Continuing the doom and gloom from my column last week, analysts at Company Watch put 173 of the UK’s 680 largest food and drinks manufacturers on red alert this week, noting their vulnerability to insolvency and other financial difficulties. And the sobering demise of DBC in the past month is a reminder of how quickly a business can unravel.
Since the onset of the economic downturn, remarkably few retailers, wholesalers and manufacturers have gone to the wall, and those that have - I’m thinking of Woolworths, Threshers, Kwik Save and, latterly, Haldanes, in particular - seemed to take a veritable age to fail, despite obvious trading issues.
Of course, others have survived thanks only to drastic and expensive financial restructuring, most notably Uniq, Bakkavör and Premier Foods. But again, these negotiations were resolved over a lengthy period of time.
But the collapse of the former Danish Bacon Company is chilling. With the blue-chip support of its multimillionaire owners -most notably, Iceland boss Malcolm Walker - and its apparently stable relationship with the MoD, it was assumed that it could survive the £4.95m losses it incurred in 2011.
This week, an anonymous source sent us a copy of the report from Baker Tilly, the receivers of DBC. It reveals that Tarsem Dhaliwal, the most active of the three shareholders, and DBC’s chairman, personally guaranteed £2m as part of a last ditch attempt to save the company.
With his personal wealth estimated at £66m, he could clearly have guaranteed more. So too could Malcolm Walker, who’s worth at least £166m. But as wholesaler rivals smelt blood, the most telling figure in Baker Tilly’s report is that it would have required incremental funding of £5m to keep the business going for just one week.
Dhaliwal, Walker and Andrew Pritchard have been subject to considerable abuse (a lot of it aired on thegrocer.co.uk). While unquestionably the owners and directors bear some responsibility, rivals have shown a ruthless dog-eat-dog streak in helping to bring about its demise.