Government urged to take action as Victorian businesses buckle under soaring operational costs

A beloved company behind Cherry Ripes and Crunchies is among a string of Victorian-based businesses crying out for a government hand up after its gas bill doubled to $5m and its operating costs skyrocket.

The number of Victorian businesses going bust has soared 58 per cent compared to last year, new figures reveal.

Manufacturing insolvencies are also up, as companies buckle under the weight of high inflation, interest rates, energy prices and taxes.

One of Australia’s favourite snack food makers is calling on the federal government to bolster its investment policies, after the gas bill at its Victorian factories doubled to $5m in the past financial year.

Federal opposition industry spokeswoman Sussan Ley. Picture: Monique Harmer

New Australian Securities and Investment Commission data shows that insolvencies in the state rose 58 per cent to 967 in the past year, up from 610 in the September quarter of 2023.

Manufacturing companies are among construction, food services, accommodation, retail companies shutting up shop.

At least 57 manufacturing insolvencies were reported in the September quarter, more than the whole of 2021-22 when 48 companies closed despite support during Covid.

Since then, manufacturing insolvencies have skyrocketed 315 per cent to 199 reports in 2023-24.

Manufacturers say the rising cost of doing business is putting pressure on industry sustainability.

Mondelēz International, one of the largest food manufacturers in Australia, has factories in Ringwood, Scoresby, Dandenong and Truganina.

It makes everything from Cherry Ripes to Crunchies, Cadbury Easter eggs, The Natural Confectionery Co. snakes and lollies, Sour Patch Kids, Olina’s gourmet crackers, scorched and chocolate covered nuts and candy.

The rising cost of using gas for food manufacturing is putting pressure on some of the country’s most beloved confectionery makers. Picture: David Geraghty

Gas-fuelled fire boilers are used to start the chocolate-making process.

But the total cost of gas at its manufacturing sites rose 100 per cent from about $2.5m in 2022-23 to $5m in 2023-24.

The blow came on top of high inflation driving up the price of ingredients, as well as freight, labour and labelling costs.

“With gas prices doubling in a year, we are eager to transition to renewable electricity,” a spokeswoman said.

“However, transition costs are high, technology is not advanced enough, and investment policies such as instant asset write-off treatments are needed to provide confidence for investment.”

Transitioning the boilers to renewable energy would cost up to $20m.

The instant asset write-off threshold is $20,000 for eligible companies with a turnover of less than $10m.

Tax treatments previously enabled Mondelez to invest in its biscuit-making facilities, which increased capacity by 30 per cent, growing its export market.

The company says incentives are needed to streamline facilities so Australian production is cost competitive, as it makes “difficult decisions” to raise recommended retail prices to remain viable.

Corex Plastics Australia chief executive Simon Whiteley last month told the parliament’s cost of living committee that the state land tax bill on his Dandenong site had increased 200 per cent over four years, with WorkCover rising 78 per cent last year.

Manufacturers are calling for incentives to streamline facilities so Australian production is cost competitive. Picture: Stuart Milligan

Federal opposition industry spokeswoman Sussan Ley claims Labor’s bad economic management is making it harder than ever to keep the doors open in Victoria, warning “businesses and manufacturers are in crisis”.

“Victoria is a great state with all the ingredients to be a world-leading manufacturer, but business needs these bad Labor governments to get off their back,” Ms Ley said.

“It is pretty simple, Anthony Albanese and Jacinta Allan need to stop crushing Victorian businesses with higher taxes and red tape.”

Industry Minister Ed Husic said the government was committed to the “hard task of rebuilding manufacturing after nearly a decade of Coalition neglect”.

“Since we formed government we’ve created more than 70,000 new manufacturing jobs across Australia,” Mr Husic said.

“And we’re providing millions in grants to businesses in Victoria through the industry growth program, including companies like (lithium sulphur battery maker) Li-S Energy.

“Rebuilding manufacturing won’t be easy or quick to achieve. But we’re committed to it.”

Australian Pipelines & Gas Association chief executive Steve Davies called on the Victorian government to “move beyond its ideological opposition” and unlock new supply for the 70,000 businesses that use gas, saying it would lower energy costs and boost industry.

“With a supply crunch looming, prices are rising, and Victoria’s global competitiveness is at risk,” Mr Davies said.

Originally published as Government urged to take action as Victorian businesses buckle under soaring operational costs