Feasibility Assessment: Wakool Agrifood naturally SUMMARY October 2014 Barham Agrifood Naturally Assessment: SUMMARY Overview Wakool Agrifood Naturally is proposed for the Barham‐Koondrook community, on the Murray River. The initial proposal involved establishment of a physical agrifood centre in Barham, and to build collaboration among primary producers and food industry businesses in building brand awareness, value adding and opening new markets. A feasibility and business case assessment, to test this proposal and the most appropriate directions for its implementation, was undertaken in August‐September 2014. Rationale leading to the Wakool Agrifood Naturally project, was to generate new economic development activity to offset recent adverse factors impacting on the local economy: ‐ Murray Darling Basin water cutbacks and restructuring of agricultural production activities under the Murray Darling Basin Plan ‐ Reduced access to the forestry resource (and a reduction in timber processing throughput, particularly red gum timber) ‐ Food supply price cutting among major domestic supermarket chains ‐ Fierce competition from low‐cost food imports Prior to the development of the Murray‐Darling Basin Plan, Wakool Shire agricultural production occupied 4.7% of the irrigated area of the Murray‐Darling basin and utilised 4.6% of the irrigated water available to the basin, or 302 gigalitres per annum. Overall use of irrigated water in Wakool Shire (4.1 megalitres per hectare application rate), at that time, was slightly more efficient than for the Murray Darling Basin (MDB) as a whole (4.2 megalitres per hectare). In the period 2005‐06 to 2012‐13, the area of irrigated land in the MDB has increased by 1.7% (to 1,592,000 hectares), while irrigated water usage increased by 25.1% over the same period. However, in Wakool Shire, Council advises that: 
There has been a considerable loss in productive land previously irrigated for grains, and this has been converted to less intensive livestock grazing activities 
Sections of the irrigation system have been retired. 
An area of land in the north of the Shire has been removed from agricultural production and sold to the State of New South Wales. Employment in agriculture in Wakool Shire has been decreasing at a rate of 0.8% per annum for the past 65 years, but this rate of decrease has accelerated to 4.8% per annum in the period 2001 to 2011. Since 2011 the loss of agricultural employment is unlikely to have slowed, creating a social and economic flow‐on to the viability of the Shire’s towns. Dimensions of the Wakool Region Food Industry The feasibility assessment and business case focused on the Barham‐Koondrook district and Shire of Wakool, with some consideration of the broader ‘trade area’ region encompassing the Shires of Gannawarra, Murray, Conargo, Hay, Balranald and Campaspe and the Rural City of Swan Hill. The food businesses in Wakool are predominantly growers, with an emerging group of agribusiness enterprises involved in processing activities. There are a few substantial food processing businesses in the broader region, particularly in the Campaspe and Swan Hill local government areas. The broader region was included, selectively, in the expectation that products and businesses from an area of 100+ kilometres around Barham could potentially supply ‘products from the region’ to a Wakool Agrifood Centre (particularly to a retail food outlet, café and/or restaurant within the centre). However, the assessment of stakeholders for collaborative food industry development activities has been focused on Wakool Shire and the adjacent area within Gannawarra Shire. 063/10/14/VR754/WS/V1 ACN 002 332 176 Page 2 Barham Agrifood Naturally Assessment: SUMMARY The estimated direct value to the regional economy of the sectors researched and interviewed in the feasibility and business case is very significant. The regional agrifood farm sectors in Wakool have a gross value of $145 million per annum, and the food industry sectors in Wakool employ 824 people (or 46% of the Shire’s employed workforce). Wakool Shire’s economy continues a transition from a primary sector dominated community to a balanced agricultural and services economy. Figure 1 demonstrates the extent to which the Shire has shifted from an agricultural product (primary sector) dominated economy to a more balanced product and service economy in the past 65 years. Indeed, in the towns of Barham and Koondrook, accommodation and food services (quinary sector) and retail trade (tertiary sector) have become the main employing industries. Figure 1 Employment by Industry in Wakool 1947 and 2011 2011
1947
Quaternary Quinary
5.41%
5.41%
Tertiary
9.36%
Secondary
13.23%
Quinary
21.41%
Quaternary
17.92%
Primary
66.59%
Tertiary
13.32%
Primary
33.39%
Secondary
13.96%
Grain production, dairying, beef and sheep production, and pig farming are the main employing agrifood activities in the Wakool and Gannawarra Shires; often several of these (and other) activities are jointly undertaken on diversified farming enterprises. Of particular significance is the importance of secondary, tertiary and quinary sector employment in the food supply chains. For example, o
14.1% of food related jobs are in the tertiary sector (mostly retailing) o
6.8% of food related jobs are in the secondary sector (food processing and manufacturing) o
11.5% of food related jobs are in the quinary sector (cafés, restaurants, clubs and hotels). Overall, there were 824 jobs in the food industry supply chain in Wakool Shire and 1,594 in Gannawarra Shire in 2011, making up: o
46.3% of all Wakool Shire jobs o
37.1% of all Gannawarra Shire jobs. Major Findings  The Wakool Shire and Barham district economies are in transition o Primary sector (agricultural) share of employment has halved over the past 65 years, from 67% of the Shire’s total in 1947 to 33% in 2011. o Quinary sector (health and social services, accommodation and food service, and personal services) employment has increased from 5% in 1947 to 21% in 2011. This sector is the only growth sector in the Shire. o The economic restructuring is even more pronounced in Barham, where the quinary sector accounts for 38% of jobs (and 32% in Barham‐Koondrook), and agriculture is only 8% of the employed workforce in both Barham and Barham‐Koondrook. 063/10/14/VR754/WS/V1 ACN 002 332 176 Page 3 Barham Agrifood Naturally Assessment: SUMMARY 



Many of the Wakool/Barham agrifood producers are niche producers, supplying small volumes at present, and with individually organised supply chains through aggregators, agents, distributors, direct to retail and/or food service outlets, or direct to customers (at the farm gate, retail stores, or farmers markets). Some of these are adding value in‐house, others outsource processing while retaining product ownership and marketing responsibility. Feedback from these business operators suggests they are enthusiastic about their products and their growth potential, but they tend to be either:  Relatively new agrifood business operators in their current activities (some have a substantial history in agricultural production but have recently diversified or changed direction) and are just commencing an ambitious growth plan.  ‘Unexpected’ agrifood enterprises, having developed a product range from a personal interest, passion or lifestyle base, and it has exceeded the original intent.  Nearing retirement age with plans to just retain activities, to scale down or sell the business. Other, more traditional, agrifood sectors (often with larger land holdings and product volumes) in the Wakool/Barham district have been heavily impacted by climatic factors and structural change and have a need to do more than their traditional bulk commodity production, by value adding or developing new markets (for example, the citrus, rice and cereal grains sectors). The emerging value‐added food sector around the Barham district is part of a trend around Australia, where like‐minded groups are uniting over food and beverage production philosophies. There is a spirit of collaboration among many of these Wakool/Barham district producers with consistent objectives and strong interest in sustainable production, product differentiation and value added products. The trends in food business development are evident in a range of Australian regions, and there is an increasing incidence of food groups, sustainability groups, food and wine joint action groups, and ‘food hub’ concepts. The Wakool businesses, particularly the members of the Red Gum Food Group, have similar philosophies to many of these groups but differ in their potential for much greater commercial scale of production. Other groups tend to focus on servicing very localised markets. 

The local business community in Barham central activities area is generally not supportive of the proposed physical development of a Wakool Agrifood Centre. These businesses believe: o
Local food retailers and food service operators are already adequately servicing the market or, in some cases, have plans in place to address the gaps in demand and are about to invest in implementing these plans. o
The Centre would compete unfairly with existing businesses. o
Council should not be the lead proponent of a Food Centre development. o
A development on the river is not suited to a Food Centre. Many agrifood business stakeholders perceive that there is merit in the formation of a food collaborative cluster and in developing a range of cluster project activities over an appropriately staged work program. Feasible Activities and Future Directions 

The assessment has found that some of the proposed components of a Wakool Agrifood initiative are feasible. These are: o
The development of a regional food showcase with high quality café and meal facilities. o
A distribution service (involving collaboration in product consolidation and marketing). The assessment has found that some of the proposed components of a Wakool Agrifood initiative are not feasible at present. These are: o
Value Adding Centre ‐ Commercial Kitchen o
Function Centre o
Interpretive and Information Centre o
Training Centre. 063/10/14/VR754/WS/V1 ACN 002 332 176 Page 4 Barham Agrifood Naturally Assessment: SUMMARY 

Of the assessed “non‐feasible” components, only the interpretive and information centre (with historic, cultural and art works related to indigenous, red gum timber and river environments, as well as visitor information) is strongly supported by the business and food producer communities, and could be an inclusion in a food showcase, café and restaurant development, as a tourism development service rather than a commercial activity. Collaborative food industry initiatives will take time to develop. A staged approach would be sensible through the establishment of an ‘industry cluster’ organisation with an active work program. A cluster is a substantial number of like‐minded enterprises (and their suppliers and customers) in an industry and region, which agree to work together for mutual commercial benefit. In addition, regionally based industry clusters are a bridge between regional development and business development; with local government, regional organisations and businesses all tackling common issues and opportunities that lead to growth of firms and the development of the region. A ‘cluster program’ involves intervention in a region to stimulate clusters or speed up cluster activities. In Wakool/Barham district the cluster would involve several links in the supply chain; from farm inputs through to retailing and food service. Indeed, the term ‘business ecosystem’ may be superior, in this case, to ‘cluster’. There is a range of potential value adding collaborative activities that are timely for a Wakool Agrifood Cluster, or Wakool Agrifood Business Ecosystem, which have been identified during consultations and research. These activities would form a challenging work program for a cluster/business ecosystem, with potential revenue streams to develop a commercial system, in the longer term. The identified projects are not exhaustive, and the projects should be prioritised by the participating businesses. The actual work plan needs to be refined and finalised through negotiation and discussion, as one of the early collaborative activities of the group. Stream 1: Value Adding  Project 1.1 New Product Development – Barley Processing. This project will involve product research and development to produce a range of malt barley formulations to suit Australia’s microbrewery sector.  Project 1.2 Grains Milling and Manufacturing. This project should commence with a feasibility assessment, followed by supply chain development, and capital investment funding.  Project 1.3 “Flavours of the Region”. This project will involve the use of local plant based agrifood products (fruit, vegetables, nuts, broadacre crops and indigenous plant foods) in developing a range of unique flavour bases, marinades, sauces and condiments to use with meat and poultry products of the region.  Project 1.4 Waste to Co‐products. This project will prioritise the most attractive, and most commercially ready low value/no value, by products and/or waste streams for new revenue opportunities (which could be in protein, oil and other extracts, stock feed, biofuels, thermal power generation, biological soil products, etc) Stream 2: Marketing and Logistics  Project 2.1 Domestic Retail and Food Service Distribution Venture. This project involves developing a group of local suppliers with a suitable product range to service a regional product offering in select independent retail supermarket groups (perhaps in a gondola‐end style display) and food service outlets. The products would be consolidated by the cluster and distributed to the customer base (possibly outsourcing the freight service) The feasibility of this venture is discussed in considerable detail in Chapter 6.  Project 2.2 Wakool Agrifood Online. An e‐commerce platform developed around cluster members to become the local equivalent of an online farmers market. 063/10/14/VR754/WS/V1 ACN 002 332 176 Page 5 Barham Agrifood Naturally Assessment: SUMMARY Stream 3: Training and Events  Project 3.1 Wakool Agrifood Demonstration Kitchen: A commercial kitchen to host and demonstrate regional produce events, with celebrity chefs, degustation menus, and featuring seasonal local produce. The kitchen may not be a specifically purpose built facility, it may be just a term to describe kitchen events, with the actual kitchen to be at various venues and locations around the region (maybe even some outdoor and impromptu locations). The region could create a seasonal farm circuit (or something equivalent to evoke the mix of travel experience, farm visit and gourmet food.  Project 3.2 Agrifood Training. A project to explore the potential for development and delivery of accredited on‐job/off‐job training in agrifood operations and careers in the region, through alliances with training providers, and potentially using a group training approach (whereby trainees are rotated around various businesses in the Wakool cluster). The points of difference in this training program would be twofold: o The close and practical link between training provider and commercial operators o The coverage of several links in the food supply chain within the training program. 

Stream 4: Production Systems  Project 4.1 Biological Farming Systems. A project to trial, benchmark and measure performance of a wide range of biological farm practices already being piloted in Barham district, such as intensive grazing for short periods, poly‐culture crop production, continuous cover cropping, biological soil amendments, etc.  Project 4.2 Wakool Cropping Group. A project to develop innovative research projects for producers in a diverse farming environment, where broadacre production, irrigated horticulture and extensive and intensive livestock are practiced in combination. A not‐for‐profit company limited by guarantee would be an appropriate structure for the Wakool Agrifood Cluster/Business Ecosystem. Staging of those ventures associated with Wakool Agribusiness Naturally considered viable is important. Some are considered to be ready for implementation, others will take 5 years or more before the necessary pre‐requisites could reasonably be expected to be in place, as shown in Table 1. 063/10/14/VR754/WS/V1 ACN 002 332 176 Page 6 Barham Agrifood Naturally Assessment: SUMMARY Table 1 Potential Staging for Wakool Agrifood Naturally Initiatives Initiative Regional food showcase (with tasting and retail sales) Café Restaurant Function and events centre Food interpretive and tourist information centre Training and skills demonstration centre Distribution Centre (with storage, picking and packing, and transport) Value adding centre (with one or more commercial kitchens) Domestic and export supply chain development New product research and development Joint products from the region Developing markets for co‐products Regional agricultural production systems group Shared production facilities and processing technologies Program of food events and joint marketing On‐line sales (with back‐up logistics) Suited to Establishment in a Centre Suited to ‘virtual’, collaborative delivery or outsourcing Likely timing for a viable commercial venture Stage 1: Stage 2: Stage 3: Long‐
Short‐term/ Medium term/5+ years immediate Term/2‐5 (and possibly years never) 
   
              
 
 


   
 
 
 A suggested implementation plan is summarised in Figure 2. 063/10/14/VR754/WS/V1 ACN 002 332 176 Page 7 Barham Agrifood Naturally Feasibility and Business Case: SUMMARY Figure 2 Wakool Agrifood Naturally: Implementation Schedule Initiative Year 1
1st Half Year 1 2nd Half Year 2
Year 3 Year 4 Year 5 and beyond Establishment Actions
Apply to MDBRED program for support to establish a food cluster and to operate a commercially driven work program involving food industry diversification, value adding and job creation. Formation of Wakool Agrifood Naturally (WAN) as a Cluster/Business Ecosystem Development of prioritised work plan and commercially driven projects Incorporation of WAN as a Company Limited by Guarantee Food Centre Initiatives
Develop investment guides for potential operators of the Wakool Agrifood Centre (with regional food showcase, café and restaurant, and possible provision for tourist information and local interpretive add‐ons). Develop supply agreements between local producers, and/or an operating agreement with WAN, for stock and displays at the Wakool Agrifood Centre. Determine the final location for the centre (based on investor preference and a future decision by Council on whether to develop and available site). Construction, or refurbishment (if existing building) and fit out Commence operations Cluster Initiatives (each project will have participant recruitment, developmental, establishment and operational phases. The operational phases should be ongoing) Stream 1: Value Added
Project 1.1 New Product Development – Barley Processing. Project 1.2 Grains Milling and Manufacturing. Project 1.3 “Flavours of the Region”. Project 1.4 Waste to Co‐products. 06/10/14/VR754/WS/V1 ACN 002 332 176 Page 8 Barham Agrifood Naturally Feasibility and Business Case: SUMMARY Figure 2 (continued) Wakool Agrifood Naturally: Implementation Schedule Initiative Stream 2: Marketing and Logistics
Project 2.1 Domestic Retail and Food Service Distribution Venture. Project 2.2 Wakool Agrifood Online. Stream 3: Training and Events
Project 3.1 Wakool Agrifood Demonstration Kitchen Project 3.2 Agrifood Training Stream 4: Production Systems
Project 4.1 Biological Farming Systems Project 4.2 Wakool Cropping Group Year 1
1st Half Year 1 2nd Half Year 2
Year 3 Year 4 Year 5 and beyond 06/10/14/VR754/WS/V1 ACN 002 332 176 Page 9