Grocery supplier goes under
Townsville AUSSIE Farmers Direct erred by pushing into the broader grocery market and was burning through $ 500,000 a week before its collapse, administrators say.
They say the group was ultimately sunk by its decision to stray from its core business of selling fresh milk and bread into a full- line grocery offering that brought it into direct competition with supermarkets.
The online grocery provider, which opened to much fanfare in 2005 and promised to shake up the $ 90- billion grocery sector with its direct- to- consumer food delivery business, has collapsed into administration.
Aussie Farmers Direct closed im- mediately yesterday, leaving stranded about 100 franchisees, 260 employees and 100,000 customers nationally.
It is the latest victim of the supermarket wars being waged across the aisles by Coles and Woolworths, with added pressure coming from discounters such as Aldi and Costco.
Administrator Craig Shepard, of KordaMentha Restructuring, said the four shareholders in Aussie Farmers Direct had injected about $ 70 million into the struggling business over the past few years, but it had failed to turn a profit.
It is owned by four venture capital funds, three based in Hong Kong and the fourth in South Africa.
There were no bankers to the company, with the lurch into administration not forced by lenders but rather a decision by its shareholders. Mr Shepard said that while its 260 employees would be paid out, the 100 franchisees to the business that undertook deliveries had most likely lost all their money.
“The franchisees had invested some hard- earned cash into a truck and into a franchise network and now that is gone,’’ Mr Shepard said.
It looked as though the company had not made a profit in years, he said.
“Over the past four years, its shareholders have put in over $ 70 million — they’ve burnt through that,” Mr Shepard said.
“This thing doesn’t look like it has ever turned a profit, particularly over the past four years.’’
Mr Shepard said that when Aussie Farmers Direct started in 2005 with its delivery of fresh milk and dairy, it might have been profitable.
But a push into full- line groceries through its “General Store” site triggered its ultimate demise, he said.
General Store offered more than 4000 grocery lines. Mr Shepard estimated Aussie Farmers Direct was quickly depleting cash.
“It burns $ 500,000 a week,” he said. According to documents lodged by the company with the Australian Securities and Investments Commission, it posted a loss of $ 15.5 million in the 2015 financial year, following on from a similar- sized loss the previous year. Its sales had dropped to just under $ 140 million. In a statement, Aussie Farmers Director said directors were putting the group in administration with “great sadness”.