- Dick Smith Foods launched in 1999 in response to concerns that the Australian food market was increasingly foreign-owned.
- Over the last 17 years, sales have fallen to less than a quarter of the $80 million-plus figure in 2001.
- Smith blames Aldi’s focus on cheap goods produced overseas for leaving the business unable to compete.
Entrepreneur Dick Smith has closed the eponymous food brand he founded 19 years ago, blaming the success of German brand Aldi for the demise of the business.
The multi-millionaire set up Dick Smith Foods in 1999 to champion Australian-made foods at a time when leading local brands were increasingly being sold to foreign multinationals.
Aldi “basically forced us out of business”, he says, producing this chart comparing the sales trajectories of the rivals.
At its height in 2001, the business had a turnover in excess of $80 million. That same year, Aldi arrived in Australia and Dick Smith Foods sales have been in steady decline since then. The 74-year-old previously considered shutting down the business in 2010, but persevered with the support of shelf space from the country’s other major supermarket chains, Woolworths, Coles and Metcash (IGA).
“It is clear that the writing is on the wall for many Australian food processing businesses,” Smith said in a three-page letter to the three supermarket giants today.
The recent announcement that Aldi was the country’s most trusted brand, ahead of the likes of Qantas, was the last straw for the entrepreneur.
“It’s amazing that foreign-owned Aldi is now our most trusted brand, whereas Coles, Woolworths and Metcash have done everything they can to try and keep our products on the shelves, are not as respected,” he said.
An emotional Smith said it was the saddest day of his life.
“At the present time the company is successful and viable. However it is clear that this will not go on forever, so I have made the decision before the inevitable takes place and we are forced into bankruptcy,” he said.
The business, which has 13 products, from jams and spreads, to tomato sauce and cereal, produced under licence, will wind down over the next 12 months.
In his letter to Coles, Woolies and Metcash today, Smith thanked them for the support, saying they’d help deliver retail sales of around $480 million, with more than $10 million donated to charity.
But the same cost pressures that have seen the supermarkets struggle in the face of Aldi’s onslaught have also hit Smith’s company, forcing prices down to levels where it was losing money.
“In recent times, the only way we have been able to achieve sales at an acceptable level (that would allow our products to have shelf space) is by discounting so much that we are often losing money,” Smith wrote.
“Most importantly, a number of our really good products such as the cream cheese, canola oil and some of the fruit spreads, have already been dropped.
“We have done everything we can to get our costs down by operating as leanly as possible with minimum staffing levels. Of course, indirectly, many thousands of Australians have been employed through Dick Smith Foods.
“It is clear that it will become more difficult for small and medium sized Australian owned food processors utilising Australian produce to compete in the current marketplace.”
Ironically, Aldi, like Smith, has built its business on mimicking well-known brands. His most successful product has been “Ozemite”, a spread similar to Vegemite, which incidentally, is now back in Australian hands after being bought by Bega Cheese last year.
Smith took a swipe at Aldi’s billionaire owners Karl Albrecht Jr and Beate Heister, calling them “secretive” in an open letter to the pair that called on them to engage more deeply with Australia.
Aldi Australia CEO Tom Daunt issued a statement in response saying the company employs 11,500 Australians and uses more than 1,000 local suppliers.
“We are proud of the reputation we have built and feel strongly that the recognition we have earned as Australia’s most trusted brand is a result of our commitment to openness, honesty and integrity in all our dealings,” he said.
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