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Is consolidation the key to business success?
Horticultural production enterprises in Australia are getting bigger, generating significant increases in farm gate performance over the last eight years.
The number of vegetable production enterprises in Australia dropped by 22 per cent between 2008 and 2015, with negligible change to the production area. The farm gate performance of the remaining businesses rose by 11 per cent.
The fruit and nut industries have followed the same trend with a drop of 30 per cent in the number of businesses that manage the same number of trees. Farm gate performance in 2015 was 13 per cent higher than in 2008.
On the export scene there has been considerable growth and consolidation of farmer-to-export fruit and vegetable businesses to 2017.
Meeting the needs of the market is driving the significant shift in the structure of horticultural businesses. Supermarkets dominate the marketplace, taking over 60 per cent of the fruit and vegetables produced, with the remainder shared between speciality stores and the food service sectors.
In the same 2008–2015 timeframe, the number of fruit and vegetable wholesaling enterprises decreased by 2 per cent and the number of primary wholesale businesses at the Brisbane Markets has remained constant at 52. With major supermarkets controlling the lion’s share of the horticultural market there are now less options for farmers who operate outside this channel. Every business must understand the changes to business performance over time and look for ways to work smarter.
Consolidation is at odds with the powerful and personal attachment many growers have to their family business. The connection with the family business model in our horticultural value chain runs very deep with individuals, their families and their communities. A big question to consider is whether this model can be sustained within the mainstream food production environment or if the model now only works for those able to supply the small number of retail businesses that offer luxury foods to consumers who seek a point of difference in the food they eat.
While the community is seeking a range of pricing options, with an overwhelming sentiment for “Down, Down”, horticultural businesses are facing rising costs. There has never been a greater need to understand your business model to focus on a low cost business model, customer intimacy model or a product development model.
Business consolidation is already having a significant impact on supply and value chain profitability due to the volume of sales and reduction in fixed costs. It is a trend that is occurring in many Australian business sectors, and the horticultural industry and individual businesses must consider the implications for the horticultural industry as a whole and at every level of the supply chain.
 ABS - 75030DO004_200809 Value of Agricultural Commodities Produced, Australia, 2008-09 and 75030DO003_201415 Value of Agricultural Commodities Produced, Australia, 2014-15
 SPENCER, S. & KNEEBONE, M. 2012. FOODmap An analysis of the Australian food supply chain.
 IBISWorld Industry Report F3605 - Fruit and Vegetable Wholesaling - in Australia - March 2017Type your paragraph here.