Victor Smorgon: the great industrialist
VICTOR Smorgon's business interests were many and varied, starting with poultry, he ended up taking on the big boys, including BHP.
LEON GETTLER
VICTOR (Abrasha) Smorgon’s business philosophy was simple. Tackle big monopoly operators across a number of industries because they are essentially lazy, arrogant and slow moving. Aggrieved customers are likely to quickly embrace a nimble and hungry competitor with fresh ideas and who meets their needs.
The family business covered a diverse range of industries, from meat to paper, glass to steel and from canning to plastics. To Mr Smorgon, it was all the same thing.
The principles that turned a bullock into steak and by-products such as glue and gelatine were the same as in other industries. In the face of family opposition to entering the steel market when it was under the control of the big Australian BHP, Mr Smorgon famously quipped: “Steel’s nothing. It’s an industrial process and we’re good at processes. It’s just like making sausages.”
When the family kept objecting that is was uneconomical, he told them: “I don’t want you to tell me why it won’t work. I want you to find a way it can work.”
This is the story that sums up Mr Smorgon’s enormous energy, vision, driving force and focus on the creative process of enterprise and entrepreneurship. He could not have done it on his own though, and he drew from family members who contributed ideas, insights, skills and experience. It enabled him to make his contribution to something that was bigger than the sum of its parts.
As his biographer Rod Myer noted in Living The Dream, “The Smorgon business was a giant living organism. Its arms and legs were the abattoirs and factories that produced the wealth. Its heart and brain was the round table where the family gathered to debate new ideas and current issues with all the passion, intelligence that traditional scholars deviate to the Talmud, the intricate codification of Jewish law.”
At the same time, however, the business drew its power from Mr Smorgon’s energy and vision. He was the ideas man who enjoyed the creative process of taking proposals and turning them into thriving businesses. He was also someone who didn’t take no for an answer and who, when confronted with problems, kept pushing until there was a ¬≠breakthrough.
As patriarch of Australia’s richest family, Mr Smorgon’s dynasty famously began in a Carlton kosher butcher shop. The family had fled Stalin’s Soviet Union, arriving in Australia in the autumn of 1927. The shop, established by Mr Smorgon’s father Norman and two uncles, was a natural first step in Australia. In the old country, the family had been in the meat business.
Right from the start, Mr Smorgon demonstrated an irrepressible entrepreneurial flair. He hit on his first idea when he left the Faraday Street State School at the end of 1927 and was enrolled in Melbourne Workingman’s College to learn bookkeeping, typing and shorthand.
One day in Flinders Lane, when he was out delivering parcels for Norman, he discovered there was money in chickens, something far more interesting than struggling with a typewriter.
After convincing Norman and family members to lend him money and a cart, he ended the year operating a business, which supplied poultry to the Carlton shop. He was making three pounds a week, when a worker could expect only one pound a week. He liked the feeling and never forgot it.
When he and other family members took the helm in the 1940s, the family business became Smorgon Consolidated Industries. That enterprise grew rapidly over the following decades, moving into areas such as meat exports, plastics, glass and steel.
A pattern was established. The family led by Mr Smorgan would take on a monopoly, build a profitable business, but there was no sentiment attached. When it was time to move, it sold these businesses for a tidy sum to concentrate on bigger ventures.
The canning business made good money and during the war, Smorgon’s Frankfurts were known to the boys in uniform as Smorgon’s Organs. The business was then sold to focus on meat, paper, packaging, glass and plastics.
Similarly with glass, Mr Smorgon went into competition with ACI and built up a 25 per cent market share by the end of the 1980s. In November 1990, Smorgon Consolidated Industries sold its glass containers business to BTR Nylex, an ACI subsidiary and the biggest glass producer in the Pacific region, for a reported $100 million. The year before, Smorgon Consolidated Industries had sold its corrugated-box plants to Amcor and the Pratt Group and its Humes plastics business to James Hardie to focus on manufacturing steel reinforcing bars.
Indeed, steel had become the backbone of the Smorgon business empire.
In the early 1980s, when BHP was notching up successive losses in its steel division, Mr Smorgon saw the opportunity to move into steel. Despite his flippant comment that making steel was like making sausages, it was not all bluff and bluster. Unlike BHP, sales rather than production were the determinate of output.
He created a mini electric arc-furnace steel mill at Laverton North, the first of its kind in Australia, which produced steel billets from scrap. Even while the mill was being constructed, Mr Smorgon took on the role of diplomat for the new business, approaching major manufacturers, such as ARC, Aquila and Boral, about how much of their production they would source to the new mill if Mr Smorgon could deliver on quality.
Promising to deliver on demand and give their customers seven days credit, the steel business began snapping up business, leaving a wedge in the once-impregnable walls of BHP’s monopoly.
That business, Australia’s second-largest steel and steel products manufacturer, became Smorgon Steel. It floated in 1999, and was taken over by OneSteel in 2007 for $1 billion. Significantly, OneSteel came out of the demerger with Smorgon Steel’s old competitor BHP.
After many decades, Smorgon Consolidated Industries, an empire reportedly worth $1.5 billion, was dismantled. And in 1995, the family members all went their separate ways with the proceeds dispersed into the different branches of the family. Macquarie Bank was brought in to find buyers for all aspects of the business.
Mr Smorgon —- who relished industrialism, grappling with problems, harvesting possibilities and mixing with workers and relatives -— was reportedly despondent. Part of his soul had been sold off.
But if that was true, he was not sad for too long. Undeterred, he set off on a new venture.
In his 80s, he became chairman of Victor Smorgon Group. In keeping with his personality, the company had interests in a wide array of businesses, including the fashion retail chain General Pants, plastics recycler Vicfam, publicly listed coal reclamation company Greenfields Coal Co and advertising group Hale Agency.
Victor Smorgon remained an irrepressible spirit.
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