MichaelSimonettaPerfectionFresh

Perfection Fresh chairman Michael Simonetta says the company has become a "grower-shipper"

Perfection Fresh, one of Australia’s leading marketers of fresh fruit and vegetables, today announced it would merge with D’Vine Ripe, the glasshouse operator it jointly owns and operates with the Victor Smorgon Group.

Established in 1978 by the Simonetta family, Perfection Fresh has evolved from a Sydney-based wholesaler to establish a national presence with involvement in production, processing and marketing.

D’Vine Ripe, meanwhile, operates a large-scale, state-of-the-art glasshouse at Two Wells, north of Adelaide. Established in 2006, D’Vine Ripe is a joint venture between Perfection Fresh and family business the Victor Smorgon Group.

Speaking exclusively to Produce Plus, chairman of Perfection Fresh Michael Simonetta said a push for vertical integration was one of ‘the key drivers’ for the merger, which takes effect on 1 July.

The merged companies, which will operate under the name Perfection Fresh, have a joint strategy to control 70 per cent of their total sales through production, licensed varieties and fresh value-added processing by 2018. This includes a 50 per cent increase in protected cropping to 150ha.

“Over the next five years, we want to become more involved in production and licensed genetics, contract with growers to produce licensed varieties and expand our value-added facilities, including our fresh-cut processing operations,” Simonetta told Produce Plus. “This merger will give us greater ownership in all three areas.”

Perfection Fresh has effectively become a “grower-shipper”, said Simonetta. “We’re doing a lot more share-farming, sharing risk with growers.”

The move towards greater vertical integration is vital in the increasingly competitive Australian market, where a push towards direct sourcing among the major retail chains has put pressure on traditional service provider models.

The shareholding of the merged entity is now split between the Simonetta family, the Victor Smorgon Group and the Orloff family. The Perfection Fresh Board will consist of Michael and John Simonetta together with Peter Edwards and James Orloff. Vince Simonetta will continue as a shareholder but take a step back from day-to-day operations after some 30 years in the business.

Financial strength

Importantly, the merger – and the wealth of the Victor Smorgon Group – also brings potential capital reserves to Perfection Fresh to invest in expansion.

“The partnership is a means of bringing equity into the business, and it gives us a bit more financial strength and prowess to help us achieve our goals,” said Simonetta. “For instance, it means we can fast-track our five-year strategic plan to control 70 per cent of our sales, and achieve sales of A$500m, so this becomes a two-and-half year plan.”

Perfection Fresh has announced plans to invest and expand in nine categories, including fresh prepared foods, tomatoes, brassicas, berries, mushrooms, grapes, mangoes, lettuce and proprietary products. “Those are the key areas we’ll be focusing on,” said Simonetta. “Our sales floors in the central markets will continue to trade other products from their existing range, but we may even divest some of the ones we’ve been involved in.”

Despite bringing the Smorgon family into the business, Simonetta was clear to point out that the merger is “not a buyout”. “There has been no financial transaction, just a change of shareholdings. The shares are now divided among a number of different family members.”

While declining to disclose how the shares were split between the Simonetta and Smorgon Group families, Simonetta added that all shareholders would be treated equally and that all decisions would be unanimous. “This is the Smorgon philosophy, and it’s one we share,” he said.

The merger was “a natural progression”, Simonetta added, noting that the families had worked together successfully for the past six years. “We’re aligned in our thinking, values and cultures,” he said.

For Victor Smorgon Group, which has a long history in food production and manufacturing, the merger represents the next step in the evolution, according to joint managing director and D’Vine Ripe CEO James Orloff. “Our new partnership with Michael and John, and their great team, gives us the ability to expand using innovative farming and growing methods to take advantage of Australia’s changing place in the world food chain,” he said.

Staying in Australian hands

While many other larger Australia horticultural companies have turned to foreign investors to access capital to expand, Perfection Fresh’s tie-up with an Australian family company in Victor Smorgon Group also falls in line with its goals.

“Over the past six years, we’ve received approaches from various potential foreign partners, none of which we’ve considered seriously,” said Simonetta. “It was critical to our family that we remained a 100 per cent family-owned business.”

Perfection Fresh and D’Vine Ripe currently employ more than 500 staff at 12 sites across Australia, and Simonetta said the merger would not result in any redundancies. On the contrary, he said the merged company expected to create around 150 additional jobs across Australia over the next 12 months.

The third stage of D’Vine Ripe’s glasshouse operation at Two Wells expanded the entire plant to 27ha in 2012, but Perfection is about to embark on stage four, which is likely to add another 8ha of production. It has also constructed a 2ha operation at Lake MacDonald near Noosa in Queensland, which began harvesting fruit two weeks ago. Simonetta said the growth was being driven by the snacking tomato sector in particular.

In an increasingly competitive market, Simonetta said the merger would allow Perfection Fresh to better serve its customers, with its current and future investments in production underpinned by robust retail programmes.

“We’re confident the programmes we have with the major retailers will continue, and we’re confident that putting plans in place for better security of supply, leading varieties, global innovations and value-adding capability, we’ll remain in a good place. We’re comfortable with our place.”