After 19 years as one of Australia’s most well-known food brands, Dick Smith Foods is set to close down, with owner and entrepreneur Dick Smith saying he’s unable to compete with the “extreme capitalism” of Aldi and Amazon.
Dick Smith Foods will likely stir fond memories for many Australians, with the company’s range of peanut butter, tomato sauce, and breakfast spreads introduced in 1999 to provide a locally sourced and owned alternatives to big-name food brands.
The company has had a tumultuous past, finding itself in numerous legal cases with international food companies such as Heinz and Arnott’s, and in the five years leading up to 2011, the company’s revenue reportedly dropped from $80 million to $8 million.
Speaking to SmartCompany, Smith blamed retailers such as Aldi for the decline of Dick Smith Foods, saying the German discount grocer had “forced him out of business”.
“They’ll send us into bankruptcy within two years, they’ll send us broke,” Smith says.
“Aldi has a formula — they’ve come here and imported most of their products while employing virtually no staff, they have 20% of the staff of the major supermarkets. That means they can sell at a really low cost.
“Aldi is now the most trusted brand in Australia, and they’ve completely outmaneuvered us.”
Smith is appreciative of the support from supermarkets such as Coles and Woolworths, which have kept the Dick Smith Foods brands on shelves. However, he says his peanut butter used to account for 12% of peanut butter sales in Australia, and today accounts for just 2%.
The brand’s assets will not be sold, with Smith giving the Dick Smith Food brand assets to his suppliers at “no charge” so they can choose to carry on the products if they want. He says the supplier will have 12 months to gradually change their processes.
“Dick Smith Foods was designed to support Aussie farmers, but that’s not possible with modern day extreme capitalism. Aldi not only has virtually no staff, but they’re not on the stock exchange, so they can even share their wealth with Australians,” he says.
While the 74-year-old founder says it’s a sad day for him, he says he’s not complaining or suggesting Aldi has acted inappropriately, saying the company has complied with all laws. Dick Smith Foods was the last of Smith’s owned ventures to exist, with the entrepreneur selling Dick Smith Electronics and Australian Geographic in the late 20th century.
Amazon’s effect on Aussie SMEs will be “staggering”
Dick Smith Food’s closure follows an open letter penned by Smith to the founders of Aldi in Germany, inviting them to come to Australia and explain their wealth and plans for further expansion.
“I would like to invite one or both of you to come to Australia and explain your plans here to Australian parents and to our politicians,” Smith said in the letter.
“Are there plans for endless expansion and endlessly selling lower and lower priced goods? Will these goods, just like your peanut butter, come from countries like Argentina where wages are extremely low?
“Won’t this mean our Australian farmers and food processors will never be able to compete with such low prices?”
Aldi was recently named one of Australia’s most trusted brands, something that drew the ire of Smith, who says it provides a “real lesson” for businesses in Australia.
“To become the most trusted brand in Australia, all you have to do is sack as many people as possible and import everything at the lowest price you can find,” he says.
“Amazon is going down the same route. The money they take from Australian businesses in the future will be staggering. Jeff Bezos didn’t invent anything, he just worked out a way of getting more people sacked.”
Smith says he despairs for the future of employment in Australia and believes there will be a tipping point where the “pitchforks will come out”.
As for Smith, he’ll be continuing his ‘Fair Go Australia’ campaign and “putting his best in” when it comes to combating “extreme capitalism”.
“But I’ve certainly failed at this,” he says.
In a response to Smith’s open letter, Aldi Australia chief executive officer Tom Daunt says the business had “never sought to ‘maximise’ profits at the cost of something or someone else”. He also defended the number of employees Aldi Australia has, saying the company employes around 11,500 workers, and engages with more than 1,000 local suppliers.
“In addition to providing employment to tens of thousands of Australians, both directly and indirectly, we are proud to have influenced the entire grocery sector, which has lead to price deflation benefiting all Australian shoppers. Our estimates suggest that we are saving Australians more than $1.5 billion per year. This is money that is returned to the economy for bills, holidays, education and other vital expenses,” Daunt said in a statement provided to SmartCompany.
“Our international heritage and global presence is no secret, nor are our intentions in Australia. We want to supply great quality products at affordable prices. We do this by adopting a different business model that is different to our competitors.
“We are not a business trying to artificially accelerate market share and we’re not looking to match the store count of our competitors.”
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