Understanding Food Markets Outside Retail

Understanding Food Markets Outside Retail Part 1: What is? By Steve Spencer

Understanding Food Markets Outside Retail Part 1: What is? by Steve Spencer December 2016 RIRDC Publication No 16/040 RIRDC Project No PRJ-010142

2016 Rural Industries Research and Development Corporation. All rights reserved. ISBN 978-1-74254-886-9 Understanding Food Markets Outside Retail. Part 1: What is? Publication No. 16/040 Project No. PRJ-010142 The information contained in this publication is intended for general use to assist public knowledge and discussion and to help improve the development of sustainable regions. You must not rely on any information contained in this publication without taking specialist advice relevant to your particular circumstances. While reasonable care has been taken in preparing this publication to ensure that information is true and correct, the Commonwealth of Australia gives no assurance as to the accuracy of any information in this publication. The Commonwealth of Australia, the Rural Industries Research and Development Corporation (RIRDC), the authors or contributors expressly disclaim, to the maximum extent permitted by law, all responsibility and liability to any person, arising directly or indirectly from any act or omission, or for any consequences of any such act or omission, made in reliance on the contents of this publication, whether or not caused by any negligence on the part of the Commonwealth of Australia, RIRDC, the authors or contributors. The Commonwealth of Australia does not necessarily endorse the views in this publication. This publication is copyright. Apart from any use as permitted under the Copyright Act 1968, all other rights are reserved. However, wide dissemination is encouraged. Requests and inquiries concerning reproduction and rights should be addressed to RIRDC Communications on phone 02 6923 6900. Researcher Contact Details Name: Steve Spencer Address: Unit 2.04 17-19 Yarra Street Abbotsford VIC 3067 Phone: 03 84140904 Mobile: 0417 969873 Email: steve@freshagenda.com.au In submitting this report, the researcher has agreed to RIRDC publishing this material in its edited form. RIRDC Contact Details Rural Industries Research and Development Corporation Building 007 Boorooma Street Charles Sturt University Wagga Wagga NSW 2650 C/o Charles Sturt University Locked Bag 588 Wagga Wagga NSW 2678 Phone: 02 6923 6900 Email: rirdc@rirdc.gov.au. Web: http://www.rirdc.gov.au Electronically published by RIRDC in 2016 Print-on-demand by Union Offset Printing, Canberra at www.rirdc.gov.au or phone 1300 634 313

UNDERSTANDING FOOD MARKETS OUTSIDE RETAIL Part 1 WHAT IS FOODSERVICE?

The big picture Distribution to consumers The chart on the right shows the mix of estimated total spending through the various channels to the consumer. This draws on the analysis conducted in the FOODmap study in 2012 updated to 2015. The numbers of outlets in the chart were assessed in June 2015. They have been established based on a variety of sources, including data from industry groups, databases of food establishments, and information from specific retail and foodservice chains. This shows the significant influence of the grocery channel on overall spending on food with a high percentage of sales through a relatively small number of outlets. While a large influencer of the value available at wholesale, grocery is a key determinant of value in the broader food market. There is some potential minor doublecounting in this analysis, as some of the smaller independent retail and food service outlets buy food and other groceries through grocery chains and specialist food stores (such as bakeries and butcher shops). retail foodservice Figure 1.1 Size of channels and distribution to consumers *referred to as Commercial segments Master channel grocery convenience specialised Takeaway* dining out* event/leisure* Sub-channel Full-service supermarkets Independent grocers Independent stores Convenience stores Bakery, cake and pastry Delicatessen Butcher, poultry, seafood Fruit & vegetables Liquor merchants Sandwich bars Independent takeaway Quick-serve restaurants Restaurants & cafes Pubs clubs functions Event, leisure & travel Accommodation Outlets 9,950 7,100 21,250 5,300 2,900 9,500 Estimated annual FY2015 sales $77bn $8bn $11bn $3bn $16bn $24bn institutional Hospitals Aged care Defence Correctional Corporate (workplace) Education 1,360 3,480 80 95 1,350 9,400 $3bn Source: Freshagenda analysis drawing on ABS, IBIS $142bn Total Page 2

The big picture The composition of major segments The chart on the right further illustrates the diversity of outlets arranged by each of the master channels. The classification of channels into large groups is based on their characteristics in terms of the nature of the outlets themselves and how meals are generally provided to patrons. There is some blurring between these subchannels. Many of the meals provided by Quick Service Restaurant (QSR) chains especially some of the recently-emerged cuisine-based groups are eaten in-house at provided tables, yet essentially those operations are primarily geared to serve takeaway meals. There is often blurring between restaurants and cafes cafe for this definition is a venue that is themed around the service of coffee and/or other hot drinks. Many accommodation hotels will feature restaurants that draw significant numbers of patrons not staying at the hotel, and hence which compete against other restaurants in the hotel s proximity. Many large sporting venues feature QSR-style outlets as well as clubs and pubs. They are however typically managed as a single major facility. Institutional food channels are based on large commercial kitchens where meals are made, assembled, or reheated for large-scale provision to patients, inmates, employees or students. The meals and consumers may be radically different, but the systems and management of these facilities are similar. Figure 1.2 The composition of major market segments Master channel takeaway dining out event/leisure institutional Sub-channel Sandwich bars Independent takeaway Quick-serve restaurants Juice bars Restaurants Cafes - chains Independent cafes Pubs Clubs Function centres Sporting venue Large hotels Motels Hospitals Day treatment clinic Aged care Defence Prison Factory/office (canteen) Mining kitchen Education Source: Freshagenda analysis Page 3

The state of the market The composition of the market The charts below provide some high-level analysis of the composition of the overall market in terms of the share of spending, frequency of visits, and the timing of eating out (time of week and time of day). This analysis shows the importance of the weekend peak in activity, as well as the importance of different occasions to certain large foodservice channels. It also shows the different spending patterns across the market. Figure 1.3 Preference in dining at certain outlet types (% of people dining at each outlet type May 2015) Figure 1.4 Day of week eating out at different venues Source: FSAA Figure 1.5 Time of day eating out at different venues Source: FSAA Source: FSAA Figure 1.6 Average spending per outlet type (May 2015) Source: FSAA Page 4

What is different? Features Grocery Convenience & specialist Product form Packaged finished goods An ingredient for a meal, generally supplied in bulk but increasingly in form to improve convenience Packaged finished goods Proteins as large primals or portions Buyer priorities Reliability Cost Function Cost as a meal ingredient Waste Outlet size/diversity Limited number of grocery store models Small, highly diverse range of outlets across different channels Small, highly diverse requirement Ability to plan demand Readily based on established (historical) demand patterns that govern supply chain fulfilment requirements Limited ability for many to predict walk-in traffic Prone to shifts in patronage Generally based on established (historical) demand patterns Path to market Generally through a major Distribution Centre (DC) High proportion of fresh produce volumes move direct from producer to retailer but co-ordinated through a DC Complex and diverse, depending on the nature of the product and the sales channels. Distributors general and specialist play a major role. Limited volumes move from producer to retailer Similar to food service but generally through distributor networks Supply chain costs Lowest, pressure to reduce further High-cost, several points of handling and significant roles for intermediaries Higher than retail due to outlet size/scale, simplifying supply chains with grocer involvement Reward for convenience Consumer prepared to pay, but want perceived value Expected to be built into the service offering by many buyers Consumers prepared to pay higher than retail Information resources Detailed sales data (at a cost) based on retail scanned sales No aggregated supply or channel data, commercial providers supply surveybased insights Convenience channel data from providers, some based on scanned sales for larger chains Page 5

FOODSERVICE CHANNELS Page 6

Channels to consumers This section This document provides an overview of the structure of channels from producers and manufacturers through to consumers. This page summarises some of the key supply chain partners relevant to food and beverage suppliers that operate across foodservice. There are a large number of distributors that operate in the sector. Type Nature of business Examples General distributors Drinks distributor Large scale distribution networks Dominating volumes of packaged products into most channels and also into convenience retail Wide category coverage, extending into fresh chilled categories Buying practices and category management similar to grocery Chilled milk and juice, and ambient drinks specialists Servicing many independent foodservice outlets as well as convenience retail and independent grocery outlets Some are either tied to or integrated into the businesses of specific drinks manufacturers & processors Bidvest PFD NAFDA AIDA group The Distributors Specialist distributor Fresh category specific, generally with cold-chain capabilities Includes gourmet and fine foods specialists Wide coverage of channels and outlets Meat/seafood specialists Fresh dairy Imported/ gourmet Wholesaler Distributors integrated into fresh produce and meat wholesalers Fresh produce or protein wholesaler Caterers (or Facility managers) Large scale contract supply and service co-ordination of facilities that include food and a wide range of other site services for event and institutional outlets ISS Spotless Delaware North Cash & carry Large retail chains specialising in bulk goods Costco Campbells Fresh cut processor Process and distribution of fresh produce and prepared meals Chef s Pantry Snapfresh Page 7

Approach for channel The pros and cons of distributors Many suppliers of FMCG goods and fresh foods have mixed feelings about the role and impact that foodservice distributors whether general or category specialists have on their capabilities to optimise opportunities from foodservice channels. Our consultation provides a set of pros and cons that suppliers should consider when assessing path to market. Advantages Larger distributors assume the risks of market access this includes reducing the search costs for an entrant attempting to identify and approach target customers in a preferred channel Their use may improve the spread of market channels reached, and reduce the dependence on a narrow number of outlets in a specific channel or region that might be exposed to changing market conditions They provide easier management of supply chain logistics providing cost efficiencies between supplier/producer and end-user They assume the working capital risk by purchasing and storing products in their supply chains for on-supply to customers These operations have strong compliance and supply chain management disciplines in place which are based on customer and consumer requirement The scope for use of supplier brands (including those in meat protein) is steadily increasing. Disadvantages Large groups provide limited visibility to suppliers of the end-user market segments, to understand trends and better assess needs This factor provides a barrier to supplier-led innovation that may lower cost or improve functionality and utility of the products supplied They prevent the building of closer relationships over time between food buyers and suppliers There is a potential layer of profit-margin that is being either met by the buyer or supplier. There are various views on the likely extent of any cost disadvantage as large distribution groups offer scale efficiencies Their use may limit the ability to offer provenance into customers that may value such a point of difference why many go around these models Many regard larger operators as similar to grocery chains in the strictness of requirements. Page 8

Dining out The dining out segment Grocery retailers The largest and most complex segment of the market with significant diversity of cuisine-specialty, price-positioning, size and formality. Total outlet numbers are difficult to accurately estimate at any point in time but are estimated at 21-22,000. The diversity of cuisine varies by region, yet over time reflects trends in consumer preferences for variety in dining experiences. Food manufacturer Drinks manufacturer Fresh food supplier Cash and carry General distributor Drinks distributor Specialist distributor Wholesaler Specialised retailers Restaurants & cafes Pubs, clubs and function centres There has been increased blurring between cafes and restaurants, mostly defined by the extent of emphasis on coffee. There has also been considerable change in the repositioning of the pub as a gourmet food venue, blurring the distinction with restaurants. The roles of key players Role Priorities Competitive advantage General distributor Drinks distributor Specialist retailer Ensuring critical mass of coverage Efficient logistics across all channel types Improving throughput and unit value to premium outlets Range and geographical coverage Range Strength of distribution & logistics network Fridge ownership model to ensure loyalty Agility Quality of product/service Cash & carry Expansion of club-retailing model across small-scale outlets Cost-competitiveness Range Specialist wholesaler Viable throughput based on network of dependent outlets Specialist Page 9

Takeaway channel The takeaway segment This comprises a large number of small independently-owned food outlets. This segment is very strongly dependent on traffic flows, with a strong focus on servicing workers and shoppers, mostly catering to breakfast, lunch and casual snacking occasions. Takeaway outlets in this segment are distinguished from the QSR segment (next page) in terms of operational scale and uniformity. Food manufacturer Drinks manufacturer Cash and carry General distributor Drinks distributor Grocery retailers Sandwich bars & takeaway Fresh food supplier Specialist distributor Wholesaler Independent fast food The roles of key players Role Priorities Competitive advantage General distributor Ensuring critical mass of coverage Range and geographical coverage Drinks distributor Efficient logistics across all channel types Strength of distribution & logistics network Fridge ownership model to ensure loyalty Cash & carry Expansion of club-retailing model across small-scale outlets Specialist wholesaler Viable throughput based on network of dependent outlets Cost-competitiveness with other suppliers Range Relationship focus Cold-chain management Just-in-time service Fresh food focus Page 10

Quick Service Restaurant channel The QSR or fast-food segment QSR chains are defined by large chains of branded casual dining outlets with uniform product offerings, sourcing, systems, and policies. Chains vary significantly in scale and cuisine focus, with increasing diversity in offerings in response to greater demand for variety and value. Due to the scale and systems in use, sourcing policies feature more directlysourced and tailored solutions, and in general are far more sophisticated than the independent fast food segment. Food manufacturer Drinks manufacturer Fresh food supplier General distributor Drinks distributor Fresh-cut processor Wholesaler QSR Chains The roles of key players Role Priorities Competitive advantage General distributor Maintaining business growth through expanding small chains Strength of distribution & logistics network Range Fast-moving consumer goods Product solutions and functionality Close relationships with major QSR chains Direct to store delivery Drinks distributor Efficient logistics across all channel types Strength of distribution & logistics network Specialist wholesaler or distributor Fresh product solutions to back of house operations Cold-chain management Just-in-time service Fresh food focus Page 11

Health and aged care channel The institutional care segment These segments refer to the provision of meals in catered aged care and hospital facilities, most of which is funded through government programs. Various delivery models exist from fully external through to in-house facilities, but there has been a gradual shift towards outsourced meal supply over food prepared and assembled in on-site kitchens, due to the focus on cost-saving in this sector. The size of the market is governed by the number of patients requiring extended care, and number of places provided in aged care facilities and funding available. A much larger number of meals are provided outside the aged care institutions in private retirement villages and delivered meals for at-home care. Food manufacturer Drinks manufacturer Fresh food supplier General distributor Drinks distributor Caterers Wholesaler Specialist distributor Own kitchens Hospitals Aged care The roles of key players Role Priorities Competitive advantage General distributor Ensuring critical mass of coverage Product range (one stop) Strength of distribution & logistics network Drinks distributor Efficient logistics across all channel types Strength of distribution & logistics network Caterers Whole of facility service Large-scale meal delivery capabilities Lower cost than in-house options Cost-management disciplines Specialist wholesaler Fresh product solutions to kitchen operations Cold-chain management Just-in-time service Fresh food focus Page 12

Events and leisure channel The events and leisure segment This diverse segment covers a large number of venues that stage or host major sporting, cultural or corporate events, including conferences and exhibitions. It also covers services to the travel market, either servicing aircraft or airport foodcourts and lounges. Corporate events can influence the demand for meals at function venues, hotels as well as private restaurants located adjacent to venues themselves and are hence difficult to measure as a separate segment of the market. Food manufacturer Drinks manufacturer Fresh food supplier General distributor Drinks distributor Wholesaler Specialist distributor Caterers Sports Travel Events The roles of key players Role Priorities Competitive advantage General distributor What drives their model Product range (one stop) Strength of distribution & logistics network Drinks distributor Brand presence at profile events Brand sponsorship or access relationships Caterers Whole of facility service Large-scale meal delivery capabilities Cost management disciplines Specialist wholesaler Fresh product solutions to kitchen operations Cold-chain management Just-in-time service Fresh food focus Page 13

Institutional channel The institutional segment These markets are generally serviced by larger contract caterers and distributors due to the size of the facilities, with fewer in-house meal facilities due to the efficiency of those providers. The approach to meal provision at schools varies markedly across states and between school systems. Food manufacturer General distributor Educational Drinks manufacturer Fresh food supplier Drinks distributor Wholesaler Specialist distributor Caterers Corporate Own kitchens Defence Corrections The roles of key players Role Priorities Competitive positioning General distributor Ensuring critical mass of coverage Range Drinks distributor Efficient logistics across all channel types Strength of distribution & logistics network Fridge ownership model to ensure loyalty Caterers Whole of facility service Large-scale meal delivery capabilities Specialist wholesaler Addressing low-cost portion requirements to balance usage Cold-chain management Just-in-time service Fresh food focus Page 14

CATEGORIES IN FOODSERVICE Page 15

Channel shares Overall volume shares The apparent share of sales into the overall foodservice market at a category level has been reconciled. This has been developed based on firstly arriving at total food available to domestic markets which is the sum of: Total production (including yields in converting fresh product into processed lines) Less exports Add imports Less waste factors/estimates Volumes sold into foodservice are based on estimated retail shares using insights as to the total retail volumes (grocery and specialist stores) at a category level. Channel shares have been taken from a number of industry reference points and past studies. Poultry is higher than red meat due to the size of the QSR market for processed poultry portions. Seafood remains the highest protein sector in percentage terms given the importance of the fish and chips takeaway segment. Vegetable volumes exceed fruit with the importance of processed potatoes (a significant portion of which are imported) to the QSR segment. While pork and red meat channels arrive at similar outcomes, this is co-incidental due to the size of beef sold into QSR and restaurant channels, and the volumes of processed smallgoods (ham and bacon) sold into takeaway and café channels. The analysis shows the volumes sold into food service channels which may be far more in some categories than those volumes that are actually eventually sold to end consumers. The potential for waste in product sourcing and meal preparation is much higher in food service channels than grocery. Estimated share of food volumes (as a % of available to the domestic market) sold into foodservice channels (5 year average) Page 16

Category size: Milk Key volume drivers Growth in coffee consumption Key value determinants Retail private label white milk prices Challenges faced Balancing supply and offtake in small-scale integrated operations Retail packages sold through much of food service (not always fit for purpose) Dominant players Wholesale fresh dairy distributors FSS retailer Processing Independent retailer Distribution Specialty retailer Takeaway Dining out distribution Event/leisure 106 million litres Export 1.97 billion litres Retail 2.52 billion litres* 2.42 billion litres* Processing Domestic supply grocery specialised takeaway 67% 33% 18% Caterers Institutional Import 0.5 million litres 360 million litres * Waste/shrinkage is deducted to derive sales volumes in each channel dining out event/leisure institutional 50% 8% 24% Page 17

Category size: Cheese Key volume drivers Growth in pizza and burger consumption through QSR chains Key value determinants Wholesale prices for cheddar and mozzarella Challenges faced Volatile world prices for cheeses, sold into the large volume segments of the market which are price-sensitive Dominant players QSR chains General distributors increasing cold-chain business FSS retailer Manufacturing Independent retailer Distribution Specialty retailer Cash & carry Takeaway Dining out Specialist distribution Event/leisure 162,000t Export 336,000t 247,300t* Processing Domestic supply 173,300t Retail grocery specialised takeaway 75% 25% 40% Caterers Institutional Import 76,300t 73,500t * Waste/shrinkage is deducted to derive sales volumes in each channel dining out event/leisure institutional 35% 5% 20% Page 18

Category size: Beef Key volume drivers Growth of pizza and burger consumption through QSR chains Demand for gourmet burgers through various segments of the dining out market Consumer health concerns regarding red meat Key value determinants Export returns for beef primals and portions Challenges faced Volatile world prices for beef, sold into the large volume segments of the market which are price-sensitive Dominant players QSR chains Local butchers servicing larger portions of the dining out market FSS retailer Processing Independent retailer Further processing Meat wholesaler Specialty retailer Takeaway Dining out distribution Event/leisure Slaughter: 8.8m head # 1.09mill t Export Fresh: 317,000t Retail # Prod n: 2.32mill t 465,000t* Processing Domestic supply grocery specialised takeaway 72% 28% 21% Caterers Institutional Import 3,000t Fresh: 125,000t * Waste/shrinkage is deducted to derive sales volumes in each channel # Carcass weight equivalent dining out event/leisure institutional 47% 8% 24% Page 19

Category size: Sheepmeat Key volume drivers Demand for premium cuts through various segments of the dining out market Consumer health concerns regarding red meat Key value determinants Export returns for lamb and mutton primals Challenges faced Volatile world prices for lamb and mutton, sold into the price-sensitive segments of the market Dominant players Specialist meat distributors Local butchers servicing larger portions of the dining out market FSS retailer Processing Further processing Independent retailer Specialty retailer Meat wholesaler Takeaway Dining out distribution Event/leisure Lamb: 20.5m head Sheep: 7.6m head # Lamb 213,080t # Sheepmeat 134,300 Processing Export # Lamb 450,000t # Sheepmeat 173,000t Lamb 125,000t Domestic supply Lamb: 106,000t Retail grocery specialised takeaway Caterers 72% 28% 4% Institutional Import Lamb: 19,000t * Waste/shrinkage is deducted to derive sales volumes in each channel # Carcass weight equivalent dining out event/leisure institutional 60% 8% 28% Page 20

Category size: Fresh pork Key volume drivers Demand for premium cuts through various segments of the dining out market Demand for pork cuts through ethnic segments Consumer health concerns regarding red meat Key value determinants Overall carcass returns for pork (influenced by value of imported cooked meats) Challenges faced Competing prices for landed processed meats Dominant players Specialist meat and ethnic food distributors Local butchers servicing larger portions of the dining out market FSS retailer Processing Independent retailer Import Smallgoods manufacturing Meat wholesaler Specialty retailer Smallgoods distributor Takeaway Cash & carry Dining out distribution Event/leisure # 28,000t Caterers Institutional Export Fresh: 56,900t Retail grocery 85% Slaughter: 4.76m head # Prod n: 356,000t Processing 71,000t Domestic supply specialised takeaway 15% 18% # 140,300t dining out 50% Smallgoods event/leisure 8% Fresh: 10,400t institutional 24% Page 21

Category size: Smallgoods Key volume drivers Health of the breakfast occasion Health of independent takeaway outlets Consumer health concerns regarding cooked meats Key value determinants Landed prices of imported processed pork (ham, bacon, other cooked portions) Challenges faced Competing prices for landed processed meats Dominant players Specialist meat and ethnic food distributors Local butchers servicing larger portions of the dining out market FSS retailer Import Processing Smallgoods manufacturing Meat wholesaler Independent retailer Specialty retailer Smallgoods distributor Takeaway Cash & carry Dining out distribution Event/leisure Caterers Institutional 140,300t Pork 70,000t Processing 248,400t Retail 354,000t Domestic supply grocery specialised takeaway 62% 38% 18% Other meats Import 284,200t 105,600t dining out event/leisure institutional 50% 8% 24% Page 22

Category size: Poultry Key volume drivers Growth in chicken product consumption through large and gourmet QSR chains Demand for poultry cuts through ethnic dining out segments Consumer health concerns regarding red meat has boosted consumption over time Ease of application across meal types Key value determinants Overall bird returns for poultry across retail and foodservice uses Challenges faced Ensuring suitable mix of business for product recoveries Passing on rises in input costs to low-value segments of the market Dominant players QSR chains General distributors increasing share of processed products FSS retailer Processing Independent retailer Poultry meat wholesaler Specialty retailer Smallgoods distributor Takeaway Dining out distribution Event/leisure Processing 33,000t Export Slaughter: 572m birds : 1.06mill* Fresh 573,000t Processed 173,000t Domestic supply Fresh: 381,000t Processed: 35,000t Retail grocery specialised takeaway 88% 12% 24% Caterers Institutional dining out 46% Fresh: 192,000t Processed: 138,000t event/leisure institutional 16% 13% * Waste/shrinkage is deducted to derive sales volumes in each channel Page 23

Category size: Eggs Key volume drivers Growth in demand through QSR chains Health of the breakfast occasion Consumer health concerns regarding red meat Key value determinants Wholesale prices influenced by market balance Challenges faced Balancing supply and demand across channels with some volatility in egg production Improving the integrity of free-range product Dominant players Major integrated egg marketers FSS retailer Grading and packing Independent retailer Wholesale egg distribution Fresh produce distributor Specialty retailer Takeaway Dining out distribution Event/leisure Caterers Institutional Processed egg: 220t Packaging Export 399 million dozen 363m dozen Processing Domestic supply Fresh: 260m dozen Processed: 3,000t Retail grocery specialised takeaway dining out Fresh Processed 68% 72% 32% 28% 55% 55% 32% 20% Import Processed eggs: 980t Fresh: 52m dozen Processed: 20,300t event/leisure institutional 3% 10% 10% 15% Page 24

Category size: Grains & flour Key volume drivers Healthy eating trends improving demand for high fibre products Key value determinants Higher demand for artisanal products in bread and bakery markets Differentiation in bread styles Challenges faced Private label price pressure on retail flour and bread markets Dominant players Major millers as processors and distributors Major bread manufacturers Large bakery chains servicing home use FSS retailer Miller Breadmaker Independent retailer Flour products distributors Specialty retailer Takeaway Dining out distribution Event/leisure Caterers Institutional Wheat: 19.0mt Flour: 50,000t Wheat: 25mt Handling Feed use Export Milling Wheat: 2.6mt Retail Flour: 2.3mt Domestic supply Industrial Flour: 0.5mt grocery specialised takeaway dining out event/leisure institutional Total flour sold into the food industry for various uses including breadmakingand a range of bakery products is estimated at about 1.8mt per annum (excluding industrial uses of flour), however shares between channels are not measured. Large-scale breadmaking is estimated to consume about 40-45% of total flour supply, but this does not count consumption in small bakeries. It is estimated that major grocery chains hold about 60% of the retail bread market, while specialist bakeries hold 30%. Page 25

Category size: Fresh Seafood Key volume drivers Growth in demand through takeaway segment Overall demand across the dining out market Consumer health concerns regarding red meat Key value determinants Wholesale prices for different qualities of white fish and salmonids influenced by overall supply Challenges faced Balancing supply and demand across channels with some volatility in supply Length of the supply chain affecting product freshness in discerning market segments Dominant players Specialist seafood distributors Specialist seafood retailers (with wholesale activities) FSS retailer Imports First stage processing Fresh chill processing Seafood wholesaler Independent retailer Specialty retailer Takeaway Dining out Specialist distribution Event/leisure Caterers Institutional 206,000t Fresh catch 40,000t Export 233,000t* Domestic supply 81,000t Retail grocery specialised takeaway 49% 51% 34% 74,000t 146,000t Processing Import 113,000t * Waste/shrinkage is deducted to derive sales volumes in each channel dining out event/leisure institutional 30% 19% 17% Page 26

Category size: Processed Seafood Key volume drivers Growth in demand through takeaway segment Overall demand across the low-value of the dining out market Budgetary scope within institutional channels Consumer health concerns regarding red meat Key value determinants Benchmark value of imported lines Challenges faced Remaining price competitive with imported products Dominant players Major Fast-Moving Consumer Goods (FMCG) processors General distributors Specialist seafood distributors FSS retailer Imports First stage processing FMCG processing Seafood wholesaler Independent retailer Specialty retailer Takeaway Seafood distributor Dining out Specialist distribution Event/leisure Caterers Institutional 111,000t Export Retail 74,000t 59,000t 170,000t From fresh catch Processing Domestic supply grocery specialised takeaway 82% 18% 50% 58,000t dining out 25% Import event/leisure 8% 111,000t institutional 17% Page 27

Category size: Fresh Horticulture Key volume drivers Overall demand across the dining out market Consumer health priorities regarding fresh foods Key value determinants Wholesale prices driven by fluctuations in supply Challenges faced Balancing supply and demand across channels with some volatility in supply Minimising waste Improving meal portion convenience/freshness Dominant players Fresh cut processor servicing large takeaway Specialist fresh produce distributors Specialist green grocers (with wholesale activities) FSS retailer Imports Broker Fresh cut processor Independent retailer Wholesaler Specialty retailer Takeaway Dining out Distribution Event/leisure Caterers Institutional Fruit: 1.69million t Veg: 3.31million t Fruit: 344,000t Veg: 177,000t Export Fruit: 1.25million t* Veg: 2.06million t* Domestic supply Fruit: 827,000t Veg: 1,364,000 Retail grocery specialised takeaway 71% 29% 15% dining out 50% Fruit: 254,000t Veg: 1,098,000t Processing Import Fruit: 175,000t Veg: 31,000t Fruit: 323,000t Veg: 532,000t event/leisure institutional 10% 25% * Waste/shrinkage is deducted to derive sales volumes in each channel Page 28

Category size: Processed Horticulture Key volume drivers Growth in demand through QSR chains Overall demand across the low-value of the dining out market Budgetary scope within institutional channels Consumer health concerns regarding fast food lines Key value determinants Benchmark value of imported lines Challenges faced Remaining price competitive with imported products Improving ready-meal assembly to lower cost Dominant players Major FMCG processors General distributors Ready-meal producers FSS retailer Imports Processor Frozen food distributor Independent retailer Specialty retailer Cash & carry Takeaway Dining out distribution Event/leisure Caterers Institutional Fruit: 254,000t Veg: 1,098,000t From production Processing Fruit: 1,700t Veg: 3,000t Export Fruit: 169,000t Veg: 660,000t Domestic supply Fruit: 46,000t Veg: 178,000t Retail grocery specialised takeaway 90% 10% 50% dining out 27% Import Fruit: 46,500t Veg: 125,000t Fruit: 123,000t Veg: 482,000t event/leisure institutional 8% 15% * Waste/shrinkage is deducted to derive sales volumes in each channel Page 29

NATIONAL RURAL ISSUES Understanding Food Markets Outside Retail Part 1: What is? by Steve Spencer RIRDC Publication No 16/040 RIRDC Project No PRJ-010142 Bookshop: 1300 634 313 Email: rirdc@rirdc.gov.au Postal Address: Locked Bag 588 Wagga Wagga NSW 2678 Street Address: Building 007 Charles Sturt University Booroma Street Wagga Wagga NSW 2650 www.rirdc.gov.au