Australian Biography

Victor Smorgon - full interview transcript

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You've said that if you can make sausages, you can make steel, or you can make paper, and the process is very similar. But one theme that has been there, in the Smorgon activities from the beginning, is recycling. What is it that attracts you about recycling?

Mostly for recycle, what you recycle you buy cheap, because people don't want it. It's finished, they've finished with it. Like paper. You read all the papers and everyday you throw them out. So there's a use for it, and it costs very little. You then build machinery to wash that paper and process it and get the fibres back into a proper size and proper clean. And then you do your economics and you know that there's a big margin, and therefore you can make a lot of mistakes. And therefore you start experimenting and you suddenly find that you can make paper. And paper itself, you read up a couple of books, and we know the Chinese started it. We know that you can take an ordinary piece of wire, mix ... take your piece of paper and put it in the vitamiser, and that's a pulp machine. That's the machine that makes up ... it's about half the size of this room, with a big thing going around smashing everything up and dissolving it in water. So you try that out first. It's very simple. Then you build machinery round it - make some machines available for other purposes. So you use the same machinery for this purpose. And one of the most important machineries is to separate the fibres after they're broken down and then there are machines today that you can separate the short fibre from the long fibre. So you separate that and put it into two separate parts and then you mix it together again. And then you put it with some other chemicals, all earth-friendly materials. We never used anything that was not. That would be objectionable from the environmental point of view.

Why's that?

Because we didn't want to get involved with politics of the environment and all the nonsense that goes on, because some inspector will come and say, 'You're not allowed to use this, you're not allowed to do that', because they're all individuals and each one has his own opinion what is right, [and] what is wrong. So we used mostly things that everybody else uses - everybody uses normally. Mostly it's water really, and some innocent chemicals.

So your concern about using environmentally friendly ingredients was a practical one.

Practical, yes.

Not because you were concerned about the environment.

I will not claim that. I do think that there should be protections for the environment, but I also think that they - at first, about ten, fifteen, twenty years ago - it was much too early from an economical point of view, because people couldn't afford to build those new machines to protect the environment. Today, you allow in your costings for so much for your environmental protection. But those days it was very new, and it's ... but it was coming in, and so you became conscious of it. So you start early, when you start in your industry you make certain that you have a friendly environmental product, earth-friendly product. And we were always careful about that from commercial point of view. I won't claim that it's from heart. It was not. It was just practical.

But it only became practical because of the political pressure.

Yes, yes, it's the political pressure that's created. At the same time, they spoiled a lot of economics in many industries. [They] had to shut down because they just couldn't afford to do what the law wanted, because they weren't able to. It can be done, but it's got to be done gradually. My daughters were a great pressure on that too. They were the ones that kept on saying to me, 'You're polluting the world'. They used to come, particularly to the paper mill, and play, pick up comics, pick up all the books, everything that they wanted. Used to come every Sunday. They used to come to the works to play in the heap of paper. Not only my kids, all the family kids. And ... but they were all conscious very early of the environment, because they learnt that at school. And that created a certain influence on us.

You ran into some problems too, didn't you, with the paper factory, with local residents getting upset.

Yes, but that was for a different reason. That was ... we had to get rid of ... when you ... We started using wood, as well as paper. We started growing our own trees and we also bought wood chips. And the wood chips use difficult chemicals. And those chemicals are then mixed together, and they used to down into the gutter, into the sea, before the laws came in. We can't do it any more. So we had to build a machine to dry out that water and to make into powder so that it becomes some material. It becomes dust. And that turned off the smell of the chemicals from the process itself. Because those chemicals that were in it, under a certain heat, became objectionable from not so much environmental point of view - it didn't do any harm to the environment - but people didn't like the smell. Those chemicals in concentrated form became objectionable.

And when the people started to object, you felt the necessity to find the money to fix the problem.

Well, we fixed the problem another way at first, and then later on we build the machines for it. But we made arrangements with the shipping company, one of the shipping companies, to take the bulk of the ... they all need bulk water for when they leave the country, because they have nothing to carry. What's it called? The ballast.

The ballast, yes.

And they were very happy to take it. We'd deliver it in the trucks, in the tanks, to the port, to the ship, pump it into the vessel, wherever they wanted it. And that would go out about a hundred, or fifty five, hundred miles away right in the middle of the ocean and [they would] drop it there. So that's how we got rid of it at first. But then it became more and more ... We became bigger and bigger and we had more and more water and they were not as happy as they were in the first place. So we then started to ... Of course we had to pay for that too, so we looked at the economics and found that we could invent our own machine, which we did. It didn't work too well. And it created smell. And then we had to stop that. And eventually we found we just could concentrate it to a lesser extent than we did before, cut out the smell and still do the same thing by taking it out to sea. But then we changed the chemicals as well. That forced us to look into other chemicals, 'til you find today, nobody objects to that because the chemicals are all earth-friendly again. So the force of opinion, of public opinion, or this pressure by the government, pressure by the environment, has played a big part in that. And people find different ways of avoiding it. For example, we recently built a chemical factory to make ingredients for paint. And we built a modern plant. It's not a large plant. That's since the break-up with the two partners that we were in that business before. And we have a hundred percent environmental free chemical factory, which is a showplace today. We're the only one in Australia. And we're getting a lot of orders from other people because they're being shut down because they won't spend the money to improve their processes to cut out all that waste that there usually is. There's no gutter to take the water out. Everything's evaporated. So it becomes solid. So whatever's dropped on the floor runs in certain section, and we have boiler and that boils it down and reduces the ... steam is always friendly. It's just steam. But the residue is very, very small. And then that gets ... We have a special oven where we burn it all, so it becomes ash.

So you say that your motivation was commercial, and in fact that's worked out for you, that by being ... by responding to the environmental climate, you've actually made money.

Yes. But not at first, but eventually we did. And it ... By that time prices go up because everybody has to put price up, because everybody's doing the same thing. Everybody has to improve. I'll give you an example of that, that I just gave you about the chemical company. There's a French company that has a plant in Sydney and they're a very huge chemical company in France. And they were going to shut the plant down in Sydney because it's not environmentally friendly. And they didn't want to spend the money. So we suggested that we'd make it for them. And it was a talk job: you supply us the material, and we will make it for you. And we have some machinery making it right now. And they then take the product that is then used with other products. They make the sticky stuff, the tape, you know, all that type of stuff. I forget the technical names for it. And particularly for paint, it's made from ... basically it's made from oil. Not oil itself, but the by-products of oil. The chemical that's the same as petrol - not petrol, but that you dry-clean clothes with.

White spirit, yes.

There's a name for it, for that particular, that type of spirit. And that's what's used by adding other chemicals to it, and under pressure, cooking it for three or four hours under pressure, very high pressure, with pressure and heat, which creates another product, which has become sort of a product they use for paint. They put their colour into it and they put other chemicals in it, and every paint shop has to have it. Any paint-producing shop.

This was one area where you were ahead of the game. How important in the history of the Smorgon business has it been to think ahead and see what was coming before everybody else did? Could you give me examples of where you've done well, either through buying in or getting out businesses, or looking for new markets, because you looked around and predicted what was going to happen in the world.

It was a habit from day one when we started the business to make things economically as possible. And make quality. We were always quality conscious because the customer wants certain standards. You have to satisfy the customer and so we would look at new ways of doing things. And you always find something that's different, having a family that's entrepreneurial and qualities ... different qualities in each family, and knowing the different jobs which are more or less the same, different materials, but the same processes. Or same processes, different material. And we always made certain that we innovated something. So everything we ever touched we innovated. But we also were ahead of the other people, because the other rest of the businesses were in big hands, and they were too lazy or not capable, or not ... You mentioned BHP before. Their problems today are problems of management, not problems with the material. It's problems with management, because [in] the management, one man is looking after billions of dollars of businesses and it's spread all over the world. No one man can do it. You have to have a team around you. You have to have the proper team around you. But that's not the system in big public companies and big companies generally. And that ... We always had a feeling. We're always interested in what is the other fellow is doing. And we always find out what other people are doing and we try to improve on that, to be ahead of them. And we, most of the times, have succeeded. Very seldom have we failed to improve the product.

How important is it to analyse markets? For example, you were very dependent on your market in England and the European Common Market must have been an issue there. When did you realise that it was going to be, and what did you do about it?

Well, the meat market, it was after the war, and before the war, it was easy. Because England wanted anything, any food. And we were in [the] food business. And so anything they wanted, we being able to organise very quickly whatever they wanted, we produced either frozen or in canned form. But the market was so short of things that they were paying us the top prices. There's a system in England for instance where they were ... You had a price for importing, for the importer; you have a price for the wholesaler; you had a price for the retailer. And we used to sell our products through brokers at the retail price. And the retailers used to sell ... they allowed the customer to buy it because it was so short. I must tell you a little story about this at this point. I was in London. My father was mostly in London selling the meat at the time, canned products. We used to exchange time. He wanted to go back to Melbourne for a couple of months, so I'd go back ... I'd go to London and live there and do his job, which was marketing. And we had our own stalls in Smithfield Market. And we had a lot of customers, a lot of brokers that were distributing stuff. And the period I was there for three months, I had two phones. One phone was a private phone which was in the bedroom, and the other one was used as an office [phone]. And the girls at the ... In those days the telephone wasn't automatic, it had to be plugged in by the girl. And my customers tried to bribe the girls. They'd buy them chocolates, they'd buy them perfume, to put them through to me, or to Father and to get ... otherwise we don't accept calls, because we just don't have the product ... enough product to distribute to everybody. And then when they get through, they say, 'Oh please give me another thousand cases of stewing steak or luncheon meat or corned beef or whatever'.

So it really was a seller's market.

It was a seller's market. It's beautiful, a seller's market, which is an entirely different situation to what I told you about the steel.

But, but I'm interested in this whole question of analysing markets and when did you realise that talk of the European Common Market was really going to affect your business?

Well, probably from the first day, because we spent a lot of time in England. Father lived there for a number of years. And even in Australia [they] talked a lot about it in the press. They talked continuously about the Common Market, [and] what is going to happen to Australian agriculture. And we were part of it. We were processing Australian product, Australian grown product, and so we were very, very concerned, from almost day one. What are we going to do? How are we going to exist? How are we going to reorganise ourselves to stay in the business?

And what did you do about it?

Well, what we did about it was wait 'til ... start planning to do something else, which was the paper mill. That's how we got in the paper mill business in the first place, because we were getting ready to do something else. All those things take time. It just doesn't happen overnight. And so you prepare yourself for the next stage of your life, of your business life. And we decided that what are we going to live on if the market collapses? Why should we expect the market to collapse, maybe two years later, five years later, but we knew it was going to come. So we then decided to go to into another industry, which was paper, which was the first thing that we did after meat. And we found that you can make a living out of that just as well.

Did you try to find other markets for your meat products?

Yes, we tried. There was no other markets for meat. There was only England. America would not allow anything in. South Asia wasn't buying - well they were buying but very, very small amounts. And to be in meat business, in the export meat business, you have to have volume. Because it's the same, whether you process one carcass or five hundred carcasses. And at that time, we used to put in all our plans. We'd be doing round about five or six thousand head of cattle of day, [which] would be processed from slaughter to breaking down cuts to ... We also introduced in England in the first place, the individual cuts. And we always did something different to everybody else. And I remember how it started. My father and I were walking through Smithfield Market, and we saw Argentine beef being brought in frozen and they were cutting off the different cuts from the hindquarter with a saw. And I'm not sure whether father mentioned it or I mentioned it, but we both got the same idea at the same time. Why can't we do that while the meat is fresh and pack it separately? In those days we didn't have polythene or things like that. It had to be wrapped in greaseproof paper. So we said, 'Let's try it'. So we telegraphed Melbourne and said, 'Break up a body into cuts, and wrap them up into greaseproof paper and put it in a box, freeze it and send it over', which they did. And we introduced that to the market, and the market thought it was terrific.

Value added.

It's value added. Not only that, when you buy a side of beef, you've got everything from the neck to the leg, including the brain and so you separate every piece. So you have your shoulder blade, you've got your ... the rib steak, you have your bits of meat that you mince or do whatever you like with, pack it separately. Then you have rump, you have loin, you have the fillet, you have topside, inside. I'm using American terms but topside's an Australian term. Topside's this, the inside is this and then there's the knuckle. This part. [POINTS TO VARIOUS BODY PARTS OFF CAMERA]

You haven't forgotten any of it, have you, really?

I can do it as I did fifty years ago.

You did manage to sell your rabbits into America though, didn't you?

Yes, yes. Well, that was a pure accident, it wasn't planned. It was ... Loti had problems with her ear. She went to a number of doctors here, and each one couldn't cure it. They didn't know what it was. Eventually she got on to some Austrian doctor in Sydney who recommended ... He said, 'Cut the ear off, and then take out whatever's troubling you and put it back again'. I said, 'No way'. Loti said, 'No way'. So we started talking, finding out what's happening in America. We heard about the Mayo Clinic ,so we decided to go to the Mayo Clinic. I couldn't go too. She had ... In those days you couldn't. It was the early fifties, and in those days you had to have a permit to leave Australia. You have to have a ticket to go. You just couldn't go on a plane like you do today. But she couldn't go on her own, so I had friends in the department. It was the food department. They were very good friends. Not from business, we just happened to be friends that ... we knew each other and we did some business together. I went to see them, particularly one particular person. And I told him ... who knew Loti very well, and I told him the story that Loti's got to go to America and I've got to go with her, but I needed sponsorship. So he said to me, 'Well you have to export something for me to give you ...'. He said, 'You want to export rabbits, don't you?' I said, 'Yes, I want to export rabbits'. And that's how it started. So he gave permission, or recommended we get permission to go to America to research the market for rabbits. But to make it look right I put two cases of rabbits in with me, on the boat and when we arrived in San Francisco, a friend of ours with whom we were trading in other things - the Americans were buying all the casings from the sheep and cattle - and he was our agent and he our buyer there, and he met us at the boat. And I'm bringing out those two boxes of frozen rabbits. He says, 'What's that?' I tell him what it is. He said, 'What are you going to do with it?' I said, 'Let's put it in the freezer and forget about them'. So we went up to the freezer, straight from the boat, and it was a Saturday. And there's a man, with a sticky nose, he says, 'What's that?' 'Rabbits'. 'Oh, we love rabbits in America. There's a big, big trade in rabbits in California'. I said, 'Do you know any people that deals with them?' 'Yes, there's a firm by the name of Berylson Brothers. They handle rabbits'. 'Can you get them for me? He said, 'I'll ring up and I'll get a phone number'. So he gave me the phone number. I rang them up. I told them who I am, 'We just came from Australia. I've got some rabbits here. I'm looking for an agent'. The two brothers came out straight away. They were just starting the business themselves and they didn't know what rabbits were, no more than anybody else. So they said, 'Put them in the freezer'. They were without skin. They were already skinned off and ready for cooking. Frozen. And he said, 'There's a convention in Chicago of frozen food and we'll arrange to send them over there. You come over to Chicago, and we'll see what we can do with potential buyers'.

So we did that. We went to Chicago, we went to the convention. And that was my first experience of convention, where most people have two or three rooms and three or four salesmen in each room, and you deal with somebody that buys it. And my rabbits were displayed. People look at it. Don't forget it's soon after the war, so a lot of Americans soldiers that used to be in America [Australia?] said, 'That's the underground Australian underground mutton'. They referred to the rabbits like that. So ... but nobody wanted to look at them. So I decided that I better take some action. So I said to the agent, to Mr Berylson, 'Can I have permission, your permission to call the chef? I want them cooked'. He said, 'Yes'. So he called the chef. The chef came up and I gave him six rabbits and I said to him, 'Use them exactly the same ... Bake them exactly the same as you would a chicken, but put a piece of bacon on the top of each one and they won't be dried out. They'll be moist'. About an hour or so after he brought in one of those huge silver dishes with a lid, puts it down on the table, and lifts up the lid and there's six beautiful brown cooked rabbits. Everybody started ... then they started looking. Then I started cutting it up into pieces and I picked up one piece to eat it, and within five minutes the lot was gone. And we start selling rabbits. Everybody got interested. So we then ... These people had arranged for agents in every state, and we're selling mostly to German people, who used to cook hasenpfeffer, a dish of, sort of, rabbit stew. The black people were buying it. The French people were buying it. The Eastern European people were buying it. The English people were buying them. So we developed a market there and quite a big market. That's how we started exporting there.

And what brought it to an end?

Well, the same old question of the whole business. It died because myxamatosis was introduced to kill out the rabbits, and the rabbits disappeared within about two months, three months. So we struggled for the first month or so, then gave it up, because the disease ...

The farmers gain was your loss.

Exactly, that's exactly right. The main loss was not so much for us, but the trappers. They all disappeared. And then it became uneconomical for them, because there wasn't enough rabbits that were good enough to catch. They caught a lot, but most of them were diseased. At first there wasn't. It took some time for myxamatosis to spread. Now they're introducing another one. Rabbits became again a nuisance, and they're introducing some other chemical now that is killing them off. And they are a nuisance. They destroy a lot of the ... Problem with the rabbit is that they go for the root, and they kill the root. Nothing grows after that. So if they ate the top it wouldn't matter, but destroying the root of the plant, that is the ...

Creates the problem.

[end of tape]

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