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GDP figures show it's a good time to be in the food business

September 7, 2018

American Financial Review

Strong household consumption figures and discerning customers willing to pay top dollar for premium produce and convenience mean it is a good time to be in the food business. Melbourne butcher of 15 years Fel Marandola said he was seeing more customers looking for personalised service and food with a known history, and people were willing to pay more for both.


"We are bringing paddock to butcher and then butcher to plate," Mr Marandola said. "People want to know what they're eating.

"When you come to a butcher or fresh fish shop or deli you have one-on-one conversations with the person behind the counter and not a cash register."

Tom Rutledge, founder of HelloFresh, says his business has seen 'double-digit' growth north of 50 per cent over the past ...
Tom Rutledge, founder of HelloFresh, says his business has seen 'double-digit' growth north of 50 per cent over the past 12 months on the back of consumer interest in home delivered meal-kits. mrtomjones.com

Strong household consumption

AdvertisementThat sentiment was echoed by Fiona Patterson, a customer of Mr Marandola's Elwood butcher's shop, who said she was willing to pay more for quality and convenience.

"You want to support people like Fel who are running small businesses like this. You know everything in here is going to be amazing. We don't eat out much because we have kids, so I'd rather spend the money on good food."

Growth in household consumption of 0.7 per cent in the June quarter, and 3 per cent in the year to June, underpinned strong economic growth figures released by the Australian Bureau of Statistics on Wednesday.

Spending in 12 of the 17 household consumption categories lifted, with food and communications leading growth in non-discretionary household spending, and alcohol and household furnishings leading the increase in discretionary spending.

You want to support people such as butcher Fel Marandola 'who are running small businesses like this', says Fiona Patterson.
You want to support people such as butcher Fel Marandola 'who are running small businesses like this', says Fiona Patterson. Elke Meitzel

Double-digit growth

Tom Rutledge, Australian founder of meal-kit delivery company HelloFresh, said his business had seen "double-digit" growth north of 50 per cent over the past 12 months on the back of strong consumer interest in home delivered meal-kits.

Mr Rutledge said HelloFresh's growth came down to three factors: convenience, price, and an increase in conscious eating. He also said the majority of customer growth had come from existing areas of operation rather than from expansion into new markets.

"HelloFresh is probably the only grocer in the country who has been able to keep prices the same," he said, noting strong customer growth had allowed the company to keep its subscription price steady.

The national accounts figures reflected ABS retail trade figures that showed a 0.4 per cent lift in spending on food in the month of June. Ai Group's performance of manufacturing index figures also showed food and beverages, the largest manufacturing sub-sector, continuing an expansionary trend that started in 2013.

Confident consumers

Treasurer Josh Frydenberg said the strong household consumption figures reflected strong employment growth and positive consumer sentiment.

"The June quarter result finishes off a strong 2017-18 financial year for household consumption," Mr Frydenberg said.

"Households are benefiting from recent strong jobs growth, with more than 330,000 jobs created in the last financial year, which is the largest jobs growth since 2004-05."

Eating into savings

But the growth in private consumption combined with moderate growth in disposable incomes has lead to a decrease in the household savings ratio, which was just 1 per cent in the June quarter, its lowest point since the December quarter 2007.

EY chief economist Peter Crone said at a time when wages growth has been weak, private consumption "was being supported by a rundown in household savings".

"If wages don't pick up, there's only so much further that households can continue to draw down on their savings to support consumption," Mr Crone said.