Story Added : 27th April 2011
And good old no pokies, no-holds-barred Senator Nick Xenephon demands another inquiry. So, what exactly has the rising star of the supermarket duopoly been up to now?
Well a contract lamb processor – Colac, Victoria, based CRF – wanted to sell after receiving a good offer (and apparently running into some financial issues of its own).
By all accounts the offer was spectacular. A whopping $25 million is being bandied around, which does include as much as $8 million of CRF debt.
CRF processes more than one million lambs a year. But here’s the rub. About 90 per cent of its production goes to Coles. Which accounts for about 60 per cent of Coles lamb product nationally. And suddenly, we are led to believe, Coles lined up the board of CRF and bullied them into rejecting the $25 million offer to accept its $12 million (approximately, but not publicly confirmed at this stage) bid instead.
The Australian Competition and Consumer Commission, that august organisation that gets involved in nothing if given half a chance, declined to comment. CRF board members were also surprisingly reticent to step up to the microphone as were members of the cartel knocked on the head.
Farmers started hollering and Xenephon found support from Victorian pollie, Simon Ramsay, who also happens to be a CRF shareholder and rural media was all over Coles like a bad rash.
Still, others in the food industry started quaking in their collective boots, seeing this as a signal that Coles was going vertical, going fast and doing it at rock-bottom prices.
Yes, Coles made it clear there would be no contract renewal with CRF if it signed with the proposed takeover group. At this point it should not be forgotten Midfield Meats also had a squiz at the opportunity and ran screaming into the night for the same reason as the boys with the lazy $25 million – Coles would not commit.
So, Coles is left holding the bag. What right did it have to torpedo not one bid, but two? Elementary my dear readers. Midfield is a competitor. And mostly unseen, but tucked away in the middle of the other consortium, was Frank Herd, of Geelong’s MC Herd. Golly, another competitor.
So, let’s check we have this right. Coles has been working with CRF on a 10-year contract, without which CRF ceases to exist and some 300 jobs and a lot of cash in the local economy are gone. That contract is close to renewal. And the management at Coles, those heartless bastards, did not think it reasonable to hand a 10-year contract, worth bazillions, to its competitors. Sure, it is a David and Goliath scenario, but it is also a remarkable backdoor for a bigger player (read competitor) to swoop and unexpectedly hook into the coffers at Coles if CRF was sold to a small competitor and received another 10-year contract.
Come on people, this is business. Would the likes of Xenephon, or producers rally to support Coles if that was the outcome? Hardly, methinks.