Online grocery delivery company Aussie Farmers Direct went into administration and ceased trading on Monday blaming the competitive might of Coles and Woolworths.
The collapse leaves 260 employees out of work and some of the almost 100 franchisees who bought into the business facing financial stress after spending large sums of money buying specialised delivery trucks.
Aussie Farmers Direct was a trailblazer in grocery delivery when it started shipping fresh vegetables, meat, bread and dairy to customers’ doors in 2005.
Before its collapse it had 100,000 regular customers.
But the company was losing more than $1 million a month in 2015 and its decision to go head-to-head with Coles and Woolworths by expanding into a full grocery offering of predominantly Australian-made pantry items and other dry goods in 2016 appears to have pushed it over the edge.
The company appointed KordaMentha as administrator on Monday morning.
“We are simply no longer able to compete against the domination of the major two supermarkets and the influx of cheap imported produce,” Aussie Farmers Direct said in a statement.
“It is hugely disappointing that it has come to this.”
KordaMentha administrator Craig Shepard said Aussie Farmers Direct had unsuccessfully tried to sell the business, and could not recapitalise it or find a partner to support its continued trading.
“Unfortunately, it is not possible to continue trading and the business will stop operating immediately,” Mr Shepard said.
A rescue plan for the group is looking unlikely as much of the company’s debt is held by investors.
Robert Cerchiaro, general manager of Red Gem Potatoes in Nar Nar Goon, south-east of Melbourne, said his farms supplied Aussie Farmers Direct potatoes and onions across Australia’s east coast and would be hit to the tune of tens of thousands of dollars by its collapse.
“They’re going to be about 5 to 10 per cent of our business – it’s going to end up being a significant financial impact on us, that’s for sure,” said Mr Cerchiaro, who is also owed money from outstanding invoices.
“You can’t afford to lose anything these days.”
Contracts with farmers are expected to be disclaimed and some farmers may become creditors of the company if they had forward supply contracts.
One franchisee, who asked not to be named, said he was left $250,000 in debt from loans taken out to acquire the rights to two delivery areas and buy two refrigerated delivery vans.
“There’s a requirement for us to keep a modern van, so I dare say almost all of us have got lease payments,” the franchisee said.
“We’ve all lost a lot of money in the franchises that we’ve purchased.”
The franchisee said there was no indication things were turning sour at the business, and the first he knew of the collapse was via a text message from a customer, followed by calls from fellow franchisees.
“There were tears this morning,” he said.
“I got the call and I raced straight into the depo. All the staff were packing up their personal stuff and leaving – a lot of them have been there since the start.”
The small business owner was drawn to buying a franchise by Aussie Farmers Direct’s philosophy of “doing things for the local Aussie farmer, looking after each other”, he said.
A small number of franchisees may be offered work at Home Delivery Service, which is AFD’s still-trading, last-mile logistics company that delivers for wine and food companies.
Launched amid a drought that was driving farmers to the wall, Aussie Farmers Direct positioned itself as a champion of Australian agricultural producers that paid higher prices and developed direct relationships with suppliers.
The company was outspoken on the dominance of Coles and Woolworths and the effect that $1 supermarket milk had on dairy farmers.
Aussie Farmers was founded by marketing professionals William Scott and Jordan Muir in 2005. The duo left the company in 2015 and 2014 respectively.
Mr Scott and Mr Muir were previously involved in Commquest, a marketing company that famously brought Paris Hilton out to Australia to promote one of its websites at a 2008 New Years Eve bash.
Documents lodged with the corporate regulator show Aussie Farmers Direct ran at a $12 million loss in 2014 and a $15.5 million loss in 2015, the most recent year it submitted accounts.
The company had 160 employees in Victoria, 59 in NSW and about 13 in Queensland, South Australia and Western Australia. There were 35 franchisees in Victoria, 30 in NSW, nine in South Australia, eight in both Queensland and Western Australia and three in the ACT.
Aussie Farmers Direct is the trading name of Stay in Bed Milk & Bread Pty Ltd. That company lists its shareholder as Aussie Farmers Holding Company.
ASIC documents list chief executive Brendan Shaw and Australian private equity outfit Equity Partners as local investors. The group also has investors from Singapore and America.
Aussie Farmers Holding Company had $65 million in paid-up capital ahead of its collapse.
A meeting of creditors will be called next week. KordaMentha will refund any customers left out of pocket.
By: Patrick Hatch & Sarah Danckert
Source: The Sydney Morning Herald