Darrell Lea expands products in turnaround triumph for once-struggling company


Updated

August 11, 2018 05:24:05

One of Australia’s oldest confectionery companies, Darrell Lea, is planning to expand into ice cream and muffins six years after it nearly went under.

Key points:

  • Darrell Lea’s strategy changed significantly after it nearly collapsed in 2012
  • Its profits have surged from $37.4 million in 2013 to $81.2 million last year
  • The company hopes to triple its licorice sales in the US

It also could be floated on the stock exchange in a few years’ time.

Life is sweet after a rocky road for the chocolate, licorice and sweets maker as its new owners, Quadrant Private Equity, inject cash into the business.

The firm almost collapsed in 2012 and was rescued by Queensland entrepreneurs, Tony and Christina Quinn, who closed down the Darrell Lea stores and massively expanded the number of retailers who sold the company’s products to include supermarkets and Australia Post.

Darrell Lea chief executive Tim York said the overhaul of the business had seen its revenue surge from $37.4 million in 2013 to $81.2 million in 2017.

“If you can picture Darrell Lea going from selling in 60 shops where people once or twice a year would walk into those stores to all of a sudden Darrell Lea was available for people in over 3,000 outlets,” Mr York said.

Darrell Lea strikes deals with Muffin Break, Lifesavers

Over summer, ice cream will return to the Darrell Lea menu.

Mr York said the company would partner with Everest Ice Cream to sell Darrell Lea flavours, including Rocklea Road, peppermint nougat and peanut brittle.

“Darrell Lea did used to have ice cream at its stalls and in some recent market research ice cream was one of the products that people really wanted to see us put our inclusions, chocolate and peanut brittle and other pieces like that into,” Mr York said.

Darrell Lea has also bought the Lifesavers brand from global food giant, Nestle, which means the favourite lolly of many Australian children and teenagers will be made here for the first time in almost 20 years.

The company is also expanding into muffins with partner Muffin Break.

Next month Darrell Lea will launch new Rocklea Road flavours based on Adriano Zumbo’s macaroon range, although the future of the partnership is unclear with the celebrity chef’s business going into administration.

Mr York said the company was planning to increase its exports which made up about one fifth of sales.

“From an export perspective, Darrell Lea today is really a licorice company and again we are the number three licorice company in America. There’s still a lot of room for us to grow there,” he said.

“We’re looking to see if we can double or at least triple the licorice business there over the next five years.”

Fund manager Roger Montgomery from Montgomery Investment Management said a broader range of products would appeal to not just to global confectionery firms such as Nestle or Mars, but ice cream and baked goods producers when Quadrant looked to sell Darrell Lea.

“There’s no doubt that Quadrant upon entering this field would already have a list of what they would call natural buyers, companies that they think would look to buy this particular brand,” Mr Montgomery said.

IBIS World industry analyst Bao Vuong said Quadrant had followed a similar strategy with the Real Pet Food Company which it also bought from the Quinns and onsold to a Chinese consortium, more than doubling its investment.

“The owners of Darrell Lea plan to continue growing and expanding and probably do the same thing they did with The Real Pet Food company and probably acquire a lot of firms, and then eventually sell it off,” Mr Vuong said.

Private Equity owner says no slash and burn for Darrell Lea

Electronics retailer Dick Smith collapsed after being bought by private equity firm Anchorage Capital.

But Quadrant executive chairman Chris Hadley dismissed concerns about private equity turnaround strategies which included buying struggling companies and overhauling them by cutting costs and laying off staff.

He told the ABC that Quadrant was not planning to sell off Darrell Lea’s assets and load the firm up with debt to increase profits.

“We focus on growth businesses and growing businesses, not actually asset stripping … because we want the buyer of this business to pay a premium,” Mr Hadley said.

“Over a three to five-year period we’d be looking to double our money but we will see what else we can do with it.”

It is too early to say if Darrell Lea will stay in Australian hands, but Mr York is considering floating the company on the share market.

“Darrell Lea may become a listed business on the ASX. Certainly, it was previously a listed business so that’s a viable option,” he said.

“Equally it could go back into family ownership and with five years to run there’s a lot of work to do before we can really crystallise those plans.”

Beatriz Cullen has worked for Darrell Lea for nearly 30 years and hoped it would be smooth sailing ahead for the firm after the upheaval of recent years.

“I am very fortunate and very lucky to have my job still,” Ms Cullen said.

“As long as I am working with Darrell Lea I will continue to support our products, not only me but my family and friends as well.”

Topics:

food-and-beverage,

business-economics-and-finance,

australia

First posted

August 11, 2018 05:07:11



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *