INGREDIENTS

Adding value to our raw materials – why it makes sense

Food & Beverage Industry News looks at why adding value to raw materials has long-term benefits for Australian produce.

Australia is fortunate that it is home to some of the best soil, an array of (some would say pedantic) regulations, and an agricultural industry that has world-class infrastructure. It is therefore not surprising, that overall it has a great reputation for producing ingredients that are wanted around the world. And if you are a manufacturer of said ingredients, then the world could be your oyster in terms of finding overseas markets.

But there is a conundrum. There are many examples of countries exporting raw materials only to have them returned as finished goods and having a negative effect on a country’s balance of trade. The same can be said for some agricultural goods.

At the Global Food Forum earlier this year, Visy chair Anthony Pratt praised Australian farmers and food processors for growing food exports to $40 billion, despite drought. But he also wondered why we were exporting so many raw materials without adding value to them.

“Value adding drives Australian investment and jobs,” he said at the time. “For example, wheat sells for a $100 a tonne. If you turn it into flour it sells for $500 a tonne, and if you turn that flour into bread it sells for $5000 a tonne. Adding value through further processing, or adding value at horticulture, is better than selling bulk commodities like wheat, which undersells the value of our farmer’s expertise.”

Brookfarm and Cape Byron Distillery were born out of one family’s vision to take the humble macadamia nut and turn it into a diet staple for the products it created. The company, run by Martin and Pam Brook, was started when they bought a rundown farm in the Byron Bay hinterland in 1988.

“We were going to move our

two very small boys up from Melbourne and we were going to become farmers,” said Martin Brook. “Then the crunch happened, so we almost went broke. It took us almost 10 years to get out of the financial issues, and we moved up permanently in 1999.

“In those days we couldn’t see a lot of sense growing a nut if you were getting $2.50, if you were lucky a kilo for a macadamia nut. It takes 10 years to grow a nut. I think it is one of the world’s most delicious nuts and one of the worlds’ healthiest nuts. And we thought ‘right, let’s take this nut and let’s put it in premium products for people to eat every day’. We started with two products and now we have about 72 SKUs.”

DD Saxena is the founder and promoter director of Riverina Oils and Bio Energy and is responsible for setting up the company’s $150 million canola oilseed crushing and refining plant in Wagga Wagga. It has the potential to produce more than 200 tonnes of refined vegetable oil for the food industry.

Saxena’s company is at the other end of the spectrum. It is an ingredient supplier to both Australian and overseas companies. Why aren’t more Australian companies setting up processing plants like his?

“I think the retail market is very limited, and therefore with branded goods there is a monopoly on distribution,” he said. “If you sell a product in most Asian countries, you are selling to 10,000 decisionmakers. When you are selling something in Australia you are selling to five decisionmakers.

“I think we haven’t focussed when selling to the manufacturing industry globally. Because if we make good quality raw materials logically we should be the supplier of many ingredients that are value added

to factories of the world.”

Brook said that in order to get into the added value market it is important to make sure food manufacturers know who their customers are, and what market they are trying to reach.

“It is interesting how our business has grown,” he said. “We export to 16 countries but it is to a specific customer that is looking for great tasting healthy food. All of our products are GMO free, no preservatives, no additives. It’s the customer who really does care about what they eat.

“It is the customer who wants to know exactly where it comes from and how it is made. It is all those things.”

As well as adding value by making the final product, there is another side effect. Something that Brook is proud of, and something that is not lost on Saxena, too.

“Byron Bay is a place of high youth unemployment for all sorts of reasons,” said Brook. “For us, obviously the environment is important in terms of what we do there. For us, it is giving young people not only jobs but careers. We’ve had people who have been with us for 18 years and we’ve seen

Canola oil is a raw product that is in high demand.

the difference that that makes in a person or families life and that is what keeps us going. And now Cape Byron distillery – doesn’t sound much – but within two years we have employed 16 people.”

Saxena’s company employs approximately 90 people, but he points out there are other aspects that

need to be taken into consideration when thinking about having a processing plant in a local area.

“It provides farmers certainty in terms of a destination market,” he said. “It also provides them a better outcome. I saw the opportunity to build a plant in Wagga Wagga because I wanted to create a better quality product using better technology and efficiency because most of the crushing plants were not integrated or very modern in Australia. We chose Wagga due to access to supply and we felt the size of such a regional town and there was a lot of infrastructure to support us.” F