A new Australian Food and Grocery Council (AFGC) report says the nation’s largest manufacturing sector is growing on paper, but warns that inflation, input costs and investment gaps are undermining competitiveness – and calls for coordinated national action on packaging circularity and digital labelling.
Released as a midway check-in against the AFGC’s 2020 Towards 2030: A food & grocery snapshot reflects on how the sector has performed through a turbulent 2020–25 period marked by COVID-19 disruption, geopolitical instability, inflation and shifting regulation.
While the report suggests the sector appears “on track” to meet its 2030 growth ambition at first glance, it argues the headline numbers mask a more sobering reality once inflation is taken into account. The AFGC notes the original target required average compound annual growth of 6.8 per cent through to 2029–30 and says the sector has posted a five-year CAGR of 6.3 per cent since 2020.
But in real terms, the report says the inflation-adjusted CAGR is 3.9 per cent – a “significant variance” that points to more modest underlying growth.
Costs up, margins down
A central finding is the sustained increase in the cost of doing business. The report describes higher input prices across the board – including ingredients, packaging, energy and freight – and labels this as the single biggest industry trend since 2020.
That cost pressure is flowing through to profitability. The snapshot says revenue has grown faster than profit, resulting in reduced margins and “less profit for each dollar of revenue” earned.
It adds that food manufacturers are limited in how much they can recover rising costs, citing factors such as consumer price sensitivity.
Investment and R&D
The AFGC positions investment as the key lever for lifting productivity, modernising facilities and building export capacity, but argues the sector is not investing at the scale required. In its conclusion, the report says the sector faces an “uphill climb” to meet its growth goals, and that boosting investment will be critical to reaching 2030 ambitions.
It also flags weak innovation settings, pointing to “flatlining” R&D spend. The report says there has been no growth in sector R&D investment since Sustaining Australia was published, and that R&D outlays are lower in both real and nominal terms than 2009–10.
The AFGC links this to competitiveness risks, noting R&D underpins new products and packaging, consumer insights, and process and manufacturing efficiency.
Packaging and labelling
For packaging stakeholders, the report’s strongest signals sit within its regulatory reform recommendations – particularly its call for national alignment on circular economy settings and next-generation labelling.
Among its recommendations, the AFGC calls for “circular economy standardisation” via a national regulatory framework with uniform standards for packaging design, kerbside collection, recycling infrastructure, and mandatory value chain traceability.
It also urges policy settings to accelerate the uptake of digital labelling.
The snapshot notes “encouraging signs” on digital labelling, pointing to Food Standards Australia New Zealand identifying it as a priority, with scoping work commencing in late 2025.
It argues digital labelling could deliver richer product information for consumers while streamlining compliance and improving traceability and supply chain efficiency.
The wider policy wishlist
Beyond packaging, the report also calls for measures spanning energy reliability, gas supply, investment incentives (including a higher-threshold Instant Asset Write-Off and accelerated depreciation), skills programs to address regional shortages, supply chain mapping, and an export growth strategy.
Towards 2030: A Food and Grocery Snapshot is available here.
