Are you looking to open up a frozen cake or pastry manufacturing business in Australia? From red velvet puddings to premium Wagyu beef pastries, there has been strong growth in demand for this niche food industry in the past five years. It is expected to grow in revenue by 2.6% over the next five years, leading to reach $610 million in Australia. While many new businesses are jumping on board changing consumer demands and eating patterns, it is important to note two legal issues in this industry: production and sale regulations, and supply contracts.
Production and Sale Regulations
All businesses in Australia that produce and sell food, including frozen cakes and pastry foods, are required to adhere to strict Federal and state government food regulations. These include state and federal government food and health regulations that maintain proper food safety standards for the production, handling, distribution and consumption of food.
In Australia, the main body that regulates food standards is FSANZ – Food Standards Australia New Zealand, which is set out under the Australia New Zealand Food Standards Code. If you are looking to set up a pastry food or frozen cake business, this Code will affect how you operate as it sets out labelling requirements, food safety, GM foods and additives.
Whether you are selling your product at a small weekend market stall or on a commercial scale, you must also provide clear and accurate food labels as displayed in the Nutrition Information Panel. This food labelling also includes a number providing a %DI, percent daily intake, recommendation on the front of products. You must also take reasonable steps to advise whether your raw ingredients contain any genetically modified food (GM).
Earlier this month on July 1, new food labelling laws also came into effect. The new food labels now set out information on where the products are produced, grown, made or packed. If you produce your pastry food or frozen cakes with ingredients solely sourced in Australia, the Australian Made, Australian Grown kangaroo logo will feature on your labels. There is a two year period to phase-in the new changes and allow businesses to apply the labels before the June 30 2018 deadline.
Manufacturers in this industry benefit from well-drafted contracts with suppliers in order to minimise volatility caused by upstream price shifts. For example, changes in inputs such as wheat, sugar, flour and fruit will have a significant impact on industry profitability. A supply contract that locks in prices, or allows operators to pass cost increases down the line via higher prices, can minimise the effect on the bottom line.
Supply contract negotiations can also play a crucial role in product distribution. Many of Australia’s biggest players in this industry, including Patties Foods (Four N Twenty, Patties Pies, Herbert Adams), Mrs Mac’s, McCain Foods (Sara Lee), have significant supply contracts with national chains including convenience stores, petrol stations and major sports stadiums. If you are entering into a supply contract, a contract review by a lawyer can identify oversights or any vague and unfavourable terms in the supply arrangement.
If you are setting up a new food business, or renewing a supply contract for a pre-existing relationship, make sure that you understand the legal regulations that may affect your business. LegalVision’s contract lawyers can assist you with a contract review or drafting for your food manufacturing business. Questions? Call us on 1300 544 755.