Australia can be the world’s food bowl, says agribusiness king Doug Shears

Agribusiness mogul Doug Shears (left), with Jean-Calvin Kayiranga, is now applying his business nous to helping farmers in Rwanda.

by Nassim Khadem

As the head of one of Australia's largest privately owned agribusiness enterprises, ICM, Doug Shears has advice for the Gillard government.

Rather than "waste" almost $30 million researching how farmers can better export to Asia, invest $50 million in marketing Australia as a clean and green food supplier to wealthy Asian consumers.

"Forget about all the studies," Shears says. "The government needs to create demand by improving the perception that Australia's food is the cleanest in the region."

In May, Agriculture Minister Joe Ludwig announced a National Food Plan that aims to turn Australia into a food bowl for Asia. The $28.5 million in research money is a major part of that.

The Organisation for Economic Co-operation and Development projects that the world's middle class will grow from about 1.8 billion now to 4.9 billion by 2030, with 85 per cent of this growth coming from Asia.

The government's food plan, a 2010 election promise, is about tapping into that anticipated demand. It sets an ambitious target – a 45 per cent increase in Australia's annual food exports, from $30 billion to $43.5 billion by 2025.

After Ford's decision last month to stop making cars at its Geelong plant within the next three years, the food plan is also part of Prime Minister Julia Gillard 's 2013 election pledge that Australia will remain an exporter of high-quality products.

The problem, according to business and industry leaders including Shears, is that the bulk of the government's funding is being channelled into research and grants, with only $2 million going to branding Australian produce in Asia.

Shears (valued in this year's BRW Rich 200 at $345 million) is best known for helping build Uncle Tobys and Berri fruit juice into iconic brands.

He later sold both companies and made millions in doing so, but the founder of ICM Agribusiness group still exports an array of goods across Australia and overseas (these include fruit, herbs, dairy and beef products; as well as cashmere).

He says the government's food plan is flawed because it is a production-driven program rather than a demand-driven one. "If there's a demand, Australians will get in and produce to meet that demand," he says. "If demand exceeds supply, then the price [to the farmer] goes up."

Shears, who more than 30 years ago started business as a farmer in Hillston, NSW, is a long-time advocate of helping Australian food manufacturers value add and export overseas. He says he feels for the industry, which is competing in the toughest export environment he's seen.

Australia's two major supermarket chains, Coles and Woolworths , represent about 50 per cent of fresh produce sales in Australia, and 70 per cent of packaged food sales. The chains are pushing branded products off the shelves to make way for their own private label products. While Shears's Gourmet Garden brand is established on the shelves, he says the smaller players lack bargaining power.

"It's really tough out there," he says."How do people deal with the banks, the supermarkets and major global competitors? How can you compete with the multinationals with hundred-million dollar sales lines? That's why the big guys get bigger and small guys get despatched."

Australians now have little choice but to look for new markets. And that's why Asia is crucial. The value of Australian food exports to Asia in 2011-12 was $30.5 billion. But most of this goes offshore in an unprocessed state. There's a huge opportunity to boost exports and create Australian jobs by having more locally based, value-added food manufacturers.

According to government figures, Asia today receives about 40 per cent by value of our annual farm and fisheries food production.

The Australian food industry employs 1.64 million people – 15 per cent of the country's total employment. Exports to Asia are crucial for regional Australia – 90 per cent of food production jobs and 50 per cent of food processing and manufacturing jobs are located away from the urban sprawl.

Shears says demand for Australian products will grow over coming decades but so too will competition from European and North American producers.

He says local farmers already know how to produce quality food. "We just can't sell it at a reasonable price," he says. "Australia can affect that by pushing the Australian clean-food name. If the current government spent $50 million doing that, they'd be better off than doing anything else."

Rich 200 member Harold Mitchell agrees. Best known as a media buyer, Mitchell also owns more than 600,000 hectares of cattle stations and exports live cattle to Indonesia. "Australia has an incredible opportunity to become part of the food bowl for Asia," Mitchell says. "We need to understand what this market needs, and forge awareness [of Australian produce] right across Asia, where we can supply. Australia is closer to all those Asian markets than anyone, anywhere else in the world."

The food plan's goals are worthy but "lack follow-through in terms of concrete action", according to the chief executive of the Australian Food and Grocery Council, Gary Dawson .

"To achieve a 45 per cent increase by 2025, there has to be significantly more value-added food exports from Australia. And there's really nothing in the plan that will build confidence to invest in that food value adding."

The National Farmers Federation has been supportive of the government's food plan. Its president, Duncan Fraser, says the government took on board many of the NFF's recommendations, including money for researching export opportunities to Asia, as well as pushing farming careers in schools.

But he also thinks the amount of funding is nowhere near what's needed to achieve the export targets.

Countries including China and India face major food security issues, which make Australian fresh produce attractive to their growing middle class. "We can't compete on price because of our high Australian dollar and higher wages, so we have to find ways to continue to market our products, tapping into our clean, green image," Fraser says. "We're doing that already – but we need more of it."

People overseas will pay good money to eat Australian food, but many at home don't realise what they are missing out on, says William Churchill , who heads AUSVEG, the body representing Australia's 9000 vegetable growers. "Australians take for granted the quality of fresh food at the price they get it for," Churchill says. "Go to England and see what Tesco carrots look like for 99¢ – I wouldn't feed it to the cows. The quality in Australia is fantastic but many people don't know."

He says that for the past decade, industry and governments have spent money on increasing supply rather than creating demand. "Our industry has been investing heavily in R&D – solving production problems such as how to make tractors more efficient," he says. "We should have invested in developing markets first."

Mildura Fruit Company , one of Australia's largest orange and citrus packers, exports about 80 per cent of what it packs overseas. General manager Perry Hill says his main problem is trade barriers. But he, too, sees the value of marketing – although he says it needs to be tailored to specific consumers in specific markets. "It's about working with importers in the counties we export to, who can help better promote the product to consumers," he says.

Shears says the other important part of becoming Asia's food bowl is value adding. Gourmet Garden's products, which was launched six years ago, are processed from Shears's factory in the Glass House Mountains in Queensland. The building has a 40-metre green belt surrounding the back of the site (Shears had to spend big bucks on a walkway and some 8000 native trees for the community when building the site).

As one of Australia's most successful producers of value-added agricultural goods, he'd know. ICM's interests include a pastoral station, orange producer Hillston Citrus, the Riverina milk and cheese brands and water manager ICM Water. Shears also owns Botanical Food Co (whose Queensland-based businesses include fruit processor Tropico Fruits and herb and spice processor Gourmet Garden).

"It's a high-tech factory producing a global food product which is distributed to around 18,000 supermarkets across the world," he says.

"It's a success story in terms of Australian manufacturing making high-quality products that can be exported."

Shears says they are making big investments in technology and looking to launch a new product globally later this year. "The technology is patented but it responds to consumers' current expectations around health and well-being, and is right in the centre of the cooking craze," he says. "We are currently growing in double figures per annum, with most of that growth coming from America."

Today Shears spends a large amount of his time in Rwanda helping local farmers produce rice for its domestic population.

He went there six years ago at the invitation of Rwandan leader Paul Kagame , and, three years ago, moved there with his wife, Deirdra.

"It's a whole new world," Shears says. "It takes you a few years to understand it. I'd been observing for a while but it's not until you get there that you start to understand it clearly."

His focus is on helping Rwanda's middle class grow. It's been 19 years since the Rwandan genocide, when elements of the Hutu majority slaughtered up to a million of the Tutsi minority. But today, the tiny east African nation is held up as a growth model for many of its neighbours.

"It's grown significantly due to the government's effort in working on the structural issues of the economy and building a commercial base for the future," Shears says. "It's an amazing growth story; it's the African growth story."

Shears says he's mainly there for philanthropic reasons, although the company is also growing. ICM buys and processes rice in its three mills.

The company works with 24 farming co-operatives, representing about 38,000 farmers, and in this way helps build their skills and quality of life.

ICM then sells the product through company-owned shops as well as Rwandan schools and hospitals. It earns about $10 million in annual turnover from doing so.

Shears says the company is slowly expanding operations in east Africa, working with farmers in Tanzania.

"If we get to a stage of excess, we would contemplate exports outside Africa," he says."In Rwanda, rice has become more popular, more affordable and more readily available. So we are still racing to catch up with demand."

For Shears, Asia is crucial to Australia's plans to become its food bowl. But, he says, if Africa can figure out a way to stamp out corruption to the extent Rwanda has, 20 to 30 years from now, the discussion may no longer be about servicing Asia's rising middle class but Africa's.