The family behind a food distribution empire

The family behind a food distribution empire

Rick Smith is not at the top of Australia’s food chain but, as the head of a family business turning over close to $1.6 billion a year, he’s certainly right up there in the pecking order.

It’s taken a long time, mind you – some 55 years, in fact, since he first joined the company as a 19-year-old delivery driver and salesman back in 1959.

The company back then traded as Food Distribution Services, an operation that had started as a fresh fish merchant almost 100 years before, in 1864, trading as J Hill & Son. By the time Rick joined the Morwell, Victoria branch, the FDS business was under the control of the processed fish products group I&J, but distributing a broad range of foods.

Rick rose quickly to the top, becoming the general manager just over a decade later. So it wasn’t a great surprise when I&J decided to sell out in the mid-1970s that Rick was first in line. The only problem was money.

“I didn’t have the capital, of course. Only a little bit,’ says, Rick, now 75. “I had to seek it from other capital sources.”

The solution was to form a buy-out consortium with Melbourne’s wealthy Liberman family, and one of their key objectives was to service the rapidly growing network of convenience stores around the country with dairy and frozen foods. This required a major expansion of both warehousing and distribution, a strategy that ultimately set PFD on the road to become one of Australia’s largest food distribution businesses.

Over the course of the next 10 years the business grew massively, adding on new acquisitions along the way. And Rick was again first in line when the Libermans decided to realise their investment in 1988, taking full ownership of PFD and a newly acquired subsidiary Glacier Foods Group. Another family business was born.

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The PFD business now employs more than 2,300 people across a national network of almost 70 distribution branches, and has a fleet of close to 800 trucks delivering fresh and processed foods, and now dry goods, to thousands of retail stores across Australia. Its customers continue to include convenience stores, as well as petrol stations, and airlines.

“It’s been a great journey along the way, and our business strategy remains focused on building our national distribution network through both organic growth and acquisitions,” says Rick.

“We see ourselves to be a food sales company. We buy it, sell it, and make a profit. It’s all about warehousing and delivery.”

Rick says the business has been averaging 6-7 per cent growth on its annual turnover, “which is a good number”.

These days he’s not heavily involved in the day-to-day running of the business but in “big ticket” items such as acquisitions. Under his stewardship the business has undertaken 20 to 30 acquisitions of different sizes, across all states, with PFD now having the largest food distribution footprint in the country. Larger deals have included the acquisition of the Nestle Dairy Products' food service division in the late 1990s, the acquisitions of the Chippy’s and Norco food services businesses in NSW during the early 2000s, and in 2012 PFD acquired the business and assets of Australian Convenience Foods Group, the market leader in the “ready to eat” food convenience industry.

“We cover about 94 per cent of the Australian population, as the essential plan is to be as near to the customer as possible. We see growth through further acquisitions, and there are still plenty of opportunities for the family to keep going and growing.”

Rick has no plans to retire just yet, but the next generation of the Smith family are now well in control of the day-to-day operations of PFD. Daughter Kerry has been CEO for the past five years, while son Lindsay looks after a number of other companies under the family’s control, and daughter Sharon Landy has worked in various areas of the business and is now involved with the company's philanthropic endeavours.

Rick says that PFD is about equal in Australian market share to the South African group Bidvest, and that together the two control about 40 per cent of the total food distribution market.

“When you look at the market we turn over about $1.6 billion, and Bidvest about $1.8 billion. The next company down turns over about $200 million, so there’s a very big gap. The biggest challenge is always competition, and there are about 600 direct competitors in the industry. They only sell a small range of goods, and we tend to be a one-stop shop to everyone, but it’s a very competitive marketplace.

“We’re developing a seafood operation, where we buy seafood, process and sell it. That will become really big for us, and I expect we will be the largest seafood processor within Australia in a couple of years. It’s all about exploring new growth opportunities.”

And that’s what the big competition has been doing as well. Indeed, Rick says Bidvest has made several approaches over the years. Because the market is so fragmented, a buy-out by Bidvest would not trigger alarms bells at the Australian Competition and Consumer Commission either.

“Bidvest have kicked the tyres several times and we’ve had many taps on the shoulder from private equity firms as well,” says Rick. “It’s all very flattering, but we’re just not interested.