Thomas Foods International is a meat-and-potatoes family business. Usually that just means it’s plain and straightforward, but in this case that’s both true and false.
A few months ago Australia’s largest family-owned meat processor and exporter bought one of the nation’s largest potato companies, Mondello Farms, so it really does now produce meat and potatoes, but while it’s owned and run by very straightforward country people, this is far from a plain business.
Thomas Foods, a family company built and owned by Chris Thomas, now 65, and managed by his 40-year-old son Darren, is rapidly expanding at the vanguard of Australia’s so-called “dining boom”, the one that’s starting to replace the mining boom.
Over 40 years Chris Thomas and the Mondellos, Frank and Basil, built their businesses in parallel, supplying Australia’s supermarkets as well exporting to supermarkets overseas – Thomas into the meat fridges, Mondello the potato bin.
Almost exactly a year ago the combination of rapid expansion and a price squeeze on potatoes in the supermarkets caught up with Mondello Farms and it collapsed. Six months later the receivers, McGrathNicol, put the business up for sale and Chris and Darren Thomas snapped it up.
The difference between the meat and potato businesses could not be starker. As the Mondellos now come to grips with the tragedy of losing their business and having to start again, the Thomases have just announced a $30 million upgrade to their flagship abattoir at Murray Bridge in South Australia and they also have a $100 million war chest for more acquisitions.
Put simply, there’s more money in meat than potatoes. Both businesses export, but meat has better margins and Thomas exports 70 per cent so it’s much less dependent on the ferocious local supermarkets than Mondello.
And Thomas is now able to make good money out of the Mondello potato acquisition because the two products use the same supply chain to the same customers: putting the businesses together makes as much sense as putting the two products together on a plate.
Chris Thomas started life as a jackaroo and met Bob Rowe in the early 1970s and started working for T&R Pastoral soon after. At that time the “T” stood for Alan Turner, Bob Rowe’s partner in the meat wholesaler.
There followed a decade of tumultuous change in the 1980s, including part ownership by Adelaide Steamship subsidiary Metro Meat, and the replacement of Turner by Thomas as the “T” in T&R. When AdSteam went broke in 1991, Metro Meat was sold to the giant state-owned Chinese investment conglomerate Citic.
In the late 90s Citic decided to exit the Australian meat industry and Bob Rowe and Chris Thomas had to choose between selling with them or doubling up and buying the Chinese out. They bought them out.
In 2006 Chris’s son Darren became CEO of the business at the age of 33 and as a direct result of that, two years later the Thomases bought out the Rowes. It was a happy parting of the ways (Bob Rowe was then 72) and as a result the former jackaroo owned 100 per cent of the big abattoir at Murray Bridge that was then processing 3000 sheep and lambs and 300 cattle per day.
Through all this period, and since, the family has ploughed all the cash flow back into the business. After the 2008 buyout of Bob Rowe, they expanded the business rapidly, buying abattoirs in Lobethal, SA, Tamworth, NSW, and Wallangarra, Queensland.
In 2010 they bought Foodcomm, America’s largest importer of Australian meat and their largest distributor, to get full control of the supply chain and capture more of the margin.
Thomas Foods now processes 120,000 sheep and lambs a week and 5000 cattle, turning over $1.3 billion. The $30 million being spent at Murray Bridge will increase output there by 25 per cent and further expansion is planned after that.
Australia’s meat industry is still very fragmented as it stands on the threshold of potentially a period of huge growth, so there are many more abattoirs to buy.
And besides that, there are more vegetables to put on the plate.