Financial Review
The growth of upmarket specialty stores retailing high-quality chocolate has partly been blamed for the demise of the 85-year-old Australian confectionary retailer, Darrell Lea.
Industry sources say the influx of brands such as Lindt, Haigh’s, Max Brenner and Guylian, coupled with underinvestment in the Darrell Lea brand and stores, have forced the company’s downfall.
The third-generation family shareholders led by Michael Lea have battled for the past five years to keep the company afloat, pumping in cash as sales and earnings declined.
To no avail. Directors of the iconic company, known for sweet treats such as Rocklea Road, soft liquorice and Bulgarian Rock candy, appointed insolvency firm PPB Advisory yesterday amid growing concerns about its ability to meet financial obligations.
Sales have fallen by 20 per cent over the past five years to about $80 million and the company posted a bottom line loss of $3.3 million in 2011 after writing down the value of obsolete stock and booking restructuring charges.
PPB is seeking to sell Darrell Lea as a “matter of urgency” and will conduct a review of the business and approach potential buyers before the first creditors meeting on July 20.
PPB partner Mark Robinson said the firm had already received expressions of interest from private equity investors, distressed debt funds and investment banks purporting to represent Australian and overseas food companies interested in the brand, network of 69 stores and manufacturing operations.
Mr Robinson said the Lea family had agreed to provide short-term funding during the administration process to enable the company to continue to trade.
“We have some funding but it is limited – the sooner we can find a buyer and move it into new owners’ hands, the more value we can get for the business,” Mr Robinson said.
The Lea family had been financially supporting the company for “some time”, he said, but “their desire and ability to do that has diminished”. The Lea family’s private holding company, DLN Pty Ltd, is believed to rank among the list of unsecured creditors.
PPB was hoping to sell the business in its present form but would entertain separate offers for the retail and manufacturing assets if required.
Analysts said Darrell Lea’s vertically integrated model could prove challenging for would-be buyers. “It’s not just buying a retail business, you have to take a view on manufacturing as well,” one analyst said.
Darrell Lea, founded in 1927 by UK-born Harry Lea, has been struggling for several years, closing stores and scaling back operations in an attempt to ensure its survival after failing to raise funds from external investors in 2007.
The company has also been dogged by in-fighting between siblings over the family empire.
Store numbers have fallen from about 74 in 2010 to 69 (63 owned and six licensed) and staff numbers have declined from 1000 to 700.
The company also sells products through more than 1800 retail outlets in Australia and overseas, including chemists, newsagents and petrol stations, and exports liquorice to Britain, Canada and the US.
Wikipedia
Darrell Lea Chocolate Shops is an Australian company that makes and sells chocolate, liquorice and other confectionery. It is based in Kogarah, New South Wales.
It was privately owned by the Lea family, and was the largest privately owned confectionery manufacturer in Australia. It was established as a company in 1927, named after the owner's youngest child, Darrell Bernard Lea, born earlier that year. Darrell Lea had 81 privately owned shops and other 1,838 outlets. In July 2012 the company was put into administration and restructured. In September 2012, it was sold to the Quinn family. Further restructuring, including elimination of the majority of retail jobs occurred during August and September 2012. All company owned retail outlets were closed by, or on, 9 September 2012.
During peak times, Darrell Lea employed at least 1,200 people.
