5 Big Trends Shaping Food and Grocery Supply Chains
12 March 2025
Supply chains are the backbone of the food and grocery industry, but they continue to suffer under intense pressure. This year, the Queensland floods and Cyclone Alfred have highlighted the need for government to invest in more resilient supply chains.
The latest AFGC and Argon & Co survey, conducted every two years, reveals the biggest challenges and trends shaping food and grocery supply chains. To read the full survey click here.
- Cutting costs in the supply chain is the top concern
For the first time in the survey’s history, cost reduction outranked customer satisfaction as the top priority for supply chain leaders in the industry. The costs of the greatest concerns were energy, materials, labour, and transport. Food and grocery manufacturers have been under pressure since the COVID-19 period forced intense cost cuts and through greater efficiencies. But costs of production continue to rise, impacting profitability. If this trend continues, companies could be forced to make tough decisions such as increasing prices, reducing pack size and quality, all of which would impact consumers.
- 43% of organisations are prioritising cost reduction over the next 1-2 years.
- Disruptions aren’t over – and they’re getting more expensive
Failures in key infrastructure, such as like roads and rails, due to natural disasters like floods and fires, result in costly congestions and delays. While many respondents reported mostly recovering from COVID-19 disruptions, supply chain interruptions remain a significant hurdle to industry productivity.
Businesses have responded to disruptions by diversifying suppliers, boosting resilience, and increasing agility. AFGC urges government investment in fortifying the East-West freight rail line and East Coast freight rail network, critical arteries for delivering essential food and groceries to consumers nationwide.
- Nearly 80% companies reported experiencing moderate to large-scale disruptions, with international shipping delays highlighted by 68% of respondents.
- The AI and Automation revolution enters the survey for the first time
The use of artificial intelligence (AI) is the emerging force in supply chain management. From demand forecasting to warehouse automation, AI is revolutionizing supply chains.
But the survey showed that a shortage of highly skilled workers is slowing adoption. Companies are racing to upskill teams to roll out robotics, machine learning, and warehouse automation.
- 74% of businesses are investing in Generative AI over the next three years, betting big on its ability to optimise routes, improve efficiency, and enhance quality control.
- Sustainability: a costly but essential priority
Complying with environmental and sustainability regulations requires significant capital investment. Companies will this year need to conform to new requirements on climate related disclosures and packaging reform are starting this year for the Australian companies and packaging reform is well underway.
While businesses face high upfront costs, sustainability investments boost brand reputation and can future-proof operations. The challenge is finding cost-effective ways to meet ever-growing expectations.
- Sourcing ethically, selecting sustainable suppliers and lowering energy use were rated the most important sustainability strategies to be implemented.
- Consumers preferences are changing faster than ever
Consumers are voting with their wallets, demanding more organic, sustainable, and minimally processed products. This shift is forcing consumer goods makers to rethink product portfolios, supply chains, and sourcing strategies. Manufacturers that anticipate and respond quickly to these shifts in consumer behaviour benefit from brand loyalty and maintain market share in a highly competitive landscape. Product innovation to respond to these consumer preferences can be capital intensive and difficult in a high cost of production environment.
- Consumer behaviour was one of the top three considerations for supply chain planning.
Bottom Line: A Call to Action
Strengthening the resilience of supply chains by investing in rail and road, embracing AI and adapting to shifting consumer demands will be critical to the industry’s success.
Australia’s food and grocery industry is calling for:
- Increased government investment in infrastructure to reduce supply chain bottlenecks
- Support industry led initiatives to enhance supply chain resilience
- Address supply chain labour, talent and skills shortages.
With the right government and industry action, Australia’s food and grocery sector can build stronger supply chains for the future.
Media Contact
Zandi Shabalala Media@afgc.org.au 0430 051 575
