Magnificent Australian grown foods

Going, Going, Gone?

Three of Australia’s largest remaining listed food companies have sold or look like selling out in part to foreign interests.

In August 2004 Berri Ltd, Australia’s leading Juice Company announced a deal with the San Miguel Corporation of The Philippines. The deal delivers San Miguel 50% equity in Berri, with Doug Shears, Berri’s major shareholder and former chairman retaining the remaining 50%.

On Australia Day, 1996, Mr Doug Shears published an open letter to the federal Treasurer stating, ‘I am writing to you concerning the apparent increase in the level of foreign ownership of Australia’s food processing industry………. I suggest that further increases in foreign ownership and control of the Australian food industry will not only lead to reductions in manufacturing in this country, but will undermine efforts by Australian producers and manufacturers to improve efficiency and productivity as they drive towards becoming internationally competitive’.

How times have changed! How is it that a country such as The Philippines, where 40% of the population is below the poverty line, the unemployment rate is over 11%, GDP per capita is only US$4,600 (Australia US$29,000) and business ethics are dubious at best, can produce an internationally competitive company like San Miguel that may eventually have control of our largest juice company? While Asia may provide significant sales growth opportunities for juices, it is doubtful that San Miguel will continue to use Australia as the main source of production for these products in the long term. Low labour costs in Asia could mean that Berri’s products will be imported in to Australia at some time in the future.

Even our neighbour New Zealand with a total GDP of US$85.34 billion (Australia US$571.4 billion) has a dairy company, Fonterra, wanting to takeover our leading listed dairy company National Foods, meaning that some production currently undertaken in Australia may shift to New Zealand. Fonterra already exports the Mainland brand of cheese successfully to Australia, in part due to the fact that New Zealand dairy farmers are paid less for their milk than their Australian counterparts. After the pain of deregulation in the Australian dairy industry, local dairy farmers may be faced with even lower returns for their milk if this deal goes ahead.

San Miguel is also having a tilt at National Foods having recently offered a significantly higher price than Fonterra. Interestingly, the National Foods board has recommended the San Miguel bid to shareholders but if they don’t succeed a $17.8 million break fee will be paid to San Miguel by National Foods if a rival bidder secures more than 50% of the company.

In June 2004 we were congratulating SPC Ardmona for buying back the IXL jam business from foreign ownership, but now they in turn will probably become part of the giant Coca Cola Amatil business that is one third owned by the US Coca Cola company. The SPC Ardmona board is recommending that shareholders accept the offer. In March this year, the Managing Director of SPC Ardmona said “Australia runs the risk of becoming a sales outlet for global food brands if the food industry doesn’t get its act into gear”.

Has he now decided that ‘things go better with Coke’? You can’t get a much bigger global brand than Coca Cola.

Where does this leave the Aussie fruit growers that supply most of the fruit to SPC Ardmona today? Will the relationship with Coca Cola worldwide lead to the use of more imported components by SPC Ardmona? Will Coca Cola Amatil sell the SPC Ardmona brands to the US Coca Cola company and license them back as they did following their acquisition of the Neverfail water business? This assists them with paying less tax in Australia.

Today more than ever we need to support Australian owned food companies to give them the chance to become successful on the world stage, and remain in Australian ownership for the long term. It can be done. Arguably the world’s most successful dairy company is the Swiss company Nestle. There aren’t many cows in Switzerland, in fact, Australia produces almost 3 times the amount of milk that Switzerland produces, but Nestle has been smarter and committed over many years to building a great company. If we allow all our Australian owned companies to become foreign owned, there will be no turning back.

Dick Smith Foods supports products which are produced by Australian owned businesses, are Australian grown and made, and those Australian companies which operate in a highly ethical manner. We believe this is important because it provides employment for Australians and all the profits remain here, helping the future of our country.

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