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Agri-food system transformations and diet-related chronic disease in Australia: a nutrition-oriented value chain approach Libby Hattersley Accepted: 12 November 2012 / Published online: 24 November 2012 Ó Springer Science+Business Media Dordrecht 2012 Abstract Attention has become increasingly focused in recent years on the role agri-food system transformations have played in driving the global diet-related chronic dis- ease burden. Identifying the role played by the food-con- suming industries (predominantly large manufacturers, processors, distributors, and retailers) in particular, and identifying possibilities to facilitate healthier diets through intervening in these industries, have been identified as a research priority. This paper explores the potential for one promising analytic framework—the nutrition-oriented value chain approach—to contribute to this area, drawing on recent insights from the global value chain (GVC) lit- erature to develop an institutionally-enriched approach. The research focused on a canned deciduous fruit value chain linking growers, processors, and retailers in South Africa and Australia. Findings reveal the multiple drivers which have converged to shape this value chain over time, and the key actors which are influencing product avail- ability, composition, price, and promotion within this sector. With its emphasis on identifying implications for end-consumption, rather than economic outcomes within the chain, nutrition-oriented value chain research repre- sents a significant shift in focus for the GVC framework. Therefore, an immediate opportunity for further research is to extend the analytic framework to primary research on end-consumption behaviours. Keywords Agri-food system Á Supply chain Á Food-consuming industries Á Global value chain analysis Á Nutrition Á Diet Á Food environment Á Population health Á Chronic disease Abbreviations CCA Coca Cola Amatil CAP Common agricultural policy EEC European economic community FCI’s Food-consuming industries GCC Global commodity chain GVC Global value chain NCD Non-communicable disease WTO World Trade Organization Introduction The steady growth in international trade in food and agri- cultural products over recent decades (Hawkes et al. 2010; Nugent 2004), the increasingly dominant role of concen- trated food manufacturing, processing, distribution, and retail industries (collectively referred to throughout this paper as the ‘food-consuming industries’ (FCIs) (Hawkes and Ruel 2006; Hawkes 2009; Hawkes et al. 2012), and the tighter vertical coordination of supply chains for food safety, quality, and traceability concerns (Burch and Lawrence 2005, 2007) have together been credited with delivering broad improvements in food availability, vari- ety, and safety (Reardon and Berdegue 2006; Dixon 2007; Reardon et al. 2010). However, these transformations have also coincided with a rapid rise in diet-related chronic diseases since the 1980s (WHO 2003). Chronic, non- L. Hattersley (&) National Centre for Epidemiology and Population Health, The Australian National University, Canberra, Australia e-mail: [email protected] 123 Agric Hum Values (2013) 30:299–309 DOI 10.1007/s10460-012-9411-9
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Page 1: Agri-food system transformations and diet-related chronic disease in Australia: a nutrition-oriented value chain approach

Agri-food system transformations and diet-related chronic diseasein Australia: a nutrition-oriented value chain approach

Libby Hattersley

Accepted: 12 November 2012 / Published online: 24 November 2012

� Springer Science+Business Media Dordrecht 2012

Abstract Attention has become increasingly focused in

recent years on the role agri-food system transformations

have played in driving the global diet-related chronic dis-

ease burden. Identifying the role played by the food-con-

suming industries (predominantly large manufacturers,

processors, distributors, and retailers) in particular, and

identifying possibilities to facilitate healthier diets through

intervening in these industries, have been identified as a

research priority. This paper explores the potential for one

promising analytic framework—the nutrition-oriented

value chain approach—to contribute to this area, drawing

on recent insights from the global value chain (GVC) lit-

erature to develop an institutionally-enriched approach.

The research focused on a canned deciduous fruit value

chain linking growers, processors, and retailers in South

Africa and Australia. Findings reveal the multiple drivers

which have converged to shape this value chain over time,

and the key actors which are influencing product avail-

ability, composition, price, and promotion within this

sector. With its emphasis on identifying implications for

end-consumption, rather than economic outcomes within

the chain, nutrition-oriented value chain research repre-

sents a significant shift in focus for the GVC framework.

Therefore, an immediate opportunity for further research is

to extend the analytic framework to primary research on

end-consumption behaviours.

Keywords Agri-food system � Supply chain �Food-consuming industries � Global value chain analysis �Nutrition � Diet � Food environment � Population health �Chronic disease

Abbreviations

CCA Coca Cola Amatil

CAP Common agricultural policy

EEC European economic community

FCI’s Food-consuming industries

GCC Global commodity chain

GVC Global value chain

NCD Non-communicable disease

WTO World Trade Organization

Introduction

The steady growth in international trade in food and agri-

cultural products over recent decades (Hawkes et al. 2010;

Nugent 2004), the increasingly dominant role of concen-

trated food manufacturing, processing, distribution, and

retail industries (collectively referred to throughout this

paper as the ‘food-consuming industries’ (FCIs) (Hawkes

and Ruel 2006; Hawkes 2009; Hawkes et al. 2012), and the

tighter vertical coordination of supply chains for food

safety, quality, and traceability concerns (Burch and

Lawrence 2005, 2007) have together been credited with

delivering broad improvements in food availability, vari-

ety, and safety (Reardon and Berdegue 2006; Dixon 2007;

Reardon et al. 2010). However, these transformations have

also coincided with a rapid rise in diet-related chronic

diseases since the 1980s (WHO 2003). Chronic, non-

L. Hattersley (&)

National Centre for Epidemiology and Population Health,

The Australian National University, Canberra, Australia

e-mail: [email protected]

123

Agric Hum Values (2013) 30:299–309

DOI 10.1007/s10460-012-9411-9

Page 2: Agri-food system transformations and diet-related chronic disease in Australia: a nutrition-oriented value chain approach

communicable diseases (NCDs)1 are now the leading

causes of ill health and death globally and, while there is

some evidence to suggest that NCD prevalence rates may

be reaching a plateau in high-income countries such as

Australia, their global burden is projected to increase

exponentially in the coming decades as a result of rapid

rises in low and middle income countries (Hawkes 2007;

Hawkes et al. 2012; Stuckler 2008).

The burden on, and future threat to global health and

development posed by NCDs has prompted a number of

high-level meetings in recent years, including the High-

Level Meeting of the UN General Assembly on the Pre-

vention and Control of Non-Communicable Diseases in

September 2011 (WHO 2011). Internationally, NCD pre-

vention efforts have focused on four major chronic diseases

(obesity, cardiovascular disease, type II diabetes, and cer-

tain cancers) which are responsible for the majority of

deaths globally, and are highly preventable through four

shared behavioural risk factors: tobacco use, inadequate

physical activity, alcohol abuse, and unhealthy diet

(Stuckler 2008; WHO 2010, 2011). There is consistent and

convincing evidence available that diets high in energy,

saturated fats, salt, and sugar, and low in fruits, vegetables,

and whole grains increase an individual’s risk of devel-

oping high cholesterol, blood pressure, blood glucose, and

body weight (WHO 2003), and almost one-fifth (19 %) of

all deaths worldwide are attributable to five diet-related

risk factors (in combination with inadequate physical

activity): high blood pressure, high blood glucose, over-

weight/obesity, high cholesterol, and low fruit and vege-

table intakes (WHO 2009; Hawkes et al. 2012).

The need for, and value of, a multi-level, multi-disci-

plinary approach to chronic disease prevention, capable of

tackling the ‘upstream’ agri-food system drivers of diets—

the ‘causes of the causes of the causes’—has been widely

advocated and has the potential to promote enormous

benefits for population health (Stuckler 2008). Attention on

the role that the FCIs have played in the global NCD

burden in particular has become increasingly focused in

recent years (Hawkes 2006; Hawkes et al. 2012; Monteiro

and Cannon 2012; Stuckler et al. 2012; Stuckler and Nestle

2012; Swinburn 2011), and identifying opportunities for

these industries to deliver a healthier food supply has been

identified as a research priority (Hawkes et al. 2012).

Nutrition-oriented value chain approaches (also vari-

ously referred to as ‘leveraging agriculture for improved

nutrition’, ‘nutrition-sensitive agriculture’, ‘value chains

for nutrition’, and ‘consumption-oriented value chains’) are

starting to gain traction in the international development

community as a means of identifying opportunities to

increase supply and demand for micronutrient-rich foods in

resource-poor settings. To-date, these approaches have been

applied almost exclusively to settings in which a significant

proportion of the population depends directly on agricultural

activities for food and income, and the over-riding concern is

one of chronic under-nutrition (Fan and Pandya-Lorch 2012;

Hawkes and Ruel 2011). In this context, the focus has jus-

tifiably been on identifying opportunities to enhance the

ability of the agricultural sector to improve nutrition while

also providing solutions to development challenges (Hawkes

and Ruel 2011). However, evidence from high-income

countries suggests that in industrialised agri-food systems

where imbalanced diets and over-consumption rather than

under-nutrition are the dominant (although not, by any

means, the only) concern, intervention in the agricultural

sector is likely to be a relatively ‘blunt instrument’ for pur-

suing public health goals (Alston et al. 2008; Golan and

Unnevehr 2008). In these contexts, as argued by Hawkes

et al. (2012, p. 343), ‘‘policies to intervene directly in agri-

cultural production to promote healthy eating are unlikely to

be effective or efficient if they do not take into account how

foods are processed, distributed and marketed through the

supply chain’’.

The potential for nutrition-oriented value chain approa-

ches to highlight the key actors shaping the availability,

formulation, pricing, and promotion of foods in industria-

lised agri-food systems has recently been demonstrated by

several scholars, with a focus on the United States (US) agri-

food system (Christian and Gereffi 2010; Gereffi and

Christian 2007, 2009; Gereffi et al. 2008; Hawkes 2009).

This paper seeks to build on this nascent research area by

exploring the application of a nutrition-oriented value chain

approach to the Australian agri-food system. Australia was

one of the first countries in the world to implement a national

obesity prevention strategy (NHMRC 1997); however, rates

of obesity, type II diabetes, and cardiovascular disease

remain amongst the highest in the world. The overwhelming

focus of diet-related chronic disease prevention efforts in

Australia has been on influencing the end-consumer and

there is little evidence available on promising interventions

targeting the agri-food system itself. Addressing this evi-

dence gap has the potential to support a comprehensive,

multi-level approach to diet-related chronic disease pre-

vention in Australia, as well as provide important insights for

international NCD prevention efforts.

Research design and methods

In their report for the International Food Policy Research

Institute’s (IFPRI) landmark February 2011 conference

1 Chronic diseases are health conditions that are typically distin-

guished by a prolonged period of illness, gradual onset (with long

latency periods between risk accumulation and onset of illness), and

complex, multi-factorial etiologies (multiple risk factors).

300 L. Hattersley

123

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‘Leveraging Agriculture for Improving Nutrition and

Health’, Hawkes and Ruel (2011) advocated for the tai-

loring of nutrition-oriented value chains research to context

and research goals, and argued that it is more useful to

define this emergent field by a set of unifying principles, or

characteristics, than a single approach. Core principles

identified in this report include the identification of out-

come-oriented nutrition goals and a clearly defined nutri-

tion problem; focusing on the functioning and coordination

of the whole chain; and creating and capturing value for

nutrition, consumers, and economic actors. Ultimately,

Hawkes and Ruel (2011, p. 15) argued, a key goal of

nutrition-oriented value chain research should be to address

the trade-offs between, and identify opportunities to inte-

grate, nutrition goals with economic opportunities. The

report identified three theoretical antecedents within the

‘nutrition-oriented value chains’ literature to-date: the field

of supply chain management (SCM) (with its focus on

identifying opportunities for individual firm competitive

advantage), the filiere literature (focused on quantitative

analysis of agri-food dynamics for agricultural develop-

ment), and the ‘global chains’ literature (with its focus on

qualitative analysis of the processes, causes, and conse-

quences of global economic integration). Of these, insights

from the global chains literature, and specifically the global

value chain (GVC) approach, were most relevant for the

present research goal.

Previous research has explicitly explored the potential

for the GVC framework to support insights for obesity and

diet-related chronic disease prevention (Christian and

Gereffi 2010; Gereffi and Christian 2007, 2009, 2010;

Gereffi et al. 2008). The GVC approach has its roots in

world-systems theory, which classifies countries into core,

semi-periphery, and periphery categories, but shifts the

analytic unit from nation-states to economic actors

(Wallerstein 1974; Gereffi 1994). In the past, the approach

has been applied mainly to the study of manufacturing

industries such as electronics and automobile industries,

although has been increasingly applied to agri-food sectors

in recent years. The initial framework (Gereffi 1994)

encompassed three dimensions of analysis: an input–output

structure (the set of products and services linked together in

a sequence of value-adding economic activities), territori-

ality (the spatial dispersion of an industry, or sector’s,

activities), and governance (the authority and power rela-

tionships determining the allocation of financial, material,

and human resources). A fourth dimension, institutional

context (the social and institutional norms and regulatory

practices shaping inter-firm relations and configurations),

was added later. The first two dimensions of the GVC

framework are essentially descriptive, while the second

two are deliberately explanatory and intended to draw out

the control (direct and indirect) that various actors have

over chain trajectory and outcomes. While Gereffi and

Christian (2007, 2009, 2010) focused on the organization

of US-based value chains and their inter-firm governance

structures, it is the linkages between the latter two

dimensions of the GVC framework (institutions and gov-

ernance), and their historical path dependency, that this

paper is most concerned with exploring. Recent contribu-

tions to the literature aimed at strengthening the GVC

framework were drawn on to support this.

Governance in the GVC literature is broadly defined as

the process of setting, communicating, and enforcing

compliance to, parameters along the supply chain within

which other actors elsewhere in the chain must operate

(Gibbon et al. 2008). While this definition encompasses

both internal and external governance dynamics, the GVC

literature has tended to focus on intra-chain (inter-firm)

power and governance dynamics (based on the concept

that, given the power, firms within a chain will adopt

strategies to position themselves at advantageous points

within it), while downplaying the ways in which chains are

constituted and reconstituted by the broader societal,

institutional, and ecological settings in which they are

embedded (Bair 2005; Neilson and Pritchard 2009; Morris

and Kirwan 2011). Neilson and Pritchard (2009) recently

drew on insights from the institutional economics and

global production network (GPN) literatures to argue for an

‘institutionally-enriched’ GVC approach that affords

greater space for analysis of the institutional environment,

and views institutional environments and value chain

governance as necessarily co-produced.

Drawing together Gereffi, Christian and Hawkes’ pre-

liminary work on obesity-oriented value chains and Neil-

son and Pritchard’s (2009) contribution to the GVC

literature, this paper applies an institutionally-enriched

nutrition-oriented value chain approach to examine trans-

formations in one particular sector of Australia’s agrifood

supply: processed fruits. The research focuses on a value

chain for canned deciduous fruits involving growers and

processors in South Africa and Australia supplying Aus-

tralia’s two major supermarket chains: Coles and Wool-

worths. This particular sector was not selected based on its

potential as a ‘best-buy’ from a diet-related chronic disease

prevention perspective. Rather, it was selected for its

potential to provide unique and timely insights into con-

temporary agri-food system dynamics and their bidirec-

tional links with food consumption. Globally, the FCIs

have shown increasing interest in the processed and

packaged fruit categories in recent years as they seek to

‘tap into’ growing public interest and anxiety over the links

between food and health, alongside continued demand for

foods that offer convenience and novelty. As a result, the

range of products available within this category has been

expanding rapidly and shows no signs of slowing.

Agri-food system transformations 301

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Processed fruits occupy an ambiguous dietary role with the

dual potential to both support and undermine diet-related

chronic disease prevention strategies; yet, products in this

category tend to be heavily marketed based on health

attributes. Within Australia, the canned deciduous fruit

sector specifically has undergone an extended period of

restructuring in recent decades culminating in one major

processor, SPC Ardmona, capturing the market for virtu-

ally all branded canned deciduous fruits in Australia.

Meanwhile, the market share captured by supermarket

own-labels in this category has been growing rapidly, with

much of this growth supplied by canneries operating in

South Africa/Swaziland and China.

The findings presented below are based on analysis of

key informant interviews conducted in Australia, South

Africa, and Swaziland between July 2009 and April 2010

with fifty-nine canning deciduous fruit growers, cannery

representatives, importers, retailers, and relevant repre-

sentatives of industry, Government, and civil society bod-

ies. Key informants were recruited through a snowball

sampling approach in which the aim was to speak to a wide

range of industry, Government, and community represen-

tatives in order to gain broad insights into changes in the

industry over time, their drivers and implications. Key

informants included small, medium, and large-sized

growers in Australia and South Africa, representatives

from SPC Ardmona and all three deciduous fruit canneries

in South Africa and Swaziland at the time (Rhodes Food

Group, Langeberg and Ashton, and Del Monte South

Africa),2 as well as Australia’s two major supermarket

chains (Coles and Woolworths). Interviews were semi-

structured and tailored to each participant’s area of

expertise. Ethical approval for the research was obtained

from the Australian National University’s Human Research

Ethics Committee. Data from the key informant interviews

was triangulated with field notes and extensive analysis of

industry and government documents and reports on the

sector.

Findings

Nature and organisation of Australia’s canned

deciduous fruit supply

When a commercial food manufacturing industry was first

established in Australia in the mid-1800s, refrigeration

and freezing technologies were under development but

remained neither reliable nor widely available (Farrer 2005).

The process of heat preserving and canning meats, fruits,

and vegetables therefore played an integral role in the

development of the industry and in the settler colony’s

ambitions as an agri-food export platform for Britain. By the

early 1900s, large-scale deciduous fruit3 growing, jam-

making, and fruit canning industries were operating in

south-eastern Australia; facilitated by a State-sponsored

project to promote settlement and agricultural expansion in

regional Australia (Sargent 1985; Farrer 2005). A distinct

pineapple growing and canning industry was developed

simultaneously in northern Queensland (Burch and Goss

1999).4

Grower-cooperative deciduous fruit canneries estab-

lished in New South Wales, Victoria, and South Australia

became oriented towards, and heavily reliant on, the British

market where they received preferential trading status.

Export volumes rose steadily amidst strong demand in

Britain, with a record 170,000 tonnes exported in 1968

representing 84 % of total production volume (BAE 1986).

Canned fruits had meanwhile become standard household

grocery items in Australia by the 1930s and domestic

brands quickly established themselves as ‘symbols of

national production’; aided by the emergence of a national

advertising industry (Humphery 1998). Apparent per capita

consumption of processed fruits (excluding juiced and

dried fruits) rose 200 % in Australia between the late 1930s

and 1970s (ABS 1999), with virtually all of this demand

supplied domestically. Prior to the 1990s, canned fruits

were only imported into Australia to top-up supply short-

ages (BAE 1986, p. 16).

This ‘golden era’ for the industry came to an abrupt end

in the mid-1970s when Britain joined the European Eco-

nomic Community (EEC) and the fruit canneries effec-

tively lost their major market. Whilst the canneries went on

to find new export market opportunities, initially in Canada

and Japan, export volumes never again reached the heights

of the 1960s. Meanwhile, domestic demand began to

decline in the early 1970s, with per capita consumption of

canned deciduous fruits falling 35 % between 1970 and

1986 (ABARE 1987; ABS 1999). The combination of

declining export and domestic market prospects triggered a

prolonged period of consolidation in the canning and fruit

growing sectors and, over a period of 30 years, the canning

sector consolidated from five canneries down to one

2 The South African deciduous fruit canning industry further

consolidated after field work had been completed, with Rhodes Food

Group acquiring Del Monte South Africa in July 2010.

3 Botanically, deciduous fruits grow on trees which shed their leaves

in winter and include grapes, kiwifruit, blueberries, and cherries.

Commercially, peaches, apricots, pears, plums, and apples are most

commonly used in canning.4 While deciduous and tropical canned fruits sit alongside each other

in supermarket aisles, deciduous and tropical fruit canning have

traditionally operated as largely separate industries due to the distinct

climatic requirements involved in fruit production. Only the decid-

uous fruit canning industry is examined in this paper.

302 L. Hattersley

123

Page 5: Agri-food system transformations and diet-related chronic disease in Australia: a nutrition-oriented value chain approach

(BAE 1986; Hattersley et al. this issue). The sole remaining

deciduous fruit canner in Australia, SPC Ardmona, was

acquired by Coca Cola Amatil (CCA), the Australian-based

bottler and distributor for the Coca Cola Company, in

2005.

SPC Ardmona is now the largest manufacturer of ready-

to-eat fruit and vegetable products in Australia. Packaged

fruit products (in cans and plastic packaging) represent just

under half of the company’s overall category mix by vol-

ume, with the remainder captured by canned baked beans

and spaghetti, processed tomatoes, jams and spreads, and

sauces. It currently operates two factories in the Goulburn

Valley, Victoria, and is supplied by approximately 200

deciduous fruit growers in the region (down from 350 in

the 1970s) (BAE 1986). The cannery rationalized its fruit

supply base by 30 % between 2006 and 2010. Grower-

suppliers receive an average of 40 % of total farm-gate

income from the cannery, with the balance predominantly

earned from supplying deciduous fruit and other horticul-

tural crops to the fresh domestic and export markets.

According to the Canned Fruit Industry Council of Aus-

tralia (CFICA), cannery fruit intakes steadily declined from

211,700 tonnes in 1972–1973 to approximately 100,000

per year over the last few years (with a low of 49,500

tonnes in 2009–2010). In 2005, the year CCA acquired

SPC Ardmona, domestic branded grocery sales represented

50 % of SPC Ardmona’s overall sales revenue, exports

represented 23 %, and retailer own-labels represented 8 %,

with industrial and food service channels capturing the

remaining 19 % (CCA Annual Report 2005). Share of sales

revenue captured by branded grocery sales declined to

36 % in 2010 (CCA Annual Report 2010).

Occurring in parallel with restructuring in this sector

over the last four decades have been major transformations

in food and grocery retailing in Australia. Until 1960,

Australia’s grocery retail sector was dominated by small,

specialized independent stores (Griffith and Wright 2009).

By the end of this decade, two retail chains, Coles and

Woolworths, had captured a majority share of food and

grocery retail sales nationally (Humphery 1998). While

canned fruits were ideally suited to the early years of

Australia’s supermarket sector, when a predominance of

‘bargain basement’ store formats stocked mainly shelf-

stable, national brands, the traditional can of peaches was

competing with growing demand for fresh fruits and fruit

juice by the 1980s. By this time, retailers had also released

their own-label brands of canned fruits, although these did

not initially present a strong challenge to cannery brands.5

Retailer own-labels in Australia were focused for almost

two decades on lower-priced, ‘budget’ brands and, perhaps

perceiving little competition, the Australian fruit canneries

initially refused to supply product for the retailers’ labels

(BAE 1986; Burch and Goss 1999). Throughout the 1980s,

retailers imported canned deciduous fruits under their own-

labels from Europe (Spain and Greece) and China, with

these labels capturing less than 5 % of total canned fruit

sales at the time (BAE 1986). By 1991, the Australian

canneries conceded to supplying the retailers with product

under their own-labels. Import volumes initially dropped as

a result, but began to rise sharply again from 2003–04

onwards when the supermarkets actively sought to expand

their international own-label supplier base, establishing

contracts with South African canneries, Rhodes Food

Group (RFG) and Langeberg and Ashton (L&A).

South Africa is one of the world’s largest producers of

fresh and canned deciduous fruits, the vast majority of

which is exported. The South African canning industry has

itself undergone a period of intense consolidation over

recent decades, from a peak of 17 canneries down to two.

While both canners also supply branded and own-label

product domestically, over 85 % of canned deciduous

fruits produced in South Africa are exported, and both RFG

and L&A are major own-label suppliers into the UK and

European markets in particular. Both RFG and L&A are

based in the Western Cape, with RFG also operating

Swaziland Fruit Canners Pty Ltd (Swazican) in Swaziland

where it manufactures canned pineapple and grapefruit

products for export markets, as well as remanufacturing

deciduous fruit sent from the Western Cape into plastic

snack-sized containers for the UK, European, and Austra-

lian markets. Approximately 1,000 farmers in the Western

Cape are involved in growing canning deciduous fruit for

the two canneries.

In recent years, Australia’s two supermarket chains have

continued to invest significantly in improving the quality

and marketing of their own-label brands.6 In Woolworths’

November 2011 investor briefing session, the company’s

then newly-appointed CEO Grant O’Brien reported a

180 % growth in budget Home Brand sales over the ten

year period 2000–2011, and a target to double its own-label

5 The first supermarket own-label was launched in Australia in 1978

by the Franklins retail chain under the ‘No Frills’ brand, and Coles

and Woolworths had released generic canned fruit labels by the early

1980 s.

6 The entry of German discount retailer Aldi (in particular) and US

hypermarket-style retailer Costco into the Australian supermarket

sector in 2001 and 2009 respectively is said to have increased

competitive pressures on Coles and Woolworths and prompted the

Australian retailers to invest more heavily in their own-label ranges as

a source of competitive advantage (Griffith and Wright 2009). The

entry of these two transnational retailers into the Australian market

dispelled previously-held assumptions that high levels of retail sector

concentration and saturation (amongst the highest in the world), a

relatively small population, and geographic isolation were disincen-

tives to foreign-direct investment in the Australian grocery retail

sector.

Agri-food system transformations 303

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penetration by 2015 to match own-label penetration in the

UK and US markets.

The following section locates the Australian value chain

within the global deciduous canned fruit industry more

broadly.

Global canned deciduous fruits industry

Throughout much of the 20th Century, the global canned

deciduous fruits industry was dominated by a small number

of well-established producer countries (predominantly

Spain, Greece, Italy, the United States, South Africa, and

Australia) supplying into a handful of developed interna-

tional markets (Britain and continental Europe, the United

States, and Canada). The industry became highly concen-

trated and dominated by a small number of manufacturers

operating trans-nationally, such as US-based multinationals

Del Monte and Heinz. Australian canneries were high-cost,

low-volume producers relative to their European, US, and

South African counterparts; however they benefited from

preferential access into commonwealth markets and high

levels of state support at home, including protection from

import competition by high tariff rates until the 1980s.

As some of the world’s first truly ‘durable foods’

(Thompson and Cowan 1995), canned foods played an

integral role in the growth of international trade and the

expansion of the world system throughout the 19th and

20th Centuries (McMichael 2009), and trade policy and

trade-related agricultural policy measures have had a pro-

found determining influence over the industry throughout

its history. Arguably the most significant and long-running

of these has been the European Union’s (EU’s) Common

Agricultural Policy (CAP). First established in 1960, the

CAP introduced a common tariff and levy structure, along

with provisions for export refunds, for canned fruits to EU

producers and processors in 1977. Production aids in the

form of minimum grower prices (MGP’s) and processor’s

aids for selected fruits were introduced in 1978 and 1979

and guaranteed a minimum price for fruits. As a direct

result of the CAP, the European Union went from being a

net importer of canned peaches in 1967–1968 to the

world’s largest exporter of these products by 1982–1983

(Dunmore et al. 1999). Major reforms to CAP supports for

the EU fruit and vegetable sectors were initiated in January

2008 in order to bring it in line with the EU’s World Trade

Organization (WTO) obligations; although, production

continues to be heavily subsidised, and import tariffs into

the EU for ‘non-preferred’ nations such as Australia remain

high (in the range of 15–20 % for canned fruits).

By the 1990s, the consequences of EU producer

subsidies combined with the emergence and rapid expan-

sion of deciduous fruit canning operations in ‘new pro-

duction locations’ in Thailand, China, Mexico, Chile, and

Argentina, along with weakening demand in established

markets, to intensify global competition and fundamentally

re-shape the geography of the global fruit canning industry

(BAE 1986, p. 17). The main competitive advantages for

these new production locations were an abundance of rel-

atively low cost raw materials and labour, favorable cli-

matic conditions, and geographic proximity to, and

favorable exchange rates with, major importing markets.

Traditionally, canneries have been located within fruit

producing regions in order to minimize transport times and

costs, and this continues to be a common feature of the

industry. However, the availability of low-cost manufac-

turing capacity in new regions, along with improved dis-

tribution and processing technologies, has facilitated rapid

growth in the use of re-manufacture processes; with min-

imally-processed products increasingly sent to lower-cost

production sites for extra processing (re-manufacture)

before being re-exported, either back into the original

producer country or into a new market. Remanufacture

offers the ability to de-seasonalise what has traditionally

been a highly seasonal process and is a significant feature

of the Thai deciduous fruit canning industry (USITC 2007).

A related trend within the sector has been the growth of

inter-industry trade; in which countries simultaneously

import and export the same, or similar, goods based on

comparative advantage. The United States, for example, is

the largest producer of canned peaches in the world, as well

as a major importer of the same products.

As a result of strong global competition, the gradual

lowering of import tariffs into Australia, and the strength of

the Australian dollar against major foreign currencies,

exports of canned deciduous fruits from Australia have

been declining alongside rising imports. The majority of

canned fruits imported into Australia in the 1980s and

1990s came from China and Europe (mainly Spain and

Greece); however, much of the rapid growth in imports in

this category since 2004 has come from new own-label

contracts with South African suppliers. While major export

markets for the South African canneries have traditionally

been the UK and Western Europe, L&A and RFG are

increasingly pursuing opportunities in non-traditional

markets such as Eastern Europe, the Middle East. Through

their contracts with Coles and Woolworths, Australia and

New Zealand have become small but important markets for

both canneries, particularly in processed peach and apricot

products.7

7 Woolworths Australia owns Progressive Enterprises Limited, New

Zealand second largest grocery retail company, through which it sells

its range of own-label products.

304 L. Hattersley

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Institutional embeddedness

As noted earlier, the initial expansion of the Australian

deciduous fruit canning industry was fueled by the nation’s

aspirations as a major agri-food export platform for the

British Empire; in fact, this was an explicit objective of the

settler colony (Pritchard 2005). The abiding concern of

agricultural and manufacturing policies in Australia

throughout much of its history has been one of international

competitiveness and this has had a profound influence on all

sectors of the Australian agri-food system (Pritchard 2005).

The Australian deciduous fruit canning industry received a

high level of assistance in domestic and export markets from

successive Federal and State Governments until the 1980s.8

However, the progressive transition from a broadly protec-

tionist to neoliberal agenda in Australia throughout the

1970s–1990s, culminating in the current strong emphasis on

minimising government ‘interference’ in the market led to

the dismantling of most of these supports. Successive Fed-

eral Governments have demonstrated a preference for soft

regulatory measures such as codes of conduct in relation to

market power, and reviews over the years into various

aspects of agricultural, manufacturing, and food regulation at

the state and national level have focused on streamlining and

reducing regulation, and facilitating international competi-

tiveness through innovation in higher value-added products.

There has also been a strong preference for soft policy

measures to address the proliferation of these processed,

value-added products within the consumer food environ-

ment, with a strong neoliberal focus on consumer choice,

responsibility, and expectations of low retail food prices.

Governance dynamics

Taking the broad typology of value chain ‘drivenness’ as a

starting point (Gereffi 1994), a broad shift can be identified

within the Australian deciduous canned fruit supply from

producer-driven towards an increasingly buyer-driven

chain; however, the contemporary value chain is best

described as ‘bipolar’ with both retailers and SPC Ardmona

exercising considerable market power. Between the 1910s

and early 1970s, the sector was dominated by a handful of

grower-cooperative canneries supplying a relatively large

number of retailers in Australia and internationally. These

‘producer/processors’ held full responsibility for product

development and marketing with relatively substantial

State support. However, by the 1990s, the two major

supermarket chains, Coles and Woolworths, began to

‘pilot’ the chain after a rapid rise to dominance in the

Australian grocery retail sector. The two retailers now

control an estimated 78 % of the dry goods grocery market

(ACCC 2008) and exert considerable market power over

their suppliers. Within the canned fruits category, the two

retailers have invested heavily in expanding their own-

label product ranges and supplier bases over the last dec-

ade; reducing their reliance on SPC Ardmona through the

relationships they have forged with South African can-

neries in particular. At the same time, as the sole remaining

deciduous fruit cannery in Australia, SPC Ardmona now

exerts considerable control over its 200 or so grower-sup-

pliers through an essentially captive relationship in which

fruit prices and terms of trade are determined by the can-

nery through long-term supply agreements, and supplier

benchmarking and quality assurance schemes.

In exerting its power to stabilise the cost and consistency

of its fruit supply, SPC Ardmona has been able to focus its

attention on the product development, packaging, and mar-

keting side of its business. Historically, grower-cooperative

canneries responded to shifting consumer demands with

slow and conservative product innovations. Three major

innovations in the industry were Ardmona’s development of

the process to preserve fruit in 100 % juice (as opposed to

sugar syrup) in the 1970s, and in small, single-serve plastic

cups (as opposed to cans) in the 1990s, and SPC’s develop-

ment of resealable, transparent plastic fridge-packs in the

early 2000s. Coca Cola Amatil’s acquisition of SPC Ard-

mona in 2005 was part of a strategic drive by the company to

build a healthier food and beverage brand portfolio, and it has

made significant capital investments in SPC Ardmona since

the take-over. In recent years, SPC Ardmona has recorded

strongest sales growth in its snack-sized products and is

seeking to ‘refocus its activities into the higher-growth,

higher-margin snacking market’ and increase its ‘presence in

the growing snack category by leveraging the Goulburn

Valley and SPC brands into a broader range of snacking

categories and by further expanding our range of brands into

the convenience and other channels’ (Coca Cola Amatil

2011). The range of ‘ready-to-use’ fruit products available

has expanded significantly in recent years, with the most

recent new product release being a range of fruit snacks

‘designed specifically to make fruit fun for kids of all ages’

released in 2011(AFN 2011), a marketing strategy for which

the company has previously run into opposition from public

health groups and parents, and attracted an advertisement

ban from the Advertising Standards Bureau.9

8 State supports included minimum fixed selling prices, production

volume control, collective marketing, direct and indirect financial

assistance (including interest-free loans) to canneries, sugar rebates,

export subsidies, and import tariffs of 10 %.

9 A television advertisement for SPC Fruit in Jelly was banned by the

Advertising Standards Bureau (ASB) in March 2011 following a

public complaint that the advertisement encouraged the consumption

of SPC Fruit in Jelly’s over fresh fruit. The advertisement depicted

school children getting rid of fresh fruit in their lunchboxes, before

cutting to a girl sitting on a bench eating an SPC Fruit in Jelly while a

Agri-food system transformations 305

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The development and promotion of ready-to-eat prod-

ucts in new packaging formats is designed to extend ‘usage

occasions’ and encourage consumption of processed fruits

as snacks ‘on the go’ and at any time of day, and the

cannery has leveraged Coca Cola Amatil’s established

channel distribution system to access alternative retail

outlets such as petrol stations, convenience stores, schools.

These non-grocery market channels have been identified as

a strategic focus moving forward. To-date, SPC Ardmona

has manufactured only shelf-stable products, although

cannery representatives indicated the company’s intention

to expand into chilled, short shelf-life supply chains in the

future. The company’s pursuit of these new product inno-

vations has been facilitated by significant investments in an

international manufacturing base over the last decade,

through which it has been able to lower its product

development and manufacturing costs (see Hattersley et al.

this issue). Its international operations also facilitate access

into international markets in which it would otherwise be

uncompetitive. Rather than evolving as a private label

manufacturer as many fruit canneries world-wide are

doing, including RFG and L&A, SPC Ardmona is posi-

tioning itself as a global manufacturer of branded pro-

cessed fruits and vegetables.

Therefore, rather than a simple transition from a pro-

ducer-driven to buyer-driven chain, relations vary greatly

in different segments of the chain. While the major

supermarket chains, Coles and Woolworths, exert consid-

erable influence over prices and the production process

(including proprietary food safety and quality assurance

mechanisms, and a growing emphasis on environmental

standards), SPC Ardmona’s control of its brand and its

strong capabilities in product innovation give it some

negotiating power with the retailers, and a largely domi-

nant role in determining what products are produced and

how they are marketed. At the same time, end-consumers

have become an increasingly powerful driving force in the

contemporary socio-political environment with the manu-

facturing sector struggling to keep pace with multiple,

rapidly-evolving, and often competing consumer demands

for fruit-based products.

Discussion

The research presented in this paper constitutes one of the

first attempts to apply a nutrition-oriented value chain

approach to diet-related chronic disease concerns, and, to

the best of the author’s knowledge, the first attempt to

apply such an approach to the Australian agri-food system.

The paper had a dual purpose: to explore the utility of the

approach in this setting, and to contribute preliminary

insights into the drivers and dynamics of agri-food system

restructuring in Australia from a nutrition perspective.

Recent insights from the GVC literature were drawn on to

support an institutionally-rich account of the historical

trajectory of, and contemporary dynamics within, one

sector of the Australian agri-food system: packaged fruits.

As Neilson and Pritchard (2009) acknowledged, such an

approach inevitably uncovers a vast, complex, and multi-

layered account of agri-food system drivers and dynamics.

However, it is in embracing this very complexity that the

greatest gains for population health may be identified.

The findings revealed the convergence of multiple for-

ces driving restructuring in this sector. The progressive

consolidation of both deciduous fruit processing and food

retailing in Australia has culminated in a situation in which

a handful of firms now control which products from this

sector are made available to the public, how, where, and at

what price. Whilst the primary production of canning

deciduous fruit has also consolidated over time, this has not

been to anywhere near the same extent as in the processing

and retail sectors. As relations between canning deciduous

fruit growers and SPC Ardmona have become increasingly

captive, SPC Ardmona has been able to leverage its posi-

tion to ensure a more consistent supply, control production

costs, and set prices, while focusing its attention on

intangible value-adding activities in product development,

packaging, and marketing. Meanwhile, the emergence of

new processing locations, along with the liberalisation of

international trade and the strength of the Australian dollar,

has enabled the Australian supermarket chains to expand

their international supply base, play suppliers off one

another, and now largely control prices and final product

standards.

End-consumers have become an increasingly powerful

driving force in this sector over time and the transition to

fruits preserved in 100 % juice rather than sugar syrup first

initiated by Ardmona in the 1970s was undoubtedly a

positive step from a nutrition perspective; however, most of

the product innovations in this sector over the last decade

have focused on packaging and labeling innovations, with

minimal changes to product composition. New products are

consistently priced higher, attracting a price premium for

processors and retailers. As Dolan et al. (1999, p. 11)

pointed out more than a decade ago:

The competition for high-spending, middle-class

consumers who are willing to pay a premium for

fresh, healthy food that can be prepared quickly has

focused on offering an increasing range of prepared

Footnote 9 continued

voiceover was heard saying ‘fruit that won’t get thrown away’. The

ASB had previously dismissed public complaints about the adver-

tisement in 2006, but noted in its March 2011 decision that ‘‘it is

likely that community standards have developed on this issue’’.

306 L. Hattersley

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foods, product combinations and attractive packag-

ing. Processing, packaging and the development of

new varieties create a very significant price premium.

New product innovations in this sector do have the

potential to deliver nutritional benefits provided they aim

for minimal processing and no added sugar; however new

products are currently of greatest benefit to higher-income

consumers with the ability to afford them and with an

interest in health and wellness. In addition, under escalat-

ing competitive pressures, SPC Ardmona’s strategy is

increasingly showing signs of seeking to drive, rather than

respond to, consumer demands; shaping and constantly re-

creating demand through a proliferation of new products

aimed at expanding markets and eating occasions. While

there is debate and ambiguity around the links between

processed fruits and diet quality, the balance of evidence,

as well as common sense, suggests that these products have

the potential to either support or undermine NCD preven-

tion efforts depending on the extent and nature of

processing, and the way in which they are marketed. The

institutional framework in Australia has facilitated this

focus on value-adding and new product proliferation, while

food and nutrition policy has failed to adequately address

the implications for consumer food environments.

The institutionally-enriched nutrition-oriented GVC

framework applied in this paper appears to offer significant

promise as a tool for understanding why agri-food value

chains behave the way they do rather than just how, as well

as identifying promising leverage points within the agri-

food system for promoting healthier diets. In particular,

there is the potential for insights into agri-food value chain

dynamics to complement and inform established approa-

ches to diet-related chronic disease prevention such as

those directed at product reformulation, labeling, market-

ing, and consumer education.

With its emphasis on identifying implications for end-

consumption, rather than economic outcomes within the

chain, nutrition-oriented value chain research represents a

significant shift in focus for the GVC framework. In par-

ticular, end-consumers have not been well integrated into

commodity chain studies to-date (Pelupessy and van

Kempen 2005); a gap that nutrition-oriented value chain

research offers significant potential to address. An imme-

diate opportunity for further research is to extend the

analytic framework to primary research on the drivers

influencing end-consumer behaviours.

Acknowledgments This paper is based on the author’s PhD

research which was supported by the Australian Research Council

(Project No. DP0773092). The author would like to thank all those

who generously agreed to participate in the research, as well as Jane

Dixon and two anonymous reviewers for their very helpful feedback

on earlier drafts of this paper.

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Author Biography

Libby Hattersley is a PhD student in the National Centre for

Epidemiology and Population Health at The Australian National

University. Her PhD research has examined agri-food system

transformations in Australia from a nutrition-oriented value chain

perspective, with a focus on informing multi-level approaches to the

prevention of diet-related chronic diseases.

Agri-food system transformations 309

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