Supermarket shelves to stay stocked, for now, as Scott’s scrambles for new buyer
Australia’s biggest supermarkets are reassuring shoppers there will be no short-term impact to the usual range of goods on shelves after the nation’s largest cold chain refrigeration logistics company collapsed yesterday.
Administrators of Scott’s Refrigerated Logistics have advised clients that its truck network is operating as “business as usual” for the time being, but Coles, Woolworths and IGA are working on contingency plans in the background.
Scott’s provides mobile refrigeration and temperature-controlled warehousing facilities and counts Coles as one of its biggest clients.
“We’re aware of the challenges being faced by one of our transport providers and we are working hard to provide support and minimise the impact this might have on our customers and product suppliers,” a Coles spokesperson said.
Woolworths and IGA separately said they did not have direct contracts with Scott’s but had some suppliers who used the refrigeration network.
“We’re aware that a number of our supply partners could be affected by this news, so we’re in the process of contacting them to gain a better understanding of how we can help support,” said a Woolworths spokesperson. “It’s early days but we’ll continue to watch this development closely.”
In a statement, IGA said it was monitoring the situation closely. “We note the administrator this morning stated that they are continuing the Scott’s business as usual and do not anticipate any supply issues.”
Aldi, which contracts Scott’s for a small percentage of freight, said it was working with suppliers and logistic partners to minimise the impact on customers.
KordaMentha was appointed administrator of the refrigeration and transport network soon after it went into receivership yesterday, leaving 1500 jobs hanging in the balance. Administrators and creditors are in talks with the supermarkets to secure medium-term funding to keep operations afloat while it seeks a new buyer for the business, with a spokesperson confirming staff will be paid tomorrow.
Scott’s was owned by private equity firm Anchorage Capital, which recently purchased David Jones for $100 million. A KordaMentha spokesperson said the company was fielding interest from a range of buyers but could not give a time frame for when a deal would be secured.
Simon O’Hara, the CEO of trucking industry body Road Freight NSW, said the trucking industry had always operated on “very thin” margins but the Morrison government’s fuel excise and non-stop supply chain issues during COVID-19 were pushing truckies and their operators to the brink.
“A lot of companies really bore the brunt of having to pay more at the bowser and not get as much back, and so they were hit with a bit of a double whammy in lots of ways,” O’Hara said. “Fuel went up, prices went up for everything, but they were unable to pass on the cost to their customers straightaway.”
When trucking operators passed on these cost increases, they often experienced a lag time of one to three months, he said. “There were some companies that probably didn’t know they were struggling quite as much during the midst of it.”
Fierce competition in the freight and trucking sector had put downward pressure on contracts for a long time, he said. More recently, O’Hara said medium-sized operators experienced profit dives as steep as 35 per cent as consumers curbed spending, leading to a drop in delivery volumes over the past four weeks.
“I’m talking about shops you would go into with big names that aren’t selling nearly as much as what they would have 12 months ago, or six months ago, or indeed even three months ago,” he said.
“It’s certainly the case that interest rates and the general approach about slowing us all down in terms of the economy has certainly started to bite.”
Transport Workers’ Union national secretary Michael Kaine yesterday said trucking companies were operating on “razor-thin margins” and called on the government to give more support to the transport industry as retailers and supermarket giants booked significant profits.
“We urgently need reform in transport to ensure wealthy clients at the top of supply chains are accountable for fair, safe and sustainable transport operations for the freight of their goods,” Kaine said.
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