How SPC went from basket case to grocery darling and back to making money

Century-old cannery SPC was losing money under previous owners Coca-Cola Amatil, but chairman Hussein Rifai had faith the company could regain it status as a grocery juggernaut.

SPC teamed up with Vegemite to launch a new range of baked beans as Australians return to buying canned food in droves. Picture: David Caird

SPC – known for its canned tomatoes, baked beans and preserved fruit – has swung to an annual profit, completing a $29m turnaround, three years after Coca-Cola Amatil sold it as a loss making business.

The century-old cannery booked a $14m pre-tax profit in the 12 months to June 30, compared with a $15m loss it recorded under its previous owners.

But chairman Hussein Rifai – whose Perpetuity Capital teamed up with Sydney private equity firm The Eights to buy SPC for $40m, a fraction of the $750m Coca-Cola Amatil paid in 2005 – says good management, rather than the pandemic catapulted the company back into the black.

“If I was to put my finger on one thing, it was really just getting rid of the three layers of management and bringing in a pretty qualified, highly motivated layer of new management,” Mr Rifai said.

“And I’ve given them a piece of the action. Day one, we announced we gave 15 per cent of the company to management, so they became our partners and their heart is in the business as much as ours.”

Since the acquisition, SPC’s new owners have invested about $35m in new information technology, rationalising old and non-performing assets, improving their production efficiency and its cost of goods.

But the past three years proved tougher than Mr Rifai initially expected. While the onslaught of Covid-19 triggered a wave of pandemic buying, with non-perishable goods such as pasta and SPC’s range of canned goods disappearing off supermarket shelves, it presented a big problem for the company.

“Covid didn’t really help us because we don’t have a continuous supply chain. We are a seasonal business and in 2020 we bought all the fruit that we thought we could sell and then everybody bought everything in the first half of the year,” Mr Rifai.

“It’s not like we can call our suppliers and say ‘business is good, send me more’, so we ended up missing out on business at the tail end of the year. So to be honest with you, this (earnings) result is despite all the difficulties, not with the help of the pandemic.”

SPC chairman Hussein Rifai says good management rather than the pandemic has bolstered the company’s earnings. Picture: NCA NewsWire / Dylan Coker

Panic buying may have eased as Australia edges closer to normality, but demand for canned fruit and vegetables has remained high as people seek cheaper alternatives to avoid soaring fresh produce prices.

But SPC hasn’t escaped inflationary pressures, with its own costs – from the metal in its cans to freight – surging.

As a result, Mr Rifai said the company has sought one price increase from the major supermarkets and hasn’t ruled out asking for more if inflation continues.

“We have tried to swallow as much of the cost as possible because we know everybody is suffering. The last thing we want to be remembered as being are the guys that gauged people because people have long memories and won’t come back to you.

“So we sat down and said ‘how can we tweak this, how can we tweak that’ to try to minimise the impact and then when we went to Coles and Woolies … we had a solid justification and we had proof that prices were going up.

“I hope inflation has peaked, and if it hasn’t we will take the same approaches.”

SPC is well capitalised after raising $111m from the South Australian billionaire Shahin family and AMIST Super in January to fund an acquisition war chest. Mr Rifai was speaking to The Australian before flying to Portugual to complete due diligence of potential takeover targets to fuel SPC’s European expansion.

The company has appointed Grant Samuel to investigate and identify onshore acquisition opportunities and hired a local corporate adviser from Madrid to identify acquisition targets on the Iberian Peninsula

“We‘re hoping within six months we should have at least one deal over there. We’re also working on trying to find all potential acquisitions, maybe in Asia Pacific, and most certainly, we’re looking at also acquisitions in Australia. So we have advisors in all of those jurisdictions looking for us,” Mr Rifai said.

“We‘re always kind of balancing because you can’t take too many (acquisitions) on otherwise you can’t consolidate them, you can’t do it properly. But the other issue is you always have to keep your pipeline full because not every transaction that you start ends up finishing so you don’t want to start from zero every time.”

SPC also launched a healthcare division last year, SPC Care, which is now providing older or infirm Australians with food that meets their diverse nutritional needs and dietary requirements. The company has appointed Luke Dillion to helm the division, whose previous roles include group general manager at Swisse Wellness in China and a Wesfarmers group general manager.

Mr Rifai said SPC Care has built a centre of excellence in science-based nutrition and is now researching and producing fruit-based snack and beverage solutions with its ProVital brand, nutritious specialised meal solutions for aged care and hospitals through its recently acquired subsidiary, The Kuisine Company.

He said SPC has boosted its home delivered meals through The Good Meal Company, with the creation of nutritious meals for a wide variety of ethnic and religious groups, as well as families with special dietary requirements such as NDIS.