Make the most of Asia: invest, don’t just export
Patrick Vizzone, Head of Coverage, Hong Kong & Head of Food, Beverage and Agribusiness, International | January 2019
Asia’s rapid growth is an opportunity Australian businesses are rightfully lining up to take advantage of – but it’s bigger than just the export market. Particularly in food and agricultural products, some of Australia’s biggest exports to the region, there are more – and often better – profits to be made in moving beyond exporting and into investing.
Research shows Australian companies have been very comfortable exporting food and agricultural products to Asia but the level of investment has not really followed suit.
A 2018 ANZ report shows the size of Australia’s investment opportunity in Asia has reached $A393 billion. One in three active business make over two fifths of the revenue from Asia and 61 per cent plan to expand their presence in the region over the next three years.
Yet this investment has been outweighed many times over by Asian companies investing in Australia looking to shore up their supply chain – and is still growing according to government figures.
With Asia’s rapidly expanding middle-class only getting bigger, Australian companies should be looking to invest directly. After all, the closer you get to the consumer, the better the margins.
And what margins. ANZ’s Opportunity Asia report showed 26 per cent of Australian businesses in Asia said their margins were much higher than in Australia – up from 16 per cent in 2016.
That growing population means in many respects Australia is only just scratching the surface in terms of demand. There is a clear path for greater exports into Asia, particular given Australia’s reputation for clean, high-quality produce.
When you look at the incremental global food demand over the next generation, it is overwhelmingly going to come from Asia - and China is going to be the bulk of it.
A recent ANZ report on the future of Australia agriculture, The Track Ahead, shows the country’s horticulture sector is experiencing enviable momentum on the back of increased productivity and unprecedented demand.
The fruit and vegetable industry probably represents one of Australia’s best future opportunities for agribusiness exports into China.
We have seen an enormous growth in fruit exports into China. China grows and consumes half the world’s production of vegetables and 23 per cent of the world’s fruit. Fruit is a far more aspirational category when it comes to consumption.
"The closer you get to the consumer, the better the margins.”
Patrick Vizzone, Head of Coverage, Hong Kong & Head of Food, Beverage and Agribusiness, International
There is a continued secular growth in food demand in China with a significant amount of that being satisfied by imports. Australia’s clean image, counter-seasonal supply and proximity are all points of competitive advantage.
I would challenge the industry to see how it can get a larger slice of the downstream pie in Asia.
Players in the market need to ask: how can we take a larger slice of the margins that are being made offshore? It’s not easy but it is something Australia should focus on.
Patrick Vizzone is Head of Coverage, Hong Kong & Head of Food, Beverage and Agribusiness, International at ANZ
For more research & insights into food, beverage & agribusiness from ANZ Institutional click HERE.
This story is an edited version of comments given by Vizzone to The Australian
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