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Saving SPC-Ardmona

Corporate welfare or government assistance? Some thoughts about saving SPC-Ardmona.

I have to admit that I have mixed feelings about the recent request by SPC-Ardmona for $25 million in government assistance. On one hand, granting the company $25 million of taxpayers’ money would send a bad message to the rest of corporate Australia that the government will subsidise their mistakes or inefficiencies. This would set a particularly bad precedent in the case of SPC-Ardmona because the parent company Coca-Cola Amatil made $215 million profit in the first six months of this financial year.

On the other hand, there are thousands of farmers who rely on SPC to purchase their stonefruit and a whole community in Shepparton and the Goulburn Valley relying on the income generated from fruit production.

This isn’t easy.

View of factory building with "Shepparton Preseving Company" lettering on the top.
The SPC cannery in Shepparton in 2011.

SPC-Ardmona has a proud history. The Shepparton Preserving Company commenced operations in 1917 as an unlisted public company, whilst the Ardmona Fruit Products Co-Operative Limited was established in 1921. Together these companies have built up a massive food processing industry around the Victorian town of Shepparton with their tinned fruits becoming available across the nation. The two companies merged in 2002.

In recent years, there have been problems within the industry. A crippling drought meant that water restrictions had to be brought in and many farmers were forced to bulldoze trees. Trees take more than a decade to produce a commercial quantity of fruit, so their destruction was significant. After the drought ended, the Australian dollar rose to historic levels against the United States dollar. The high value of the currency did considerable damage to export industries.

In April 2013, SPC-Ardmona announced that it would be halving the amount of fruit that it would buy from growers, resulting in the destruction of three-quarters of a million peach and pear trees. In May 2013, SPC-Ardmona asked the Commonwealth Government to reinstate “emergency tariffs” on cheap imported tinned fruit and tomatoes as a short-term means to saving the industry. Supermarket giants Coles and Woolworths/Safeway have in recent years chosen to use imported fruit in their generic tinned products, although Woolworths announced in September 2013 that it would now buy all fruit from SPC-Ardmona . Either way, it was too late to save 73 maintenance workers’s job before Christmas 2013.

Clearly, times are desperate. What should the government do?

I do not believe that the government should stand back and let this industry die. Such a move would be as reckless as allowing Ford and Holden to cease car manufacturing. Our leaders are constantly reminding us of the pending “Asian Century” and our role as some sort of “food bowl” for the region. Such opportunities cannot be exploited if our last major fruit processing company folds. In recent times, we have also seen a Heinz tomato sauce factory close and a McCain potato processing factory shut its doors.

Just as I wrote a few weeks ago, I believe the Commonwealth Government needs to start seriously considering what sort of economy it wants for Australia. Do we want to keep our food processing industries alive? If we do, then we need to sit up and act rather than persisting with a laissez-faire approach to our value-added industries.

The issue of whether SPC-Ardmona should receive a “handout” is complicated, but not impossible. Concerns about precedent-setting are valid, although I’d have thought that the General Employee Entitlements and Redundancy Scheme is also just as likely to generate moral hazard through the precedents that it has set. As always, there are contradictions and inconsistencies everywhere.

I see no reason why this debate needs to be an either/or proposition. There is a third option. Perhaps the Commonwealth Government could supply SPC-Ardmona with a low-interest loan (with an interest-free period) so that they can get their business restructured and update critical equipment, processes and infrastructure. That way, the industry would be spared and the imposition on the taxpayer minimised.

Time could also be bought to enable the industry to become sustainable again (this is important).

In the interim, we should all have a look through our pantries and ensure that in future the only tinned fruit and tomatoes that we buy are grown in Australia.

We have to help ourselves before we can ask anyone else to.

   

Comments

9 responses to “Saving SPC-Ardmona”

On 1 February 2014, Philip Collis wrote: Hyperlink chain icon

I agree some thing needs to be done, I believe the biggest mistake was going on the stock exchange all those years ago , not knowing the full details of why, can only assume to improve infrastructure to grow, having said that coca cola amatil will probably sell as a fire sale, if the company is sold as a whole with in Australia the overseas investments could be sold off, re invest back to Shepparton and start again, maybe look at being a co-operative again, the options are endless if we try.
if we expect the government to help, every big international company would try the same ploy, as did Holden and Ford.
Your thoughts?

On 1 February 2014, Andrew wrote: Hyperlink chain icon

I am not sure about the need to save the iconic SPC, but Australia grows very good food and can do it very efficiently and now in an increasingly environmentally friendly manner. Our farmers really do need to be valued.

On 2 February 2014, Adam Dimech wrote: Hyperlink chain icon

I agree wholeheartedly, Andrew. The needless destruction of so many trees that are productive symbolises the neglect shown to agriculture at present.

Philip, I believe that you make a very valid point about going to the stock exchange. As soon as the company was floated, the priority switched from the farmers to the shareholders. Whilst this was absolutely appropriate in a corporate sense, it meant that farmers effectively lost control of a large part of their industry. I think a similar situation has been observed in other agricultural sectors too, particularly dairy.

On 28 February 2014, Anne-Maree Wheeler wrote: Hyperlink chain icon

What happened to the profit-sharing enjoyed by all employes, (McKinsey & Company, Inc. study) in the 60s-70s! When did it go? This was a very profitable company when this was introduced. Sir Fletcher Jones did it, I think in the 60s. Same thing!

On 28 February 2014, Anne-Maree Wheeler wrote: Hyperlink chain icon

Perhaps SPC should consider profit-sharing again and keep the greedy unions out of it?

On 26 April 2014, Peach Princess wrote: Hyperlink chain icon

Of course SPC Ardmona needs to be saved. It needs to rebuild and thrive like it once did. Not only for the region of Shepparton but also in the name of all Australian Produce. Growers all across Australia have been screaming out for years that they can’t compete with imports yet imports come faster and cheaper and in huge volumes. Fair enough for the Federal Government not to give the $25Mil co-investment package but why don’t they demand their Government departments to support Australian Produce. Why do many Australian Hospital serve imported products to our sick, frail and aged??? Products that are proven to contain twice the level of lead than Australian standards. Tainted with chemicals and grown and irrigated with sewage. Why is our Australian Defence force fed imported products?? If the Government doesn’t want to set a precedent in bailing out companies, that’s ok but on the other hand the Government should protect our Aussie food supply, and make Farming and Growing Australian produce something to be respected and valued for now and future generations.

On 24 May 2014, Freddy Facts wrote: Hyperlink chain icon

The facts are SPC Ardmona have sustained loss of market share. In response rather than making rational decisions CCA decided to gut Ardmona and Kyabram sites, and move everything to Shepparton site. In doing so it is a traffic bound site making it inefficient to get produce into the site and retaining SPC’s Shepparton site outdated and inefficient processing lines, that then had to be brought up to export standard, when Ardmona site was already at export standard. Having wasted the opportunity to develop a far superior processing site Mooroopna, that would have more than coped with the decreased processing needs of the company, all is moved to Shepparton, where it is claimed closing Andrew Fairley Avenue will give it a 3% increase in processing efficiency. Bloody lie!!!! In the 1980’s and 1990’s when maximum processing of fruit and tomatoes was occurring even this would not be the truth. The maximum time this road would be closed then would be 3 hours in 24 if that, and with a 50% in intake in peaches and pears, these executives pushing this idea must be delusional. In 5-15 years they will be gone, as they have got rid of the skilled engineering workforce who I respected for they kept cookers and other processing machinery maintained and operational. Now they have gone who has the expertise built over 100 years to do the job they did? It’s called industrial sabotage with the company crying poor because of their ineptitude and incompetence. Then go seek token financial assistance when they know they are going to fail……….

On 8 November 2016, Ray Carter wrote: Hyperlink chain icon

I think the main lesson is to keep control over the product. As quite rightly said above, the move from co-operative to company started the rot, and the Coca Cola takeover meant that growers had no control at all over what they were producing. A condition of assistance to SPC should have been that Coca Cola been made to divest SPC.

In general terms, we as a nation should not allow any foreign company to buy our companies! Time and time again we see how overseas companies buy Australian companies, and we lose control over our own destiny.

We need to ask “Would China let us take over one of their companies?” “Would Korea let us take over their companies?” Would Japan let us take over their companies?” The list goes on.

They are even allowed to buy our strategic enterprises!! Like Darwin’s port. Like electricity suppliers.

It used to be that we needed to have overseas investments in Australia to help us grow. Now we no longer need that investment because our very large superannuation funds can supply over a billion dollars in investment funds.

When we talk about competition and markets controlling improving our economy, we should have said to Coca Cola that if they want to get into fruit juice and fruit in Australia, they should build a factory to compete with the existing companies, not reduce competition buy simply buying an existing company. In some situations, such as strategic facilities, they should not only be allowed to buy existing facilities, but not allowed to even set up a facility.

And then there is the social issue of having our workers not being able to control their own destinies….

On 17 November 2016, Adam Dimech wrote: Hyperlink chain icon

Hello Ray,

As a point of correction, SPC-Ardmona is owned by Coca-Cola Amatil which is an Australian company listed on the Australian Securities Exchange. The Coca-Cola Company (an American enterprise) owns about a quarter of the shares in Cola-Cola Amatil; the rest are owned by Australian investors. It is important to make a distinction between the two companies.

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