Australia’s food market is normalising after a long period of being adversely impacted by the pandemic and inflation, a study by Rabobank shows.
According to the bank’s research division, the food market has been challenged by the Covid pandemic, supply chain disruptions and rising commodity and energy prices over the past five years.
“We saw a period of reduced food and ingredient availability, multi-decade high food price inflation and changes in consumer behaviour, including a switch away from out-of-home dining to eating in,” said report author, RaboResearch senior analyst – consumer foods Michael Harvey.
“All of this happened amid an unprecedented decline in real disposable incomes for Australian households, which changed food-purchasing behaviour, particularly among lower-income younger Australians,” he added.
However, the report said that the food market is now embracing a “new normal”, characterised by altered consumer-purchasing behaviour and extensive structural change to the market and supply chains.
Key consumer trends include trading down to supermarket private labels, shifting from fresh to long-life or frozen goods, increased purchasing of discounted items, engaging in multi-store shopping and reducing volumes bought or delaying purchases.
Retailers have been responding to these shifts by innovating offerings, such as ‘meals to go’ and healthy snacks, as well as investing in e-commerce and expanding private label options.
Regarding the food service sector, the road to recovery remains slow after restaurants, cafes and bars were hit hard by the drop in demand for dining out.
“While there are early signs of improvement, dining out will remain a luxury for many Australian households until household budgets substantially improve,” commented Harvey.
Key trends for the sector include the expansion of some global QSR brands, rising popularity of bubble tea, enhanced focus on customer convenience and time saving, expansion of sushi brands and consumer preference for barista-made coffee.
Overall, the report indicates that the food market remains highly attractive for food and beverage companies and farm suppliers, with a growing population and a highly urbanised consumer base.
“As a result, the domestic food market is expanding in volume and value, and food purchasing – including food service dining – generally outperforms other discretionary spending,” said Harvey.
