The pressure being placed on Australia’s food companies has resulted in another corporate collapse, with one of Australia’s largest food and vegetable growers placed in receivership.
Bundaberg-based Barbera Farms, which supplies about 65% of Australia’s capsicums, 60% of zucchinis and 25% of tomatoes, was placed in the hands of Justin Walsh and Chris Munday, partners at accounting firm Ernst & Young by secured creditor Suncorp.
The bank said it has supported the business for an “extended period of time” through “difficult trading conditions” before its decision to bring in receivers and managers.
The long-term fate of the business, which turned over more than $73 million last year and has 800 staff, is unknown, although the business will continue to trade and meet supply arrangements.
Geoff Chivers, chairman of the Bundaberg Fruit and Vegetable Growers Associations, says the region has been hit hard by the impact of poor weather, culminating in widespread flooding at the start of the year.
“It wasn’t just the impact of floods. It was the heavy rains before that period that has made it hard to prepare the ground and disrupted production,” Chivers says.
While fruit and vegetable price have risen sharply at a retail level as a result of the floods, Chivers says farm gate prices remain “suppressed”.
Chivers says the difference between retail and farm gate prices is allowing other operators along the food supply chain to try and recover costs.
While he is hoping for a recovery in price, more worrying is the acceleration of costs.
“We’ve seen massive increases in our fuel costs, our transport costs, our energy costs. And unfortunately some of our Bundaberg growers are just at that critical point where they will hit the wall.”
“The current returns to the farming community are unsustainable. We cannot keep absorbing these cost increase – not without major dramas.”
Another issue complicating Barbera Farm’s situation has been a battle with the workplace health and safety prosecution.
The charge stemmed from an investigation into the death of German backpacker Jessica Pera who died while working at the company’s farm at Farnsfield.
The pressure placed on grocery sector suppliers by Australia’s supermarket giants has claimed a number of companies in 2011.
In March, iconic Melbourne cake manufacturer Susan Day Cakes was placed in administration. Sources suggest up to 80% of the company’s revenue was derived from Woolworths and Coles.
Earlier this year, the collapse of commercial refrigeration manufacturer Frigrite was blamed on the loss of key contracts with Coles and Woolworths.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
