Significant issues
In addition to the issues that specifically impact our businesses, there are broader issues that have a significant impact on the sectors in which we operate. These include:
A sustainable dairy industry
Conditions in the dairy sector are challenging for farmers and producers alike.
Our National Foods business is still some way from achieving an acceptable return on invested capital. Input costs remain relatively high by historical standards and we face ongoing challenges to maintain adequate operating margins in a highly competitive retail environment. Since the beginning of this calendar year, the price of milk on private label and control brands has been deeply discounted. This threatens to further dilute the profit pool available to all players in the supply chain. It is a situation that is unfortunately likely to have adverse impacts on the sustainability of the entire dairy industry.
On a more positive note, we've made good progress in integrating the former National Foods and Dairy Farmers businesses. We are looking to increase our investment in marketing and innovation and will work with our suppliers and customers to build a group of powerful brands that will drive value in the market.
Healthy eating and drinking and community impact
We acknowledge that the misuse of alcohol has its costs: anti-social behaviour, burdens on healthcare and law enforcement systems, and lost productivity. Likewise, we acknowledge that in Australia, diet-related, preventable chronic diseases remain on the increase. An alarming 68% of men and 55% women are overweight or obese, as are one in five children. Type-2 diabetes is a leading cause of disease, and projected to be the main cause of disease in men by 2023. Cardiovascular disease is expected to reach $23 billion per annum by 20321,2. Government is therefore focused on prevention, with the National Preventive Health Agreement committed to spend more than $800 million over a six-year period, starting from 2008.
The food industry is an important player in educating and providing consumers with product choice to help address preventable chronic disease. The number of products with front-of-pack labelling continues to grow: over 2,200 brands now display information. Products are being reformulated, with a growing number reducing salt, fat, sugar and portion size, and increasing positive nutrients such as calcium, vitamin D and dietary fibre.
On the alcohol front, we actively participate in community efforts to change unhealthy drinking behavior. For many years we've supported programs to better understand and prevent alcohol misuse and minimise the potential harm associated with:
- Drink driving
- Misuse by at risk groups
- Under-age drinking
- Long-term risky drinking
- Short-term risky drinking causing immediate harm
The above are however the negatives. On a positive, dairy, juice, soy and the responsible enjoyment of alcoholic beverages are all part of a healthy lifestyle for most people, and when enjoyed in moderation, our portfolio of food and drink brands can benefit wellbeing. Dairy foods, for example, are the richest source of calcium in the Australian diet and can provide, naturally, a unique package of more than 10 essential nutrients. There is also a significant body of evidence to suggest that when enjoyed in moderation, alcohol can deliver wellbeing benefits.3
- AIHW (2010) Australia's Health 2010. Australia's health series no.12. Cat. No. AUS 122. Canberra. AIHW.
- Goss J (2008). Projection of Australian health care expenditure by disease, 2003 to 2033. Cat. no. HWE 43.Canberra. AIHW.
- R Doll et al, Mortality in Relation to Consumption of Alcohol: 13 Years' Observations on Male British Doctors BMJ 1994, 309:911-918; L A Simons et al Moderate Alcohol Intake is Associated with Survival in the Elderly: the Dubbo Study MJA 2000, 173: 121-124; AIHW Statistics on Drug Use in Australia 2006 p.35; Rimm EB et al, A Biologic Basis for Moderate Alcohol Consumption and Lower Coronary Heart Disease Risk: A Meta-Analysis of Effects on Lipids and Haemostatic Factors, BMJ,319: 1523-1528, 1999; Hines LM et al, Moderate Alcohol Consumption and Coronary Heart Disease: A Review, Postgrad Med J,77:747-752, 2001.