Coles acquires ready to eat meals producer Jewel Fine Foods

Chef Fresh, a subsidiary of Coles Group, has acquired Jewel Fine Foods, a manufacturer of chilled ready-to-eat meals.

Jewel Fine Foods, which has a production facility in Banksmeadow (Sydney), produces a number of own brands such as Jewel of India, The Soup Kitchen, Quick as Wok, and Spice & Fashion. The company also supplies home brand products to a number of major retailers in the Australian market including Coles and Aldi. 

Following a period of financial hardship, the company went into voluntary administration in April 2019, after which it appointed administrators from KPMG’s Ferrier Hodgson – the firm’s wing dedicated to insolvency and restructuring services formed in March last year after the Big Four firm acquired the specialist consultancy.

Peter Gothard and James Dampney from KPMG were appointed administrators at the end of April, and since then Jewel Fine Foods has been trading business as usual while turnaround and recapitalisation opportunities were pursued in the background. 

Within months a deal was struck with B&J City Kitchen, however, following an antitrust investigation by the ACCC, in September the transaction was blocked by the authorities. Jewel Fine Foods and B&J City Kitchen are Australia’s two largest producers of chilled ready meals, and combined they would have had a too dominant market position, both in the retail and wholesale segment of the market.

According to the watchdog, alternative suppliers would have been unable to compete with the merged group in terms of scale, range, quality, reliability and price.

The news was a blow for Jewel Fine Foods and its shareholders plus creditors, but once the disappointment had settled in, it sparked some criticism on the role of the administrators. While they are tasked with acting “in the best interests” of the company, which in an insolvency context is focused on the interests of creditors but also employees, it is also their duty to in advance assess the likelihood for receiving clearance. 

According to an analysis by Jonathon Turner and Tim Mornane from lay firm Norton Rose Fulbright, based on previous cases, the chances were high that the ACCC would define the market narrowly, while contending that the company would be likely to be picked up by an alternative purchaser, and as a result block the joining of forces.

“Insolvency practitioners (as well as creditors and other stakeholders) must be aware of the potential competition obstacles that may need to be overcome or at least mitigated when selling a distressed company's assets or shares. It is critical to engage with the ACCC and obtain specialist competition law advice at the earliest opportunity,” the antitrust lawyers wrote in a blog post.

Acquired by Coles

Seven months down the line, Jewel Fine Foods has successfully been acquired by Coles, with the transaction receiving green light from the ACCC last week. “Coles’ acquisition of Jewel ensures that there will still be two major suppliers of chilled ready meals. And, “the continuation of Jewel’s production of chilled ready meals is a better outcome for competition than liquidation of assets,” said ACCC Commissioner Stephen Ridgeway. 

Coles is one of Australia’s largest supermarkets and does not play a role in the production of chilled ready to eat meals. The antitrust investigation further found that other retailers would not be foreclosed as a result of Coles acquiring the business, given that Coles’ main rival Woolworths already has supply arrangements with B&J City Kitchen and other retailers have access to other suppliers.

The deal is Coles’ first business acquisition since the company listed on the ASX in late 2018. “Jewel’s Sydney-based manufacturing plant boosts our food production capability,” said a spokesperson for Coles. As part of the integration, Jewel Fine Foods will be integrated into the Chef Fresh division. 

Commenting on the transaction, KPMG’s Gothard said, “We are delighted to have reached a successful outcome in the current challenging environment. The sale is a positive step forward to providing a stable operating environment for everyone involved in the Jewel business.”

Fellow KPMG partner and administrator Dampney added, “The successful sale of the business to Coles is a real credit to the way the management and staff of the business have performed during the administration process. We are extremely pleased to see the business’ future secured as a result of their hard work.”