Thursday, February 13, 2014

Manufacturing in Australia is not dead, but it does seem to have taken to its bed with a temperature, unwell from the effects of high costs, a high exchange rate and poisonously one-sided free trade agreements.

But all is not lost. The survivors of this shakeout won't be the lumbering dinosaurs like the carmakers, but family companies, which can fly under the union radars, tighten their belts when necessary, innovate, move quickly and reinvest – always reinvest.

The CEO of the Australian Industry Group, Innes Willox was out and about yesterday talking up the future of manufacturing and when pressed by Richard Glover on the ABC's Sydney Drive program he listed a few success stories. They were almost all family businesses, and some of them, like Ego Pharmaceuticals in Melbourne, have been stars of Business Spectators' weekly series of profiles.

Today's profile is another one: Robern Menz, a 100-year-old Adelaide food manufacturer that has adapted and innovated over the years, and frequently knuckled down to weather the storms that have come and gone.

Food manufacturing, especially fruit, is one of the toughest businesses of all. This one stayed afloat, and eventually prospered, by taking risks, being prepared to change and above all by always putting everything on the line.

The business was started in 1908 by Walter Sims, opening a grocery store in North Unley. He was ambitious and he ended with four stores. He couldn't get enough dried fruit to meet demand so, seeing an opportunity, he started a dried fruit business in Irymple, near Mildura. He called it Robern after Robert Burnell, in honour of the son of a friend who tragically died.

The business grew rapidly, and Walter's son Edgar ended up with six factories producing dried, frozen and canned fruit and dehydrated vegetables. You had to have a factory in every town in those days because the roads were too bad for deliveries, especially in the country.

Anyway, Edgar closed the grocery stores and in the 1950s and '60s, Robern was a thriving commodity-style food manufacturer, producing bulk product for house brands and export.

But there's definitely something about the third generations of family businesses: either through bad luck or bad management they often blow up their heritage. In this case it was definitely bad luck and the business didn't quite go under, but it nearly did. Plenty of others did.

It was when Britain joined the Common Market, in 1973, and as a result exports collapsed. It was a far worse time for Australian manufacturing than the current one and many went out of business, greatly worsening the 1974 recession caused by the 1972 Oil Shock.

Edgar had three brothers, and all four of them had worked in the business. When the great contraction of the mid-70s hit, three of them – Brian, Rupert and Lyall – moved on and left Edgar to it.

Edgar Sims had two sons, but one of them died in an accident at 18, leaving Grantley to take on the family company. He was fourth generation, but he ended up with all of the business like the first generation.

The way it happened, though, was a bit circuitous: when things were at their toughest and his father's business couldn't support him and his young family, Grantley bought a disused glace fruit factory in Berri, South Australia and moved the family there, where he went into competition with his dad.

After five years of competing and meeting for family Christmases they decided it was ridiculous to compete and merged.

There followed a series of expansions driven by Grantley into, first, fruit confectionery, and then in 1985 into chocolate. This culminated in 1992 in the acquisition of Menz from Arnott's, which was then being taken over by Campbell's Soup of the US. Menz was a baking business that started in 1850 and was bought by Arnott's in 1964 because it possessed one of the great biscuit brands in the nation – Yo Yos.

Menz also had the FruChoc brand, which has been declared an icon of South Australia by the National Trust.

As a result of those brands, Robern Menz, as it became, moved from a commodity food supplier to a value-added manufacturing operation with great brands of its own, including Menz itself of course.

Grantley's two sons, Philip and Richard, now run the business with Phil, 47, as chief executive and Richard, 43, as general manager operations. Grantly, now 75, works three days a week, and three of them share ownership and make up the board.

This is an excellent little South Australian business, doing about $20 million in sales and growing despite the difficulties facing all manufacturing, especially food, through innovation and focusing hard on its niche.

There needs to be more of it.

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