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  • STRATEGIC RISKS FACING THE AUSTRALIAN RED MEAT INDUSTRY AUGUST 2016

    ampc.com.au

  • 32

    AMPC STRATEGIC RISKS FACING THE AUSTRALIAN RED MEAT INDUSTRY

    EY | 1

    Biosecurity & food risks

    Community risks

    Environmental risks

    Industry & market risks

    Political & regulatory risks

    Technological risks

    Number and strength of interconnections

    Rapid and massive spread of infectious

    disease

    Supply chain contamination

    Changing consumption

    patterns

    Unable to attract skilled labour

    Inability to understand evolving consumer

    preference

    Social license to operate

    Increased ‘extreme’ weather

    Changing weather patterns

    Increasing competition

    Threat of substitutes

    Price and currency volatility

    Insufficient capital

    investment

    Large-scale offshore

    processing

    Lack of market coordination among Australian exporters

    Inability to develop differentiated products

    Socioeconomic readjustment of key

    target markets

    Unmanageable inflation in key

    markets

    Supermarket wars extend to beef

    Onerous regulatory environment

    Inability to influence developing political, legal and regulatory regimens

    Rising trade barriers

    Insufficient supporting

    infrastructure investment

    Increased protectionism

    Differential tariffs for live vs. processed beef under

    FTAs

    Reduction in government industry

    resourcing

    Increasingly stringent

    emissions target Failure to match global technological advancement

    R&D lacks focus

    Competition from artificially grown beef substitutes Failure to benefit from

    carcass assessment technologies

    EY | 1

    Biosecurity & food risks

    Community risks

    Environmental risks

    Industry & market risks

    Political & regulatory risks

    Technological risks

    Number and strength of interconnections

    Rapid and massive spread of infectious

    disease

    Supply chain contamination

    Changing consumption

    patterns

    Unable to attract skilled labour

    Inability to understand evolving consumer

    preference

    Social license to operate

    Increased ‘extreme’ weather

    Changing weather patterns

    Increasing competition

    Threat of substitutes

    Price and currency volatility

    Insufficient capital

    investment

    Large-scale offshore

    processing

    Lack of market coordination among Australian exporters

    Inability to develop differentiated products

    Socioeconomic readjustment of key

    target markets

    Unmanageable inflation in key

    markets

    Supermarket wars extend to beef

    Onerous regulatory environment

    Inability to influence developing political, legal and regulatory regimens

    Rising trade barriers

    Insufficient supporting

    infrastructure investment

    Increased protectionism

    Differential tariffs for live vs. processed beef under

    FTAs

    Reduction in government industry

    resourcing

    Increasingly stringent

    emissions target Failure to match global technological advancement

    R&D lacks focus

    Competition from artificially grown beef substitutes Failure to benefit from

    carcass assessment technologies

    FIGURE 1: AUSTRALIAN RED MEAT INDUSTRY RISKS INTERCONNECTIONS MAP

  • 3

    AMPC STRATEGIC RISKS FACING THE AUSTRALIAN RED MEAT INDUSTRY

    EY | 2

    Biosecurity & food risks

    Community risks

    Environmental risks

    Industry & market risks

    Political & regulatory risks

    Technological risks

    Number and strength of interconnections Number of interconnections

    Digital transformation

    Changes in the way we work

    Major shifts in the global market place Urban world and

    demands on infrastructure

    Resourceful allocation of scarce planetary resources

    Increasingly challenged resource

    environment

    Increasing consumer awareness

    Increased regulatory complexity

    Rising export dependence

    Change in consumer demands

    Simpler access to markets

    Ongoing climate change

    Strong emerging

    market growth

    Megatrends

    Industry specific trends

    Increased ‘’extreme’ weather

    Changing weather patterns

    Threat of substitutes

    Inability to develop differentiated products

    Rising trade barriers

    Changing consumption patterns

    Social license to operate

    Increasing competition Large-scale offshore

    processing

    Onerous regulatory environment

    Inability to influence developing political, legal and regulatory

    regimens

    Insufficient supporting

    infrastructure investment

    Increased protectionism

    Reduction in government industry

    resourcing

    Increasingly stringent emissions

    target

    Failure to match global technological advancement

    R&D lacks focus

    EY | 2

    Biosecurity & food risks

    Community risks

    Environmental risks

    Industry & market risks

    Political & regulatory risks

    Technological risks

    Number and strength of interconnections Number of interconnections

    Digital transformation

    Changes in the way we work

    Major shifts in the global market place Urban world and

    demands on infrastructure

    Resourceful allocation of scarce planetary resources

    Increasingly challenged resource

    environment

    Increasing consumer awareness

    Increased regulatory complexity

    Rising export dependence

    Change in consumer demands

    Simpler access to markets

    Ongoing climate change

    Strong emerging market growth

    Megatrends

    Industry specific trends

    Increased ‘’extreme’ weather

    Changing weather patterns

    Threat of substitutes

    Inability to develop differentiated products

    Rising trade barriers

    Changing consumption patterns

    Social license to operate

    Increasing competition Large-scale offshore

    processing

    Onerous regulatory environment

    Inability to influence developing political, legal and regulatory

    regimens

    Insufficient supporting

    infrastructure investment

    Increased protectionism

    Reduction in government industry

    resourcing

    Increasingly stringent emissions

    target

    Failure to match global technological advancement

    R&D lacks focus

    FIGURE 2: RISKS-TRENDS INTERCONNECTIONS MAP

  • 5

    CONTENTS

    Letter to Members 5

    1. Executive Summary 6

    2. Introduction 11

    3. Industry Risks 2016 14

    3.1 Increased competition 15

    3.2 Changing consumption patterns 20

    3.3 Climate change 24

    3.4 Social licence to operate 27

    3.5 Regulatory risks 30

    3.6 Lack of value chain integration 32

    4. The Economic and Industry Outlook to 2025 34

    APPENDIX A 38

    APPENDIX B 44

    APPENDIX C 51

    APPENDIX D 56

  • 5

    AMPC STRATEGIC RISKS FACING THE AUSTRALIAN RED MEAT INDUSTRY

    DEAR MEMBERS, We are currently finalising our 2025 Strategic Plan, and an essential part of that was a future scan. This scan provides an overview of macro, uncontrollable environment factors that have the potential to impact Australian red meat processing.

    From this work, we commissioned Ernst and Young to identify the key strategic risks we face, and this report outlines these risks in more detail, and recommendations for how the meat industry can respond. Six critical strategic risks have been identified over the next five to ten years:

    ⁄ ⁄ Competition

    ⁄ ⁄ Changing consumption patterns

    ⁄ ⁄ Climate change

    ⁄ ⁄ Social licence to operate

    ⁄ ⁄ The regulatory environment

    ⁄ ⁄ Value chain integration.

    There are multiple other strategic risks impacting the industry, which are also covered here. The main purpose of the report is to enable you to manage, adapt to, and overcome the risks. Understanding these risks helps our industry to respond properly to ensure our long-term survival.

    At both the organisation and industry level, we need to develop the systems, processes and relationships to protect a sustainable red meat industry. This report provides the scenarios and the evidence to help with our planning.

    I look forward to working with you to create a bright future for red meat processing.

    Best regards,

    Peter Noble Chairman Australian Meat Processor Corporation

  • 76

    AMPC STRATEGIC RISKS FACING THE AUSTRALIAN RED MEAT INDUSTRY

    1. EXECUTIVE SUMMARY

  • 7

    AMPC STRATEGIC RISKS FACING THE AUSTRALIAN RED MEAT INDUSTRY

    As Australia’s largest manufacturing sector with processing facilit

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