.au/.  

Food Standards Australia New Zealand (www.foodstandards.gov.au) has released the following:

Food Standards Australia New Zealand (FSANZ) announced a month-long campaign aimed at reminding food businesses about the need to get allergen labelling right.  

FSANZ Acting Chief Executive Officer Peter May said the campaign was timed to coincide with Australia’s Food Allergy Week (May 14‒20). 

“Food businesses in Australia and New Zealand need to be across the mandatory allergen labelling requirements in the Australia New Zealand Food Standards Code,” Mr May said. 

“Correct allergen labelling can mean the difference between life and death for people with food allergies so it is vital that food businesses meet labelling requirements.  

“There are currently nine foods which must be declared whenever they are present as ingredients or as components of food additives or processing aids. Lupins are expected to be added to the list this month. 

A subscription service is available on request from FSANZ.   

FoodStream Associate Jacinta Sexton can provide expert advice here, see http://www.jayfoodconsulting.com.au/.  

TRAINING NEWS

We have just completed our latest series of courses in Norway – with excellent feedback from participants.  For the first few days it snowed on us again, then cleared to beautiful (if cold by Australian standards) spring weather. Our European courses commenced with “Aquafeed Extrusion” in 2015.  We added “Food & Feed Drying” to the program in 2016.  This year we presented three courses, adding “Petfood Extrusion”.  And while numbers for the Petfood course were limited, we have agreed to build on it next year – all three courses planned for the same time in 2018.

And a further addition to our European program is the “Food Extrusion Technology” program at Hes-So (University of Western Switzerland) in Sion, Switzerland in September.  If you have relevant contacts in Europe, please tell them about our courses (or come yourself – Sion is in a beautiful part of Switzerland, and Norway is good to visit too!)

Of course we have programs running in Australia and Thailand too. The courses are organised through Food Industry Engineering (FiE) – www.fie.com.au/events. Direct links to coming programs:

Advance notice for next year:

 

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