Overview of Australia’s dairy industry

Discus about the Financial Considerations for Health and Safety.

Food is a fundamental need of every human and it is essential part of our daily lives. It has an important role in terms of social and economic aspects. Preparing, and sharing of the food is a part of the family life, culture and the values of the society. Australia is a major food producer and the trading nation that exports 70% of the agricultural production. Food processing is the Australia’s largest manufacturing industry. It is the small producer of milk and the dairy industry is Australia’s third largest rural industry (Australian government, 2018). There are numerous segments of the food industry of Australia such as dairy, agricultural and fisheries, seafood and meat. The report discusses about their growth, challenges, and opportunities in the near future (Santacruz, 2016).

Australia produces a range of dairy products that include milk, milk powder, yoghurt, butter, and cheese. The dairy industry of Australia is situated in the southeast of Australia; Victoria is the largest production state. The dairy industry is highly dependent on the availability of water, and the industry employs around 42,100 people. The importance of the dairy industry of Australia has increased over years as it ranks third behind the beef and the meat industry. The dairy market is open to the trade with the other international markets, and is at the fourth position in terms of world dairy trade which represents the Australian dairy industry as one of the emerging industry.

 The dairy manufacturing sector of the Australian food industry is diverse, adapts to the climatic changes and operates at both the level i.e. private and the public (Soufiyan and Aghbashlo, 2017). Yogurts in the industry have shown the considerable growth over the past two decades. In addition, there has been a growth in imports for the purpose of local consumption (Silanikove and Koluman, 2015).

Although the Australian dairy industry is a large size organisation depicted a high growth rate and profitability over years, but there are certain barriers and drivers, which either progresses the growth or reduces the profits. The operations carried in the industry faced some barriers and distortions, these include unfair administered tariff quota, restriction to access. Along with the barriers, there are some drivers in the dairy industry that affects the performance, growth and the food safety in the industry. These drivers include the inputs, global demand, and supply, economy, Australian market and the exchange rates (Lower and Pollock, 2017).

Competitive environment and Porter’s Five Forces analysis

The chart and the diagrams below represent the Australia’s Dairy industry growth trend and the details about the export and the production. The next describing about the registered dairy farms, and these also represents the dairy industry as growing or emerging in the Australian market.  

(Source: Rayner, Tan, and Ward, 2008)

(Source: The Conversation, 2013)

Porter’s five forces is a framework that helps to identify and analyse the competitive environment of an industry or a market. The table brings out the analysis of the five forces describing about the scenario of the Australia’s dairy industry (Fern Fort University, 2018).

Factors	Notes
1.      Threat of New Entry	With the entrance of new firms in the tobacco, food, and beverage industry, the firms use new and innovative methods of production. This in turn puts the pressure on the Australian’s Dairy farms through lowering the price of the products. As the Australian milk product and dairy market is large, therefore there is always a threat of new companies launched in the industry. Hence, there are many barriers to their entry by the Australian government.
2.      Substitutes	As when a new product or a service fulfils the similar customer needs, the industry suffer in terms of profitability. The country faces the threat of substitute products as it accounts for 2% of the world’s dairy production. The customer’s preference for the “vegetable based substitutes” has been increased over time due to higher prices of dairy products. The substitutes can be frozen foods, ice creams, and milk. Therefore, the dairy industry can improve the situation by being service oriented rather than just product oriented.
3.      Competitive Rivalry	In the case when the rivalry among the existing players in an industry is high, it leads to decrease in prices and hence the overall profitability of the sector. The Australian dairy industry faces stiff competition at both the international and the national level.
4.      Bargaining power of suppliers	All the firms in the food and the dairy industry obtain raw materials from the suppliers, who being in a dominant position can affect the earnings of the company. The Australian Dairy industry maintains a healthy relation with their suppliers because of the high purchasing power. Hence, the bargaining power of suppliers in this industry is high as the famers are in a position to supply their items to the multiple buyers (Grindlay, 2014)
5.      Bargaining power of buyers	The milk processing companies and the dairy manufacturing sectors in the food industry, have considerably high bargaining powers due to the availability of large number of substitutes. The dairy industry of Australia can reduce the bargaining power of buyers by building a large customer base and introducing new products in the market (Dairy Australia, 2018).

Opportunities

Threats

·         Management of production risk, and there is an increased demand from Asian countries of their products and services. ·         There were growth opportunities in various products categories, and the domestic market growth is expected to rise gradually. ·         The dairy market is growing at a large pace, and the growth in this sector is  driven  by the change in dietary patterns. ·         In addition, there were introduction of dairy components in innovative food functional foods and other varieties. ·         There were expansions in other commercially viable market access opportunities. ·         The industry at Australia has been growing over time as it caters to the diverse needs and culture.

·         Despite the growth and significant role in the Australian’s economy, the dairy and the agriculture industry faced some challenges across the whole supply chain      (Department of Agriculture and Water resources, 2018). ·         Some of the challenges relate to the production sector, which means at the farm level, the production of milk is slow. ·         The key challenges at the farm level include the rebuilding of the national herd size, despite the fall in the numbers of cow. ·         To understand and analyse the implications of the new technologies on the Australia’s international cost competitiveness and profitability of the farm. ·         There are some technical challenges such as technical access barriers including bio-security and the competition from the non-dairy substitutes (Pwc, 2018).

The Australian dairy industry has been growing continuously and has reported huge profits and success since years. Australia has a well-earned reputation for producing natural and high-quality dairy products. Therefore, the industry has been assessed for the key challenges and opportunities to emerge as the most successful in future. For the purpose of gaining an awareness of the dairy products or farms in a better way, various aspects have been included in the assignment. Australia has a well-earned reputation for the production of natural and high-quality dairy products. Extensive products of the Australian dairy industry include specialised soft and hard cheese, wide variety of natural and fruit yoghurts, spreads, healthy dips, butter, cultured milk drinks and several others.

 The dairy products include, cheese, natural and fruit yogurt, healthy dips and spread, butter, cultured milk drinks and many others. The emerging sector or company in this industry has been as the Bega cheese company located in the town Bega, New South Wales, Australia. It was found as an agricultural cooperative owned by the dairy suppliers, but later on established as a public company after getting listed on Australia Securities Exchange. Bega Cheese is considered as the largest dairy companies in the Australia, with huge revenues. As cheese has consistently become the major product stream in this industry, therefore the main product of the Bega cheese company includes cheese, yogurt, spreads, grocery, and bio-nutrients. The company is dealing in the manufacturing or introducing a new product “ice-cream”. Bega Cheese limited has a long and unique history that started the beginning of stepping stones of success of the company. The name of the Bega stands for quality, and integrity and serves the Australian values. Ice-cream as a different product with the company to be introduced with the aim of catering the new emerging requirements of the people of the country. Going beyond the standard flavours of vanilla, chocolate, and strawberry, some other flavours also need to be introduced in order to be innovative. These new flavours will include cinnamon horchata, blueberry passion fruit, and chocolate mascarpone. Therefore, upbringing the production of a new product in the dairy industry will boost the sales and growth of the company ensuring long-term success.

The dairy industry at Australia should set priorities towards the improvement of export trade policies that will further bring opportunities and options for the Australian exporters. Moreover, the industry should encourage the employees and management to involve in the multilateral trade agreements with the WTO.

Conclusion

To conclude the above discussion, there is a growth and opportunities, in the dairy sector of the Australia food industry. Despite the strengths, weaknesses the industry has a wide popularity and operates at both the levels. It means both the public and the private sector governs the functioning of the firms. Among all the products, in the dairy industry yogurts have been considerably growing, yielding profits to the industry. Therefore, the industry should consider growth and other aspects, fulfilling consumer needs at a larger level by revising the methods of production, and overcoming the trade barriers.

References

Australian government (2018) Dairy Industry. [online] Available from: https://www.agriculture.gov.au/abares/research-topics/surveys/dairy [Accessed 31/07/18].

Dairy Australia (2018) Investment and the Australian Dairy Industry. [online] Available from: https://www.dairyaustralia.com.au/about-dairy-australia/about-the-industry/investment-and-the-australian-dairy-industry [Accessed 31/07/18].

Department of Agriculture and Water resources (2018) Dairy. [online] Available from: https://www.agriculture.gov.au/SiteCollectionDocuments/about/factsheets/dairy.pdf [Accessed 31/07/18].

Fern Fort University (2018) Australian Dairy farms Group Porter Five Forces Analysis. [online] Available from: https://fernfortuniversity.com/term-papers/porter5/asx/632-australian-dairy-farms-group.php [Accessed 31/07/18].

Grindlay, D. (2014) Dairy farmers read up on collective bargaining as power dynamic between suppliers and buyers shifts. [online] Available from: https://www.abc.net.au/news/rural/2014-11-24/dairy-farmers-armed-with-new-guidebook-to-negotiate-fair-milk-p/5914284 [Accessed 31/07/18].

Lower, T. and Pollock, K. (2017) Financial considerations for health and safety in the Australian dairy industry. Journal of agromedicine, 22(2), pp. 131-139.

Pwc (2018) The Australian Dairy Industry: The Basics [online] Available from: https://www.pwc.com.au/industry/agribusiness/assets/australian-dairy-industry-nov11.pdf [Accessed 31/07/18].

Rayner, V., Tan, N., and Ward, N. (2010). Trends in farm sector output and exports. Retrieved from: https://www.rba.gov.au/publications/bulletin/2010/dec/1.html

Santacruz, S. (2016) Food Industry Sectors in Australia. [online] Available from: https://www.foodsafety.com.au/resources/articles/food-industry-sectors-in-australia [Accessed 31/07/18].

Silanikove, N. and Koluman, N. (2015) Impact of climate change on the dairy industry in temperate zones: predications on the overall negative impact and on the positive role of dairy goats in adaptation to earth warming. Small Ruminant Research, 123(1), pp. 27-34.

Soufiyan, M.M. and  Aghbashlo, M. (2017) Application of exergy analysis to the dairy industry: A case study of yogurt drink production plant. Food and Bioproducts Processing, 101, pp. 118-131.

The Conversation. (2013). Cooperation versus Investor Returns- the future of Dairy farming in Australia. Retrieved from: https://theconversation.com/cooperation-versus-investor-returns-the-future-of-dairy-farming-in-australia-20679