‘You can’t make money from $8 chicken’: Cheap chooks, production woes blamed for Red Lea collapse

MORE than 500 workers at a 60-year-old Australian company were sacked by email just before the Easter long weekend.

HUNDREDS of employees at a 60-year-old takeaway chicken brand were informed they no longer had jobs in an email over the Easter long weekend.

Red Lea Chickens, founded in western Sydney’s Blacktown in 1957 by Croatian immigrant John Velcich, was placed into voluntary administration on March 29.

“Due to the financial position of the companies, we regret to advise that the administrators are unable to trade the business and have no alternative other than to undertake an orderly wind-down of operations,” administrators McGrathNicol said in a notice on the Red Lea website. “Further information will be provided to creditors and suppliers in the coming days.”

More than 500 employees at the Blacktown processing plant, where a meeting was held by administrators on Tuesday, plus employees at six company-owned retail stores are now out of work. The franchisee network of 22 stores are seeking alternate suppliers.

Zagorca Ciolac said she had been working at the plant for 33 years. “It’s difficult, now we have to go look for another job,” she told Network Ten on Tuesday.

Rouse Hill franchisee Mark Huang said Red Lea informed him of the situation in an email last Thursday. “They said Saturday delivery, Monday last delivery, that’s it,” he told news.com.au.

Mr Huang, who has arranged an alternative supplier arrangements with Baiada and YCC Poultry, said he expected his store to survive. “At the moment we have organised everything so we should be all right,” he said.

He blamed falling production levels at the Red Lea processing plant following Mr Velcich’s retirement in 2016 for the company’s financial woes. “Chicken [doesn’t have] much margin,” he said. “If you don’t kill enough chickens, you lose money.”

But Mr Huang said rising rents and intense competition from Coles and Woolworths — which sell roast chickens at a loss, according to one analyst — were hurting everyone.

“Coles and Woolworths drop the price down, they want to kill all small business,” he said. “You can’t make money from $8 chicken. Every year rent goes up 5 per cent. I’ve been here 13 years, it’s nearly doubled. Wages go up. No one makes money now. That’s why lots of shops close, one by one.”

He said shopping centres had too much power. “We can’t believe how this lease works. The Australian government should be fixing this problem. We have no power, we complain but it doesn’t help. Rent per square metre shouldn’t be this high. This is big, big trouble in Australia.”

The first creditors meeting will be held on Thursday April 12. “The immediate focus of the administration is to work with key stakeholders to ensure an orderly wind-down of operations and commence our investigation into the affairs of the Red Lea Group and the reasons for the its failure,” McGrathNicol said in a statement.

Red Lea’s sole director has indicated he intends to submit a proposal for a Deed of Company Arrangement — a compromise between Red Lea and its creditors to avoid liquidation — which would cover outstanding employee entitlements.

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