Australian Biography

Victor Smorgon - full interview transcript

Tape of 12

Tape 1 2 3 4 5 6 7 8 9 10 11 12

When you discovered that wholesaling was much more profitable than the business that your uncles and father were in, and you decided to set up on your own, and your immediate family came with you, was that really the start of the break-up?

The first break-up. In the Smorgon family, it happened many times. It's not ... nothing new about that. The brothers ... before that the uncles, their uncles in Russia were all together and then separated. Families get too big and then become ... they got children who bring their children in and not everybody has the same temperament and so there's quarrels and it breaks up. In our case it was purely the financial or commercial situation, not any other situation. At that time we were reasonably well off. We weren't poor, whatever you think poor is. It's about the poverty line, well above the poverty line but by that time we'd already developed the business. Because the next business we went into was export.

And how did that happen?

Very simply. Persistence. My father and I used to go round the market and see there was half a dozen exporters and they were buying hundreds of thousands of sheep and cattle and they were exporting. Where are they getting money? We know they're not very rich. Where are they getting the money from? And we kept on saying to each other, 'Where are they getting the money from?' Because you can't do anything without money. So one day ... and I kept on. As you notice, I'm a good talker and one day I talked to somebody and I said ... was telling them that we'd like to get into export, but we don't have enough money. So they said, 'There's a man here who's an agent for an English company. Talk to him and he'll arrange it for you'. So he introduced me to him. His name was Spittle and so I started talking to him, and I said ... he asked me what numbers were we doing. I said, 'We're doing six thousand sheep a week', at the time. He said, 'Well sixty percent of that can be exported at a much higher price than you get locally. And forty percent can be local. But the more sheep you kill, the more sixty percents you get'. I said, 'We don't have any money'. He said, 'Don't worry, I'll fix it up'. I said, 'How are you going to fix it up? He said, 'Well, I will lend you my brand name. Use my brand name. You can use my license to export. I want a percentage of, so much of whatever it was, three percent or five percent of the sale'. And I said, 'What about money?' He says, 'Well what you will do is when you slaughter your cattle, your sheep, you put them in a stockinette which I'll supply you with, with my brand on them, and you'll take them to a freezer. The freezer will give you a note, a docket that will say that you brought in so many sheep at such and such weight, and such and such quality, and you'll take that to the bank. I'll sell them before you go to the bank, the same day as you buy them, or even before. And you then ... the bank will give you ninety percent against that invoice'. Crazy. 'How can that be?' He says, 'Well, that's how it works'. So I came home, I told my father. I rushed home. I told my father. Father wouldn't believe me. I told my uncles. They wouldn't believe me. I said, 'I don't believe it myself, but I made an appointment for tomorrow to see this man [coughs] who told me all this'. So we go ... so they didn't want to go. So I said, 'What are you going to lose by going? Let's go and listen to him. Maybe it is the truth. Maybe it does work like that'. So we went to see him, and he told exactly the same story, and then you realise it's very simple, because the bank is not taking a risk, because there's a letter of credit already in place for whatever he sold for us, and he gets his commission from that. And so the whole thing opened up like a picture, like a painting. So it became clear how it works. Exactly a day after we became exporters.

That was quick organisation.

That's quick. We've always been like that. Always quick organisation. Because there's plenty of slaughter men around and plenty of room at the city abattoirs. And we immediately put on more people and organised immediately. But then we had to get rid of the meat. You've got to sell the the rejects. So that's when the canning came in. So we started a meat cannery. And we became bigger and bigger and bigger and bigger, because we could use up the cannery. At that time it's 1930 odd and Britain is looking for meat, for anything, any food, because war is coming. So whatever they wanted to we gave them. We started producing more and more and more, and the more we exported the more canned meat we made. We made all sorts. We used to make luncheon meat. You know, like Spam? Only it was mixed with flour instead of ... Spam is usually 100 percent meat and pork. But this is mutton or beef or whatever there is.

There used to be this awful thing called ...

Remember Camp Pie? We made Camp Pie.

It didn't taste very good.

It's beautiful. [NOISE] The first ... My father went to Europe to pick up a master canner and he brought this Jewish man, who knew the industry, knew the what's it's name, and wanted to get out of Germany, because Hitler was already started playing up. And he made the first lot of Camp Pie for us. And he put nutmeg into it, you know, the European flavours. Couldn't sell it. We nearly went broke. Because it's not a taste Australians [like]. All they want is salt and pepper. So then we realised the we made a mistake, and we started producing it the Australian way. In fact we pinched one of the men from Vestey's or Angliss's. Angliss's were the big butchers. They started exactly the same way as we did, only a generation before.

And so we took the canner, the master canner, and paid him double the price that he was getting over there, and we started. We then showed him how to do it because we started practising before that. He started learning from us, because we started using meat that he never dreamt of using. And it's still the same Camp Pie. And you know, we used to take cuttings from the butcher's shops and bring them in, to mince them up, and put together with the other meat. Very hygienic. Nobody gave a damn about it. Anyway it all gets cooked at 400 degrees to get it sterilised, so whatever you put in you can eat, it doesn't matter what it is. And we used to then, just before the war started, England wanted anything. And after the war particularly, they wanted even more. They wanted eggs. They couldn't import eggs. So we boiled the eggs, put them in a big can and exported eggs. They wanted bananas. We put bananas in a can and we export that. They wanted sausage meat. And they're not allowed to import meat. But they're allowed to import sausage meat. And one of the brokers ... one of the people that we were dealing with in England, said, 'Put one percent flour and call it sausage meat'. Because it's sausage meat because it's got flour in it. So we minced up the meat, mixed up with one percent of flour and shipped in thousands of tons at a high profit. And then he was very happy because he had meat. He could make sausages or whatever he made out of it. And we were very happy. And there's many thing like that. We were always innovating. We were always picking up ideas of how to do it, and which way to do it.

Now you did your slaughtering at the city abattoirs, you said. Did you decide that you'd like to have your own meat works?

Yes, we did. And we started building one - not the meat works, but a cannery, just opposite the Royal Melbourne Hospital. And the unions objected. And then the Lord Mayor got mixed in it, and the Premier got mixed in. And we said to them, 'Well you don't like us building here, give us some other place'. So we made a deal with them, with the Lord Mayor of Melbourne and the Premier at the time, and they gave us five acres of land at Flemington, alongside the abattoirs. There was empty land there. And so we stopped straight away - stopped building. Because we accepted. That's one mistake we made: we trusted. Don't trust politicians. That's the first thing you learn. Once we stopped, yes. We were promised it but what happened in five year's time - might have been ten year's time - all sorts of excuses. Then we decided, to hell with them, we'll buy our own land. And we went out to Somerville Road and we bought about thirty acres of land, which is outside of Melbourne at that time. It was like another world. And started building our own plant. And that's when I got involved with the politicians in a different way - using them instead of them using us. And I ... we built an abattoirs, built a meat works, but everything was there except the ramp for the cattle and the sheep to go up to the slaughterhouse. Father went to America and bought the machinery for the rails and all the different things that we needed for beef slaughtering. And we waited for the opportunity for the government ... we knew the government thought there was not enough being slaughtered. People wanted more food. And meanwhile the city abattoirs decided that they're going to build another place to increase their slaughter, by I think 500 head a day, and for something like thirty, forty million dollars, pounds at the time. And when we read that I decided that I'd better use ... I'm going to use politicians. And the politicians started off in the first place, you know ... I'm sure you know about Calwell, Arthur Calwell. Arthur Calwell was just taking over the seat of Melbourne, Melbourne seat of Dr. ... can't think of his name. He's a very famous Labor man. And at that time we already had the small cannery, and we were in North Melbourne, and I get a phone call and a man says to me, 'My name is Arthur Calwell. I'm a politician and I'm going to stand for Melbourne and I need help. I need a car and a man to help me'. So I turned round to my father. I said, 'There's a man on the phone that's a politician, and he wants a car and a man to help him in election time, to go around with him'. He says, 'You have a car, you're the man, go'. So I went. And I spent two weeks with Arthur Calwell, standing alongside. People were asking me questions that I couldn't answer. I stood alongside him and I drove him everywhere he wanted to go, with pamphlets. I was his assistant. And he appreciated that. And he says, 'One day anything you want, just call on me'. And when this opportunity came that I talked about, the abattoirs, I went to see him and I said to him, 'We could do the same thing just by putting the ramp up and it would cost 750 pounds instead of millions. And we could produce twice the amount but we've got to get a license'. And a license was not given to us politically because of a fellow named Dedman. He was Minister of Post-War Construction and he was in Geelong and Footscray, covering that Federal area.

What year are we talking about?

We're talking about 1942.

Middle of the war?

Middle of the war. And as I say he politically refused it, otherwise it wouldn't make any difference to him. The ... So then we started again. We learned that we got to use politicians. That's when I went to see Arthur Calwell. And I said, 'You've got to help me'. So I told him the story. He says 'Come over the Canberra, I'll introduce you to the right people'. I went over to Canberra, and I saw him. He said to his secretary, 'Look after Victor. Anything he wants provide for him. Make any appointments he wants'. And particularly the Treasurer, which was ... Chifley was the Treasurer. Curtin was the Prime Minister. And he made an appointment for me with ...

Ben Chifley.

Ben Chifley. And I walked into his office and introduced myself. And my slight, slight ... I still have some accent, I still have a little bit, but not as much, and I told him the story more or less what I'm telling you: how we started and how we arrived and how the family worked together, and how we're building an abattoirs. He was fascinated, the same as you are. More so. And he just couldn't believe that that could happen. Immigrants like that, and already building an abattoir. And so meanwhile Curtin walks in. So he introduces me to Curtin. He says, 'This is Mr Victor Smorgon. He's from a big family. They're in the meat business and he wants to ...'. He told him the whole story as I told. He got very interested and wanted me to tell the story again about the immigrants ... success of an immigrant. At that time it was great success and he was fascinated. So when Chifley said to me, 'Well leave it to me, I'll try my best. I can't do it on my own but I'll do ... I'll try to do it for you'. Father also met another fellow from New South Wales, another Minister, who was Minister of Agriculture. He was ... Father approached him as well. So there was ... now we had three friends there. Now I stay in Canberra overnight because the meeting is the next morning, and I start ... I was there at nine o'clock, and I wait in the passages around the Prime Minister's office and Treasurer's office. They're more or less together in the old building. And one o'clock, two o'clock, two-thirty. Maybe they walked around the other way, maybe I missed them, I don't know, because I didn't expect it to be so long. Eventually at about quarter to three they're all walking out and one of the Ministers came up, the one fellow that knew Father. He said, 'It's okay. It's fixed. Go and see so and so'. And I went down to see this man, who was one of the bureaucrats. He says, 'Yes, it's been passed in Parliament and you can have your license. You can start tomorrow'. And it happened to be on the Jewish holiday there - Yom Kippur, you know the Holy Day, the Fast day. And so I caught the plane and went back to Melbourne and went straight to the synagogue where all the family was, and broke the news to them that we got it. God helped somewhere, I think. I think Chifley helped. He was the God. And so you learn these things as you go along. You ... but you have to have that personality. You have to be able to do that. You can't always do that. You can't ... You've got to be a certain type, [have] certain ambitions.

You were only about thirty when this all happened.

Probably less than thirty ... much less than thirty.

And so for a young man to be in this situation where you were able to do this, did this set a pattern for you? Did you learn from that ...

I learned a lot of times and I'm still learning. It's continuous, it's non-stop. You learn every day something. And as I told you, I'm doing [?] and I'm learning. It's a new business, but it's completely new - never been done before, ever. Completely new, completely. I went away from the principles of whatever has been done before in that particular industry.

Businessmen these days often employ lobbyists or get other people.

Always get other people, I never claim that I did it on my own. It's always together. It's always ... the principle of the Smorgons family was always to work together and rub off one another. Each one improves. When I talk about what happened, it just didn't happen that simply as I'm talking. There's many discussions and many of the ideas, and you talk to people, talk to uncles, talk to ... I always look for a pessimist. I'm an optimist. Optimists on their own can't do anything. They destroy, they don't make because they go without any thinking. They just want it, period. You've got to learn to balance it against somebody that thinks maybe you shouldn't be doing it. So always I had this uncle that I keep on talking about. He was a complete pessimist. And even when we weren't partners I used to go to him and say to him, 'I have this idea, what do you think?' And immediately he would say, 'It's no good'. Doesn't matter what I said, it was no good. 'Well, tell me how we should do it?' He'd say, 'Well go this way'. I'd say, 'I don't think that'll work', and I'd come up with an idea, then he'd come with an idea. And then the idea is born. And then it comes to a conclusion where we meet: yes, and we agree. And sometimes there were five or six people involved in the same thing, you know, depending what you happened to be in. And it works. No one person in the world of business can do everything. It's always somebody else, other people helping. I have certain qualities in business, as a businessman, but I don't have them all. And I need other people. For instance, I can't count. Nobody believes me. I know that two and two is either six or ...

I must tell you the story about this. There's a ... I met a Lebanese that's supposed to have a very sharp brain and be successful, particularly in Sydney. And it was in one of the papers in Sydney about this Lebanese family, a rich family. There's several of them there. And the Lebanese gentleman was being interviewed, like you're interviewing me, and he was asked, 'Well what is it that makes Lebanese people so different?' He says, 'I'll bring you my ten year old son, and ask him'. He brings in the ten year old son and he says to him, 'What's two and two?' He says, 'Are you buying or selling?' Simple. And that's really what life's about. That's what business is about. You know, when you buy, you've got to buy cheaply. You sell, you've got to sell for more. And then you make plenty of mistakes in between. You learn from mistakes. But it's always, whatever Smorgon accomplished in Australia is not a one man job. It was a collective job. It's always together with everybody. Everybody contributes something, everybody has some ... when we come into this world, we will bring in certain genes with us, and they're not all the same. If they're the same then there's quarrels, because there's competition. But if there's ... We have engineers. My brother was a brilliant engineer. My two cousins and their sons are brilliant engineers. My other cousin was a brilliant analyst, Sam Smorgon. I'd come to him and I'd say, 'This is what I think we should be doing'. He'd say, 'This is okay, this is okay'. He puts everything in squares, where I talk all over the place because my mind's rushing away. And his is a controlled mind that puts everything in a box. Say, 'Okay, let's take this box, how do we overcome that?' So by discussing it and bringing somebody else in, bring some experts in that know the job, and we'd work it out - yes we can do that. Or organise the whole thing another way. But the idea's still there. So sometimes one idea leads on to many other ideas and you forget about the first idea altogether and you get onto something else. But it starts off from that one idea.

From when you got that meat works put in and that big industry there, really, established, things started to really take off, didn't they and you started diversifying. How did that come about?

Well, in the first place we became the largest meat exporters, and meat can makers in Australia. We used to produce ... At the end of the period of the meat industry, we used to produce about a million cans of canned meat all going to England. England started talking about [the] Common Market. And [the] Common Market meant that Australia was going to be out of it. Australia would have to find another market. So we started talking amongst ourselves, and we said we have to find some other business. We have to ... not export, because all our business was export at that time. Because we used ... we forgot about wholesaling, we forgot about ... we had no retailing, no domestic meat business whatsoever. Everything was export. And we then realised that we had to do something else in Australia if we're going to stay in Australia. There was nowhere else to go, and nobody wanted to leave Australia. And we started looking at different businesses, particularly the big ones. Because we had the experience in the meat game, there was three big companies. There was Angliss, which was actually English, brought out by an English company called Vestey's, which is probably the richest family in England. And then there's Borthwick's, which also are another very wealthy family in England. And then there was Wilson's, or Swift's rather, who was very, very big in America. And they ... The bigger they are, the harder they fall. And we could run between their feet and pick up whatever they didn't want. They had clerks writing down all the purchases. They had buyers and clerks with the purchases. So I get friendly with the buyers, and say to the buyer ... and they kept a check what everybody bought as well. If I wanted to know what was bought, I used to go up to the buyer and say to him, 'How many sheep did they buy?' And they'd tell me, because they'd keep a record of that. Because the companies want to know what's happening everywhere else. Meanwhile, at ten o'clock every Tuesday, which is a sheep and lamb day, all the three chiefs from those three big companies would get together. I'd talk to them from time to time. I knew them, they knew me. And they would huddle and decide they're only going to buy first quality lambs particularly. Second [or] third quality was neglected. And we'd hop in. I was the buyer, and there were other buyers. So we concentrated on second [or] third quality. So [we would] buy them at half the price of the normal price. A couple of weeks later they'd say, 'Don't buy any first quality, we've got enough. Only buy second [or] third quality'. So we'd buy the first quality much cheaper than normally. But the same thing - when we became big the same thing happened to us. All the smaller people were running around our feet and doing the same things we used to do to the others. So when you get too big, you get in exactly the same situation.

What made you decide to move out of meat? Or to stay in meat, but to move beyond meat and take on other things?

Well, because of the English. England started talking about the Common Market, and [the] Common Market meant that Australia will be out of it so we have to find another industry. And that's when we got into paper. We looked for a monopoly, because we had the experience of working against big people. We knew that we could do very well in other industries with big people, because as a family we could do many things and make quick decisions and do whatever's necessary to do - improvise. And I went out with two APM, Australian Paper Mill people. They were ex-people, they were retired people, to buy second hand junk machinery, to start a paper mill.

So the Australian Paper Mills were a monopoly?

They were a monopoly. They were the only ones making paper. So we got that junk to Australia. My brother put it all together, together with some other engineers, and we started producing paper. We thought wrapping paper is the right job. It wasn't. But we made the wrapping paper, and APM in their wisdom had decided to drop the price by about thirty percent to punish us, to get us out of the market. But we were already making a profit from day one because we were using waste paper in the first place. We were using waste paper and making the same product as they were. Maybe not as good, but we were cheaper, about ten dollars cheaper, which was a lot of money at the time. And we were still very profitable. But the market was very small. There was only about 8,000 tons of wrapping paper was produced. So they could easily afford to drop the price. But two-thirds of their production is in box making. So we then said, 'Okay, we're caught'. One of my cousins, Charlie Holckner, went over to America and bought the other part of the paper making. One is ?? which is wire, long wire, and then it goes through a series of drums to dry. It stays thin, whatever thickness you make. And the other is board making for corrugated boxes and boxes generally you have to have solid board. So you have eight drums which all go on the felt and create the paper about that thick [GESTURES ABOUT ONE CENTIMETRE] which goes through the same system, same dryers. So we built a mezzanine floor and put that ... what we call the wet end on top of the other part and either produced one or the other one, whatever we needed. And then we started making ... To find a market we started making boxes. We brought in our cousins who were making shoes. Said to them, 'Go into this business and we'll finance it', which we did, and they did. And we started to build, and we built two plants: one in Melbourne and one in Sydney. And so we had ... also had another friend who was making boxes for us, because we were large users of boxes ourselves, so they were interested in supplying us with the boxes. So we said, 'Set yourself up and ...'. In fact we were going to do it ourselves. They said, 'Why should you make boxes? We'll make boxes for you'. That's the mistake we made, but that's another story. And so we had three customers really and then we started growing bigger and bigger and bigger. And when we filled up the machines, we then decided to buy fibre containers, which were on the market. Fibre containers had seven plants. Fibre containers belonged to the Coca-Cola people, what's their name? The company.

Amatil.

Amatil. And we paid a high price for it, and APM tried to stop us from buying. But that time we had the trade practice law in Australia, and so we appealed against them trying to shut us off and the case lasted about three or four months. And we won. And that was a big win. And ... but meanwhile before that, APM dropped the price on the ... oh, there's a story before that. When we couldn't sell the paper, we filled up our own plants, for our customers. APM had an agreement with all the plants, and there were about fifteen or twenty plants, that if they buy 100 percent from them, they get seven percent discount. If they buy one ton from somebody else, they lose the seven percent for the rest of it. So we couldn't sell. So I called ... I called all of those people into the head office for lunch, and I said to them that we have ... 'We're big in meat and we're making about a million pounds a year', at the time. I got accounts to prepare a official statement that that's what we're making before tax. And we said, 'We have that million to spend. It'll cost you fifteen or twenty million or thirty million. Buy a third of your paper from us and we wont' be fighting you, so go and fix it up with APM'. So it took about another three months. Most of them agreed. There was one of them that didn't and took a bit longer. And APM agreed [for them] to buy it - to allow them to buy twenty-five percent from other Australian paper mills. But then they claimed that they also are the 'other' Australian paper mills. So they were selling seventy-five percent at a higher price than they were selling twenty-five percent. That's where they were unfair. That's where the unfair trading came in and they lost the case. And from then on we just grew and grew. And then Pratt came in. And he mucked up the whole lot. That's the paper story.

And paper wasn't the end of it, was it?

No.

You'd developed a taste for recycling.

Yes. We always recycled something. We recycled the meat. We used to take meat off the ... my brother learnt this system of when you have a lot of boning to do, particularly with people that are not experienced, you know, arrive off the boat from Italy or from wherever. They come in, immigrants, mostly women, and we'd give them a knife and a long belt, and there's probably a hundred women, fifty on each side of the belt, It's a very long building. And take the meat off the fat. And that meat went for canning. But there's still a lot of meat left on the fat. And my brother invented a system. He took that fat, which had meat on it, and put it through a double coil system: stainless steel pipes, double pipes, with steam outside, that melted the fat, and then [it was] put through [a] centrifuge, which separated all the solids, which is meat, and the fat went to the tank where it settled down and water was underneath, [to] runoff the meat and [it was] sold separately. And that meat we used for canning. And we were allowed. It was allowed to be used. Twenty-five percent of that. Maybe we cheated about ... about thirty percent.

Back in the Ukraine you'd learnt waste not, want not.

That's right. It's everywhere, not only in Ukraine, wherever you are. But you got to be innovative. You've got to do something else that nobody else does. What surprised me, it took about twenty years for other companies to wake up to what we're doing, and we didn't keep it a secret. We used to talk about it. 'Look at what we're doing'. We never kept secrets, we'd talk about it. People don't believe you. People naturally don't believe you, particularly business people. And I have a habit. I don't have a good memory, so I don't always tell the same story, [but] I always tell the same truth. And because nobody believes the truth anyway, so whatever story you tell people they don't believe you. But every time those people ask me the same story, as you notice now, I repeat the same thing because I don't remember what I've said ten minutes ago.

[end of tape]

Proceed to Tape 5