Don’t blame Aldi: Expert says Dick Smith only has himself to blame for food company’s closure because it couldn’t compete on prices
Millionaire Dick Smith has been slammed for suggesting Aldi ‘forced’ him into closing his food company after almost two decades.
An expert told Daily Mail Australia Dick Smith Foods’ collapse was because of all the major supermarkets – not just the German giant – and the company’s lack of marketing, promotion and brand awareness with Aussie consumers.
‘There’s a lot of factors behind the downfall, it’s not solely placed on Aldi,’ IBISWorld Senior Industry Analyst Bao Vuong said.
Millionaire Dick Smith has blamed German supermarket Aldi for ‘forcing’ him to close his food business after almost two decades (pictured getting teary at the announcement July 2018)
However, an expert told Daily Mail Australia that Dick Smith Foods’ (pictured) collapse was because of all the major supermarkets and their lack of self promotion
‘Coles and Woolworths and Aldi – they all had an effect on downfall of Dick Smith Foods because consumers are price conscious.’
Mr Vuong said the food company, founded in 1999, proved they could not compete in a competitive market which favours cheap products.
‘It’s the company itself, it’s not a prominent or well-known company with Australian consumers,’ he said.
‘The lack of brand awareness contributed to the downfall over the decade.’
The expert explained Dick Smith Food’s prices were double that of their competitors and this was a ‘large contributor to the downfall’.
‘If you can sell cheaper products, consumers will give you incredible support … price is most important when it comes to consumers,’ Mr Vuong told Daily Mail Australia.
‘They may have had a chance, although it was a very small business, if it promoted itself better and compared its products … it potentially could have done well in the market.’
The 74-year-old made the shock announcement on Thursday morning where he said ‘extreme capitalism’ and the European supermarket had led to his company’s demise.
Dick Smith Foods will be wound down over 12 months after almost two decades in business and $480 million in retail sales.
Mr Smith said ‘the driving force of our closure, however, is Aldi’ in a five-page open letter to Coles and Woolworths.
‘It is not just battlers who support Aldi. Many wealthy Australians also support Aldi – and in fact say positive things about Aldi and negative things about your companies,’ he wrote.
Mr Vuong said the food company (Mr Smith pictured with products), founded in 1999, proved they could not compete in a competitive market which favours cheap products
Mr Smith accused Aldi of taking money and jobs out of Australia – something he claimed to support with his failed food company – which produces sauces, spreads, biscuits and cereals
‘This is sad and hardly consistent with the support you have given Australian companies such as our own. It looks as if there is nothing we can do about this. It is simply modern ‘extreme capitalism’.
‘That is the reason I am closing Dick Smith Foods.’
He also issued a warning to the supermarket bosses.
‘The Aldi concept is ruthlessly astute and it is clear that unless your companies move towards this system, you will very likely become uncompetitive,’ Mr Smith said.
Mr Smith accused Aldi of taking money and jobs out of Australia – something he claimed to support with his failed food company – which produces sauces, spreads, biscuits and cereals.
The entrepreneur, who once had a net worth of $50 million, said while his business was still viable at the moment, he made the decision to shut it down as he feared it will soon succumb to the inevitable and slide into bankruptcy.
‘It’s quite devastating. I basically failed,’ Mr Smith told Daily Mail Australia.
Mr Smith (pictured Thursday) said ‘the driving force of our closure, however, is Aldi’ in a five-page open letter to Coles and Woolworths
Mr Smith (pictured in 2001) launched Dick Smith Foods 19 years ago, with the products made using Australian grown ingredients
‘I don’t make any money out of it. We established (the business) to help Australian farmers and workers in the food industry.
‘We could’ve made the business make a fortune – you can just import the cheapest (products) but I’m not going to do that.
‘It’s devastating but that’s life. I’ve been very lucky. It will affect the charities we helped.’
Mr Smith said there was little hope for food production in Australia.
‘The future for Australian manufacturing is just terrible. It’s on its way to complete destruction,’ he said.
‘There will be less and less food production in Australia if we allow this to continue.’
‘In two years’ time we will go out of business, so I’m closing it down now when times are good.
‘It’s a decision forced on me because most people just want the cheapest prices, and the cheapest prices will always come from overseas.’
‘It’s quite devastating. I basically failed,’ Mr Smith told Daily Mail Australia after he broke the news he was shutting down the Dick Smith Foods business
Mr Smith (pictured) had fired off a scathing letter to Aldi’s owners this week, demanding to know ‘when will enough be enough?’ when it comes to their expansion plans
Mr Smith also informed the bosses of Coles, Woolworths and Metcash of his decision in a letter, thanking them for their support for almost 20 years.
‘We have done everything we can to get our costs down by operating as leanly as possible with minimum staffing levels,’ Mr Smith wrote.
‘Of course, indirectly, many thousands of Australians have been employed through Dick Smith Foods.
‘It is clear that it will become more difficult for small and medium sized Australian owned food processors utilising Australian produce to compete in the current marketplace.’
The business will be wound down over the next 12 months.
Dick Smith Foods ‘are made in Australia by Australian owned companies using Australian grown ingredients’, the company’s website says.
The team behind Dick Smith Foods is ‘quite small’ with three direct employees.
‘The staff employed directly by Dick Smith Foods are responsible for the management and marketing of the brand. As there are no manufacturing processes to oversee, the Dick Smith Foods’ team is quite small.’
‘All the products are produced by Australian-owned companies under a licensing agreement with Dick Smith Foods.’
The business had also given more than $10 million to charity over its 19 years.
Mr Smith said Aldi had ‘taken billions of dollars of business from existing Australian owned companies’ (stock image)
Mr Smith had fired off a scathing letter to Aldi’s owners this week, demanding to know ‘when will enough be enough?’ when it comes to their expansion plans.
His comments came in response to the $40 billion privately-owned discount retailer being this month voted Australia’s most trusted brand.
‘In Australia your Aldi company has been phenomenally successful,’ Mr Smith wrote in an open letter to Aldi owners Karl Albrecht Jnr and Beate Heister.
‘It has not only taken billions of dollars of business from existing Australian owned companies, but it has now been voted the most trusted brand in Australia, and it has also been reported that it is our most profitable supermarket chain.’
But Mr Smith claimed Aldi’s operations were doing Australians out of a job.
‘Your formula of employing less staff per dollar turnover compared to the typical Australian owned supermarkets will ultimately mean less Australians employed,’ Mr Smith wrote.
‘We already have a problem in Australia. We have 14 per cent youth unemployment and over 20 per cent youth underemployment – that is, where our young people can’t get a proper full time career.’
Mr Smith also accused Aldi of being ‘secretive’ and said they had a duty to explain how their future plans will impact Australians.
‘Our tradition here is one of openness. However I notice much of the reporting on your company mentions secretiveness. It appears that neither of you have ever conducted a media interview on your plans for the expansion of Aldi,’ he said.
Aldi has hit back, saying it has saved Australians more than $1.5 billion per year (stock image)
‘Can I ask why you are so secretive? Surely being worth $30 billion US dollars (that’s $40.63 billion Australian dollars) you have a responsibility to be open and explain your long term plans to all those who are affected.’
Mr Smith called on Aldi’s owners to visit Australia ‘and explain what you are planning to do in the medium and long term future that will affect our children and grandchildren’.
Aldi Australia hit back stating the company proudly supported an Australian-first buying policy and had shared its growth with more than 1000 local suppliers and 11,500 Australian employees.
‘As a privately owned business we have never sought to ‘maximise’ profits at the cost of something or someone else,’ Chief Executive Tom Daunt said in a statement.
‘Rather, we opt for long-term sustainable growth strategies.’
Mr Daunt said Aldi was proud to have influenced the entire grocery sector ‘which has led to price deflation benefiting all Australian shoppers’.
Aldi opened its first store in Sydney in 2001 and filled a void in the discount supermarket business that arose when discount grocery chain Franklins went out of business.
STATEMENT FROM ALDI
‘A strong purpose drives growth and profitability. At ALDI we strive to provide our customers with high quality products at affordable prices. Losing focus of this purpose just adds costs. This might sound like a gross simplification of our business, but in our efforts to ensure efficiency this remains our driving purpose,’ ALDI Australia CEO Tom Daunt said.
‘Our focus on the essentials and our optimisation of the discount principle has made ALDI the successful Australian retailer it is today. We offer a consciously reduced, carefully selected range of food products and other daily necessities.
‘ALDI has been operating in Australia for 17 years; the business started with two stores in NSW (Bankstown and Marrickville) and has now expanded to more than 500 stores. Today, ALDI employs more than 11,500 Australians and partners with more than 1,000 Australian suppliers to deliver our range of high quality products.
‘Our exclusive brands form the heart of our core product range.
‘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.
‘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 distinct business model that is different to our competitors.
‘We proudly support an Australian first buying policy and have shared our growth with hundreds of Australian manufacturers and thousands of staff who have been direct benefactors of our business growth.
‘We do not cut corners, we do not abuse our market power, we do not mislead our customers. We do not avoid tax payments, we do not squeeze our suppliers. We keep things simple and we focus our attention on what matters most to consumers.
‘We are proud of the reputation we have built and feel strongly that the recognition we have earned as Australia’s most trusted brand is a result of our commitment to openness, honesty and integrity in all our dealings.’