Dick Smith – the entrepreneur who launched a crusade against the foreign ownership of Australian food processors in the late 1990s – says his company’s ”days are numbered”.

Dick Smith says company’s ‘days are numbered’ as local suppliers disappear

May 23, 2014 – 4:44PM

Jared Lynch

Dick Smith with a pallet load of his Australian grown sliced beetroot. Photo: Ben Rushton


Another iconic brand sold: Peters Ice Cream set to be sold to French company

The pool of Australian food producers is shrinking so fast that it is becoming difficult for patriotic players like Dick Smith to stay in business.

In the end Dick Smith Foods is going to be forced to close 

Mr Smith – the entrepreneur who launched a crusade against the foreign ownership of Australian food processors in the late 1990s – says his company’s ”days are numbered”.

His comments came after the private equity owners of Peters Ice Cream entered into exclusive negotiations with French ice-cream giant, R&R.

The brand, which owns a factory in Melbourne’s east, is expected to sell for more than $400 million.

Mr Smith said it is getting increasingly harder for his company to source Australian-owned food producers – with overseas buyers snapping up at least one local manufacturer about every six months.

”For example, I want to get a beetroot made but the only Australian cannery was Windsor Farms at Cowra, ” Mr Smith said. ”It has gone broke, closed down, it doesn’t exist. So we can’t get any beetroot anywhere because there are no Australian [owned] canneries.

”This is going to happen more and more where in the end Dick Smith Foods is going to be forced to close.”

The turnover of Dick Smith Foods has fallen sharply in the past 10 years from about $80 million a year to as low as $8 million.

Mr Smith said he has managed to lift that figure to about $20 million after an ”enormous amount of work”, but he doesn’t know how much longer he can continue.

”I’ve kept it going for 12 years.

”[But] I think the days are numbered because basically anyone who is any good as a food producer is pretty much immediately bought out by the Northern Hemisphere. These companies have to get growth and the only way they can get growth is by buying out other companies.”

He said Dick Smith Foods was set to make about a $1 million profit this year, which the company would donate to charity, bringing the total amount given away to about $5.5 million.

”I run it like Paul Newman Foods. But he is an American company and he has given away $16 million in Australia. We would love to compete with that but I’m sure we won’t be able to.

”I reckon from now on it will start to drop how much we give away.

”We have a running battle with Coles and Woolworths. They are always going to drop our products because they don’t meet the hurdle rates.”

Mr Smith said Australian companies struggled to compete with overseas players, who have deeper pockets and greater economies of scale.

”You can’t compete with the salaries being paid. The last time I looked the chief executive of Kraft, with bonuses, got $26 million a year so that means you just simply get the most astute business people ever.

”The Northern Hemisphere is an example of ultimate capitalism and as you start to get to the limits of growth these companies get the absolute best leadership and  … very quickly they will do ruthless things that a typical Australian businessman wouldn’t do.”

For example, Mr Smith said when US food giant Heinz closed its tomato sauce plant in northern Victoria two years ago, sacking 150 people, in favour of moving production to New Zealand – they did so ”save about 5 cents in the dollar”.

”The labour rate is slightly lower there. Once you’re big and global you can do that, whereas if you’re and Aussie company it’s hard to suddenly say ‘we’re manufacturing in Victoria lets move to NZ’.

”If you’re a global company you can change to any country virtually instantly.”

A spokeswoman for Peters’ owner Pacific Equity Partners declined to comment.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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