Food Suppliers advised to diversify

Small food suppliers need not be at the mercy of the big supermarkets.

"In fact most smaller industries should not be going anywhere near a supermarket unless they have a turnover of $10 million," said agrifood commentator and consultant Dr David McKinna.

"There are a lot of other distribution channels beside the supermarkets, such as Coles and Woolworths.

"There are the independent supermarkets that are more pro-local, they deal at a less aggressive level and are more supportive of local businesses."

Dr McKinna told the New Rural Industries Australia conference in Ballarat last week that farmers' markets were important, online selling was becoming "increasingly important for high value products" and "boutique food stores and food service options were growing in some areas".

The route or milk bar trade and direct supply companies such as Aussie Farmers Direct were also options.

Dr McKinna said smaller food companies also need to be diversified, rather than rely on a single distribution channel.

"For example, plenty of people might have half their business with Coles, but if Coles pulls the plug then they are threatened," he said.

"Whereas if they have their business channels diversified they will survive."

Dr McKinna said new industries that were started with passion had to quickly get to a commercial phase and critical mass to attract investment.

"In our business, increasingly investors come to us and say 'We want to invest in agrifood, where do we go?' But you have to give them a business case to invest in."

He said marketing boards were "on the nose" as a way to build critical mass in a small industry, but co-operatives were an option.

Dr McKinna is an advocate of attracting outside investors and believes the managed investment scheme structure put Australia's olive industry "on the map".

"We now have a world-class olive industry largely because of MIS investment," he said. "The point I am making is the critical mass that investment bought gave us our industry.

Dr McKinna said if new industries did not have the critical mass to be a national player then they were better off to "do it well in one state".