Plan to rescue health food chain
THE boss of the Gold Coast-founded Flannerys health food chain says it can return to profit after a shot in the arm from creditors.
The Natural Grocery Company Pty Ltd, which owns Flannerys and other health food brands, fell into voluntary administration in November after repeated financial losses and the failure of a turnaround plan.
A number of its stores were closed as a result including Taringa and Wynnum in Brisbane, Toowoomba, and Crows Nest, Bondi Junction and Lane Cove in Sydney.
Last week creditors voted to approve a deed of company arrangement under which the majority of creditors will receive between 40 and 100 cents in the dollar.
Employees are to receive their full entitlement.
The DOCA preserves 10 stores of the 20-strong network, including Miami, Benowa, Robina and Paradise Point, which has been bought by the previous franchisee owner.
The other stores to remain open include five in southeast Queensland, one in Sydney and one in Lismore. One hundred employees have been made redundant out of a 400-strong workforce.
CEO Fergus Collins, who previously headed Metcash supermarkets, joined The Natural Grocery Company prior to administration.
Mr Collins said the DOCA leaves the company with a "viable" business to build on.
"The business with 10 stores and a cafe (on the Sunshine Coast) is a profitable network that will look to support the customer base and grow and be a viable option for consumers looking for organic and wholefood products," Mr Collins said.
"It is a very good industry and it is growing."
Mr Collins would not be drawn on what mistakes he believes were made prior to the business entering administration other than to refer to "excessive rents" in Sydney.
He has focused on talking to suppliers and emphasising the key role Flannerys plays in the marketplace.
"It is important to have offers like Flannerys in the marketplace. It is important for suppliers to use that as a testing field and I'm happy as a testing field I just want to be rewarded for it," he said.
"That has been my conversation with suppliers. They realise they have got to support this industry as well because it is a major part of their MPD (marketing and product development) as well."
A creditors report prepared by administrator Timothy Cook, of Balance Insolvency, shows gross margins declining from 43 per cent 33 per cent between FY18 and FY19 while the company's loss widened from the $446,830 to $7.968 million.
Mr Cook wrote that the company suffered from poor strategic and inventory management.
The company also underwent a rapid expansion, adding six stores in FY18, but the new stores failed to meet financial forecasts.
Mal and Berice Flannery established Mrs Flannery's - now known as Flannerys Organic & Whole Market - on the Gold Coast in 1973 and grew it into a multimillion-dollar franchise business before selling out 12 years ago.