Australian cosmetics company collapses with $1.5 million debt
Thursday, October 3, 2013/
Australian cosmetics brand Inika has collapsed with more than $1.5 million in debt, with the company having consistently traded at a loss.
The business was placed in administration with Gavin Moss and Nick Combis appointed from Vincents Chartered Accountants.
Vincents Chartered Accountants insolvency manager Henry Kwok told SmartCompany there is no clear indication yet as to why the company became insolvent.
“It appears to be related to continued trading losses. But based on the information available, the business appears to have been profitable for the last few months,” they say.
Despite the past few months of profitability, the business hasn’t been able to repay its debts totalling $1.53 million.
Inika was founded in 2006 by Miranda Bond and its range is sold in more than 16 countries.
The company markets its mineral and organic cosmetics as being free from synthetic chemicals and incorporating vegan and organic products.
Unsecured creditors are owed a total of $530,000, secured creditors are owed $980,000 and employees still need to be paid $20,000 in entitlements and unpaid superannuation.
The three largest creditors are Cardinia Nominees, the Australian Taxation Office and the Commonwealth Bank.
Combis and Kwok say Inika had around 10 employees at the time of their appointment, with seven or eight people employed in New South Wales, two in New Zealand and one in the United Kingdom.
“We terminated three employees, two local and one in NZ,” they say.
“Now that a receiver and manager have been appointed, the receiver and manager are in control. I understand that the receiver and manager has ceased trading and terminated all staff.”
Combis and Kwok say the business will be put up for sale, but is likely to go into liquidation.
Inika was founded following Bond’s experience trying to fall pregnant while suffering from endometriosis.
The condition makes it difficult for women to become pregnant, but Bond was successful after only three months when she tried an organic diet and eliminated products with harmful chemicals (such as some nail polish).
Her success inspired her to create Inika, an all-natural cosmetics brand.
While it’s still unclear what caused Inika’s collapse, a recent IBISWorld report notes the industry has been in decline for the past five years at a rate of 2.1% per annum.
“Growth has been constrained by poor economic conditions, the associated frugal mindset of many consumers in relation to discretionary spending, heightened competitive pressures and an increased reliance on price discounting at the retail level,” IBISWorld says.
However, IBISWorld predicts in the next five years there will be a surge in popularity for health-friendly, green-friendly cosmetic products.
“The willingness of Australian consumers to buy a range of increasingly complex and green products will also assist industry performance,” IBISWorld says.
“The introduction of various natural and botanical products has occurred in line with back-to-basics trends favouring natural and organic ingredients and the move towards ‘chemical-free’ personal care products.”
Between 2013 and 2018, the cosmetics, perfume and toiletries manufacturing industry is predicted to grow by 1.6%.