Where the Margin Goes: How Manufacturers Can Hold It When the Pressure Arrives

Australia's food and grocery manufacturing sector turns over $172.7 billion annually and has grown at a compound annual growth rate of 6.3 per cent since 2020. It is the largest manufacturing sector in the country.

And it is quietly losing margin.

Adjust that growth for inflation and it falls to 3.9 per cent. The profit-to-turnover ratio has declined. Capital investment fell 11 per cent to $3.8 billion in 2023-24. Revenue is growing. The underlying commercial position is not. I use food as my evidence base because it is the most complete proof point available. But the pattern I am describing is not unique to food. It runs through every manufacturing sector I have worked in or advised.

The pressure is no longer a future risk. The AFGC's Towards 2030 report, published in February 2026, is direct: global reliance on long and complex supply chains has made manufacturers more vulnerable to geopolitical disruption. Regional conflicts, trade rewiring, and geoeconomic competition have produced a sustained era of instability. At the end of last year, China's central government launched a RMB100 billion National Guidance Fund targeting frontier technologies including biomanufacturing. That is a sovereign industrial strategy with a twenty-year horizon, and it is the same playbook it ran on solar and EVs.

Most manufacturers I speak with understand the technology side of this. They can tell you what automation they are deploying, what AI pilots are running, what capital expenditure is planned for the next cycle. What fewer can show me is a partnership strategy. Not a supplier list. Not a grant pipeline. A deliberate answer to the question: who is building capability with you, funding it with you, and standing in the uncertainty with you before the crisis makes those questions urgent?

In my experience, that gap is where the margin goes.

Across twenty years inside global manufacturers, the same pattern repeated. I have sat in the rooms where the investment was deferred for one more cycle, and I have seen what that deferral cost when the disruption arrived. The companies that came through with their margin and their market position intact were not the ones with the best technology. They were the ones who had built the architecture of relationships underneath the technology before they needed it. The ones who struggled were the ones who treated partnership as something you arrange after the strategy is set, rather than the thing the strategy is built on.

The good news is that this is a solvable problem. It does not require a new budget line or a government programme. It requires a leadership decision to treat the partnership question with the same rigour you bring to the capital expenditure question.

So here is what I would ask any senior leader reading this. 

When did you last review your partnership strategy? Not your supplier contracts. Not your technology roadmap. The deliberate architecture of who you are building with. If you cannot answer that clearly, what would it take to change that before the next wave of pressure arrives?

Because in the world we are operating in now, the next wave(s) is not a possibility. It is a certainty.