Australia is a global heavyweight when it comes to food exports, but we only have a handful of globally significant food or drink companies. Many companies that seem to be on that path don’t stay in Australia for very long. Which, for investors like Brown, is disappointing.
“Whether we’re talking about animals, seafood, wheat grains or…dairy products and so on, for a country that has a pretty big competitive advantage in growing these things, the investor has very, very few ways to participate in this. industry at all,” Brown said.
Arnott’s, the company behind Tim Tams, was taken over by the American multinational Campbell’s Soup in the 1990s.Credit:Natalie Boog
“When we get them, they tend to be taken.”
Small fish in a big pond
One factor behind this dynamic is the fact that our food export prowess is primarily in the form of agricultural raw materials rather than processed or “value added” products.
Australia’s small population is another inhibiting factor: while we have the land mass to grow plenty of food, 25 million mouths isn’t many compared to, say, neighboring Indonesia, which has a population of over 273 million. .
Airlie Funds Management founder John Sevior.Credit:steal homer
“In processed foods and in branded foods, honestly, we don’t have any big brands here that are globally significant,” Brown said. “We tend, obviously due to the size of our domestic market, not to have economies of scale.”
This, coupled with our proximity to Asia, makes Australian companies look very attractive to global players looking to target the huge Asian market, he added.
Scale comes up again with Sevior, who says it counts in a “global game” like manufacturing. “I think Australia has brands with some intangible value, but the companies hadn’t built a big enough manufacturing base to be globally competitive,” he said.
Charging
“They didn’t really have the firepower or maybe the ambition to compete globally… Their cost of production is never going to match.”
Shouldn’t we be concerned about the number of Australian food and drink companies that have ended up in foreign hands?
Sevior says there may be some patriotism behind those sentiments, and he doesn’t think foreign ownership is necessarily detrimental to the Australian economy or market, although he acknowledged concerns about food safety. However, realistically, a current Australian shopping basket is likely to contain many more smaller-scale ’boutique’ brands that are local in the midst of a long-term shift towards health and wellness.
“Locally, with the paddock to plate movement, people [are] just be much more insightful,” he said. “The bigger question is how important are some of these brands, how relevant are they in people’s diets, compared to what they might have been 10 or 20 years ago?”
As a result, Australian food giants, while they may have long-standing market dominance and brand recognition, may be in “a kind of extinction phase,” Sevior says.
“There hasn’t been a lot of market capital to invest in big food and drink companies in Australia for a long time.”
Who is the next one?
Currently, only a handful of major Australian food and drink companies remain in the ASX200, including poultry player Ingham’s, Bega Cheese, which in addition to dairy owns Vegemite, and Penfolds owner Treasury Wine Estates.
Brown would not be surprised if a takeover bid emerges from Bega or United Malt, the world’s fourth-largest supplier of barley malt to the brewing and distilling industry.
ASX-listed barley malt seller United Malt may be on the takeover menu.Credit:Bloomberg
“This is a very personal opinion: I think [United Malt] it is an absolute corporate target, in sight, in sight,” Brown said. He also pointed out that mining tycoon Andrew ‘Twiggy’ Forrest, who bailed out bootmaker RM Williams, has recently increased his stake in Bega.
Meanwhile, the Treasury, which has a market value of around $10 billion, is one of the rare examples of an Australian company finding global success. Brown describes the company as “the pinnacle of Australia’s wine industry”, but even the world’s largest publicly traded wine company is not immune from the threat of a takeover.
“Treasury is not bulletproof in terms of a takeover but certainly the way it managed to bounce back from the Chinese embargo is pretty spectacular so I think it hasn’t been taken out of the takeover range but it certainly would be a big swallow for anyone. ,” he said.
Charging
The Treasury was itself a spin-off from the Melbourne-born Foster’s Group. And CEO Tim Ford seems determined to keep the company in Australia.
“We have planned to be the largest luxury premium wine business in the world and there is nothing to suggest that we cannot achieve this in the long term. Now, if you’re a public company, I guess at any moment someone is looking to acquire us, then that’s their option to try and do it,” Ford told The New York Times. Herald Y Age.
“However, I think at this stage we will be a very strong Australian listed Australian company for a very long time.”
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