Cabinet will decide on the future of embattled fruit processor SPC Ardmona later today, and things aren’t looking good.
Overnight, Treasurer Joe Hockey strongly implied he’d be arguing against SPC’s request for a $25 million government cash injection to keep it afloat.
“I’ll advise my colleagues tomorrow of my position, as I’ve done in the past, but if we’re asking the Australian people to help the government to live within its means, then corporate Australia must also follow,” Hockey told the ABC.
“The parent company of SPC Ardmona, Coca-Cola Amatil – which is an Australian company – in the first six months of this year had a profit of over $215 million, for six months, and yet there is a request for $50 million of taxpayers’ money.
“I think you can understand why we are being very cautious, very careful about handing out taxpayers’ money to companies that are profitable let alone companies that aren’t profitable.”
This added to sceptical comments on the bailout from Prime Minister Tony Abbott, who said while he took the request seriously, “the business should get its own house in order, rather than seek government assistance”.
Not everyone in the Liberal Party agrees.
One of the voices of dissent has been that of Liberal MP Sharman Stone, who’s represented the regional Victorian electorate of Murray since 1996.
She tells SmartCompany she’s optimistic about today’s cabinet meeting.
“I believe the facts speak for themselves,” she says. “I’m hopeful for the right outcome.”
“I find it concerning when there have been statements made that we can’t set a precedent for doing such things. A government is elected to take issues on board, and look at them on a case-by-case basis.”
SmartCompany asked Stone why she thinks the canned fruit manufacturer should be saved. She gave us five reasons why.
There are more than 760 jobs at the fruit manufacturer, but that’s not the whole story.
Stone says once you count the businesses that feed into and depend on the factory – orchards, fruit-storage businesses, packaging businesses, businesses in transport and logistics – another 3000 to 4000 jobs could be affected.
“All those businesses would have immediate job losses if the factory closes,” she says. “That’ll have a larger impact on the northern Victorian economy than the Holden decision had on Adelaide.”
Fruit manufacturing isn’t a simple industry. It takes decades to build the requisite farming and the operational knowledge is hard to come by. “You can’t build these industries overnight,” Stone says. “Fruit trees cost around $50,000 per hectare. When you add up the cost of that, the irrigation, the roads, and the surrounding industries like trucking and packaging that are built up around this factory, it becomes clear that you can’t restart that once it’s been killed.”
SPC Ardmona is Australia’s last canned fruit manufacturer.
Ultimately, Stone says, bad businesses should go under. But SPC’s been hit by a “tsunami” of problems, none of which were its doing.
The massive hike in the value of the Australian dollar killed its exports, which used to account for 30% of its business. It also has been affected by Australia’s two supermarkets opting for a lot of what Stone describes as “cheap, dumped and frequently contaminated” canned fruit.
In September, Woolworths signed a $3 million agreement to source all its private label packaged fruit from SPC Ardmona. That, evidently, did not come soon enough to save the business.
Many commentators point out that Coca-Cola Amatil, SPC’s owner, is a profitable company, and in a position to bail SPC out rather than shut it down.
Stone argues Coca-Cola Amatil has done its part.
“Any other company would have walked away years ago given their losses,” she says. “They’ve been hanging on [to SPC] despite these enormous losses, understanding the significance of this industry and its future prospects. They just need to get over this hump and get new capital equipment in place. And not a cent of the $25 million we’re discussing is going to be spent on wages, redundancies, or debt.”
Stone has a consumer safety concern as well. She says canned goods from China have been found to have double the level of lead allowed, according to results from the National Measurement Institute, which recently analysed the contents of eight cans of tinned peaches from China.
“A lack of Australian fruit processors exposes us to a lot of food safety issues,” Stone says. “There were horrific levels of food contamination in canned samples from China.”
That same National Measurement Institute analysis found SPC canned fruit meets all safety standards.
Myriam Robin is a reporter for SmartCompany and its sister site LeadingCompany. She has degrees in economics, international studies and journalism. She likes writing about businesses taking risks and doing new things.
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