The collapse of a leading Australian food player
A multi-branded farming, food processing and manufacturing business that supplies fresh salads, ready-made meals and pre-prepared vegetables, HS Fresh Food encountered significant trading difficulties before its collapse into Voluntary Administration.
Despite generating over $100 million in annual sales and employing around 500 staff across Australia, HS Fresh Food struggled with supply chain issues, intense competition, a decline in sales and accumulated debt – factors which ultimately triggered its demise.
Investment from a private equity firm, as well as several wealthy Tasmanian families highlights the company’s stature within the sector. However, its downfall serves as a cautionary tale for small and medium business owners in the fast-moving consumer goods (FMCG) and fresh food sectors.
Against the backdrop of disruptive economic conditions and trading challenges, the company’s extensive operations and significant market presence were not enough to protect it from financial collapse.
Key considerations for FMCG SMBs
For business owners in the FMCG and fresh food manufacturing sectors, the experience of HS Fresh Food brings to light several important insights:
- Trading conditions: HS Fresh Food’s struggle with trading conditions is a common challenge in the industry. Major supermarket chains often impose demanding conditions on suppliers, affecting profitability and compliance.
- Operational efficiencies: The complexity of managing diverse brands across different regions can lead to logistical and financial challenges. Simplifying operations and focusing on optimising efficiencies can mitigate some risks.
- Robust financial management: Early engagement with external financial consultants can provide critical insights that a business owner might not otherwise gather internally. Ongoing financial oversight and proactive risk management are essential for sustaining business health.
The FMCG and fresh food manufacturing industries in Australia face constant pressure from rising operational costs, stringent supermarket regulations and fluctuating market demands.
Further, a recent Senate inquiry on supermarket prices in Australia highlighted the underlining challenges small and medium businesses face, such as pricing pressures, power imbalances and unfavourable contract terms. These added challenges can jeopardise the sustainability and market viability of businesses within the sector.
5 top resilience practices for SMB owners to adopt
Prioritise risk management
Proactively identify and mitigate risks. This could involve conducting regular risk assessments and having contingency plans in place.
Remain on the pulse with market developments
Keep up with industry trends and regulatory changes. Being well-informed allows you to adapt and respond to changes more effectively.
Optimise efficiencies and operational uplift
Streamline operations to reduce complexities and improve efficiencies. Simplifying processes and reducing redundancies can lead to better performance.
Maintain financial awareness
To take advantage of strategic growth opportunities, stay informed about your cash flow through periodical financial health checks from an external advisor. SMB owners should also aim for a cash buffer of at least 3-6 months of operating expenses to withstand unexpected challenges.
Seek advice before problems arise
If your business is showing signs of financial or operational distress, don’t delay seeking advice from small business debt specialists and external CFO/COO advisory experts.
However, seeking advice when ‘business is good’ is also a wise decision – one that can help foster long-term resilience and circumvent unnecessary problems.
Plan for the future
Every business is unique. The strategies listed below provide a helpful starting point but it’s important to tailor these to your specific situation. Regular consultation with financial and legal advisors provides valuable guidance that can help safeguard and strengthen your business’s financial future.
- Assess risk: Perform a risk assessment audit on existing and potential threats and develop mitigation strategies.
- Evaluate your current position: Consider where your business stands in relation to challenges, opportunities and competitors.
- Find areas to improve: Identify strategies that could be utilised to create the biggest impact on your business.
- Develop an action plan: Create a plan to implement one or two key improvement strategies in the next quarter.
- Get expert advice: Reach out to small business advisors with FMCG expertise for tailored guidance and strategic support in high-risk or high-impact areas relevant to your business.
In a tough economic environment, business owners will benefit from proactively evaluating their practices to secure long-term sustainability and resilience.
AVA Advisory can assist SMBs by providing strategic guidance, helping you avoid pitfalls similar to those that led to HS Fresh Food’s collapse.
At AVA Advisory, we’re committed to helping FMCG business owners thrive.
Connect with our corporate advisory team today by calling 1300 181 220 or scheduling an obligation-free consultation through our online booking system.
