Case Study: SPC Ardmona - Balancing Competing Interests in Australia

This case study examines the SPC Ardmona dispute, an Australian-based fruit and vegetable packaging company, and the challenges it faced in the 1990s due to economic downturn, shifting consumer preferences, and increased competition. The analysis explores the environmental factors, including economic, political, and social issues, that contributed to the dispute. It details the roles of key stakeholders, including the management, employees, and the federal government, and their actions and responses. The case highlights the negotiation processes, the impact of decisions on the workforce, and the involvement of unions and political entities. The resolution involved cost-cutting measures, union negotiations, and government support, leading to the company's survival and eventual merger. This case study provides valuable insights into managing competing interests, industrial relations, and the impact of external factors on business operations.

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Balancing Competing Interests: The Case of SPC Ardmona
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25th September 2017

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Balancing Competing Interests: The Case of SPC Ardmona
1. INTRODUCTION
BACKGROUND
SPC Ardmona is an Australian based company traded as SPC, Shepparton Preserving
Company.It is currently owned by parent company coca cola Amatil that specialises in large-
scale fruit packaging. It is the largest current producer of premium packaged fruits and
vegetables in Australia, accounted for processing 150,000 tons of fresh fruit and tomatoes
from its proud supporter of Goulburn Valley community. However challenging economic
conditions had led to the contraction in output of SPCA. It started in 1990 when Australian
food industry had faced a decade of significant difficulties. Firstly due to consumer change in
taste and preferences to freshly produced fruits and secondly due to increase in overseas
competition (Hiscock, 2015).
1.1 DISPUTE
Many other factors affected SPC such as its export market share in Canada who switched its
import to the United States from America. High-interest rates and recession worsened the
situation leading to the closure of most businesses in the sector resulting in a whopping loss
of 2.6 million dollars by SPC. Such a huge loss discouraged the stakeholders leading to the
election of a new board. The incoming board contracted KPMG Peat Marwick to review its
affairs and make necessary recommendations which were to be acted upon by the
management. As a result, some of the actions taken by the company included reducing
permanent workforce, the closure of two off-shot loss-making business, termination of joint
venture business and pay –less and re-staffing. The banks were still not contented with such
initiatives and therefore demanded additional security in granting loans. This called for the

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implementation of further actions to cut the production cost. Some of the other plans taken of
which both the management and the union disputed over include weekly pay cuts for
employees, roistered day offs, high pay on weekends. This had altered the industrial awards
and had created an issue among the unions and government.
2. Environmental factors that contributed to the dispute
2.1 Economic factors
The economic condition of Australia wasn’t good; it was going through a deep recession
where people were losing about 600 jobs a day, and 80% of Victorians were registering for
unemployment benefits (Ball, 2014). The other factor was the market demand shift towards
fresh farm produce and the infiltration of cheap Chinese imports. China being an international
leader agri-business, exports its canned foods which are relatively inexpensive in Australia
whose food industry has not developed in food canning.
A group called “friends of SPC” was formed with the Former mayor, Jeremy Gaylord as its
head with the mindset that closure of SPC could have an adverse effect on Shepparton.
It was the largest business in Shepparton contribution 40$ million into the local economy
whereas employing around 300 permanent and 1000 seasonal workers in the peak time
between January and April.
2.2 Political Factors
The political lobbying that led to the government’s rejection of the plea by SPC Ardmona for
financial support of $25 million was a step that far much overshadowed the broader issue that
affected the food industry of Australia.

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The state opposition ( the coalition of the national and liberal party) indicated their support
for SPC contrary to the government. Furthermore, there was support from various labor
group. The trade union also was politicized in its quest for the justice of the employees
although its effect was not much felt like that of the state (Bailey and Peetz, 2015). SPC
commissioned a survey where 88% of the public supported the company and employee in
negotiation deal to keep the company alive and secure the jobs.
2.3 Social Factors
Some of the recommendations by the KPMG affected both the permanent and casual
employees of SPC. These included reducing permanent workforce, the closure of two off-
shot loss-making business, termination of joint venture business and pay –less and re-staffing,
weekly pay cuts for employees, roistered day off, and high pay on weekends. Some of these
decisions contravened the some of the provisions of the Fair Work Commission of Australia
thus sparking industrial strikes and petitions (Stewart, 2011).
3. Stakeholders in the dispute
3.1 The employer
The SPC management acted on the recommendations from the KPMG and the prospective
banks that were to offer to fund. The recommendations majorly included the reduction of
labor costs by disengaging 25 percent of the permanent employees through voluntary
dismissal and normal attrition. Also, the offshoot businesses that made losses were shut
down, termination of the contract with the canned food processing company, and the
reduction of fruit prices from farmers . The new management recruited a new managing
director who replaced all managers except the personnel manager thus coming up with a new
management team. This move was preferable because the new management consented to the

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reduction of pay cut just like the new board directors whose remuneration was reduced by
half. Still, the banks were not contented with the changes and thus recommended further
decisions to be made to qualify the company for funds. The primary option that the
corporation management took was to cut labor costs by 11.5 % across the board. After
considering the reduction of labor costs as the best decision to saving the company, the
management did not take the initiative of discussing the decisions with the unions that
represent the-the SPC employees as it was the standard practice. Instead, the management
directly engaged the employees on such deliberations a course whose motive is not clear.
After reaching a consensus with its employees, the SPC leadership did not consult the
Australian Industrial Relations Commission (AIRC), but to the contrary, they contracted the
International Public Relations (IPR), which they were mandated with the role of publicizing
the agreement to the media, two days after the consensus. The SPC only notified the Union
ten days after the approval date and five days after it was trending in the press.
3.2 The employees
The employees of SPC Ardmona were involved in the dispute because of the effect it had on
their jobs. The company had taken measures to try and reduce production cost to continue
surviving in the market. Some of the decisions included changes in provisions regarding
cashing out of sick leave, redundancy payments, entitlements, and allowances, etc. regarding
the sick leave. The SPC management’s decision to reduce labor costs was directly discussed
with the employees instead of through the labor unions. The shop stewards in response
devised a package that would as well minimize the production costs of the company but at the
same time reduce the severe impact of weekly pay cuts of the staff . Whereas the proposed
pay cuts were achieved, the agreement required the employees to relinquish the initial
employment terms and conditions agreed in their awards. This meant that the workers could
no longer be entitled to rostered days off, weekend rates, and shift penalties and stipends

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(Bray and Macneil, 2011). Fascinatingly, the package which was to last for twelve months
minimized the terms and conditions of the awards without affecting the most of the over-
award payments. The SPC management also agreed with the employees to initiate a profit-
sharing scheme a year after the company regained its initial profitability. This agreement was
overwhelmingly supported through secret ballot by the permanent workforce. However, the
temporary workers were not consulted in the agreement neither were they invited to the
meeting whose aim was to vote for the agreement, a direct contravention of their rights
(Buddelmeyer, and Wooden, 2011). These seasonal workers were to be profoundly affected
by the pay cuts more than the permanent employees. The fact that most of these seasonal
workers lived in Shepparton were relatives to most of the permanent employees and members
of the Food Preservers’ Union aggravated the matter.
3.3 The Federal Government
One of the major stakeholders in the SPC Ardmona dispute was the government particularly
in the manner employee relations were handled (Steel, 2013). The state and the federal
governments both were in support of the industrial association processes that were inexistent
as per the provisions of the industrial relations (Enterprise Bargaining in Australia, 2013).
Their objective was preventing the dispute from being politicized and that it didn’t escalate to
levels of complicating the industrial relations system that existed. They aimed to achieve this
by keeping a low profile in their involvement and thus moderating it. However, the Labour
government of Victoria refused to be involved in the dispute for reasons the government
treated the issue as a matter in the private sector that needed to be solved only through the
existing processes. According to Senator Cook, the objective of the Federal Government was
to ensure that the SPC dispute did not become an obstacle to the industrial relations system.
The Industrial Relations Minister tried to expedite the resolution of the issue but ended up
stating that the AIRC parties were the ones who could solve the matter amicably. The

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minister did not stop at this but went ahead and met the SPC management in Canberra for
consultation with Primary Industry minister and the advised the organization to find ways of
awarding the variations. Furthermore, he suggested that over-award payments be cut for the
permanent staff and to temporarily suspend the non-award work activities. In order to
minimise the possibility of politicizing the dispute, the minister for Industrial Relations
warned the opposition from meddling in the matter. Through the media and parliament,
Senator Cook repeatedly reminded the opposition and other companies that any variation
from the awards had to be ratified by the AIRC.
4. The Resolution
The response of the union was quick to respond after realizing that the SPC had violated the
award system. Immediately, the Victorian Trades Hall Council (VTHC) suggested the union
representatives and the SPC management meet and resolved the stalemate. However, the
meeting never matured, and the union single handed postponed the meeting by directions
from the AIRC, a decision that is a hindrance towards the resolution of industrial disputes
(Townsend, Wilkinson and Burgess, 2013). The disagreement was also on the SPC’s
disregard of the number of representatives to attend the meeting. The community also was
engaged in the negotiation of the rights of workers regarding terms and conditions of
employment. Additionally, the politicians from the Liberal and National parties also joined
the debates and fuelled it further. The hearing of the dispute was referred to the president of
the IRC for consideration which found out that the parties involved in the case had not
committed themselves fully to its resolution and therefore it needed not the full bench as
requested by the SPC. Various factors were discussed between the unions and SPC with the
aim of solving the stalemate. The findings indicated that first; the SPC management had
committed procedural flaws in the variation of the award provisions under the supervision of
experienced managers who in their capacity knew the outline procedures. Secondly, the

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hiring of the public relations company and the publication of the issues before informing the
responsible unions was a gross violation. Therefore, based on the preceding conclusions, the
union assumed that the board and senior management of SPC aimed at challenging the award
system. However, the SPC Company excused their quick actions citing the pressures from the
banks to resolve their financial quagmire, the Australia economic recession, increased
competition from imports which the government had sanctioned (Hattersley, Isaacs, and
Burch, 2013).
Irrespective of the challenges surrounding the dispute, the SPC management was able to
increase the workers’ pay by 2.5 percent which was claimed as a gross overpay. The
company was also able to secure funds from the Victorian government, in 2014 the
Woolworths and SPCA were able to sign a contract for the supply of additional tonnes of
local fruits for over five years. Furthermore, the merger of Shepparton Preserving Company
(SPC) and Ardmona in 2002 enhanced its competition. In 2005, the Coca-Cola Amatil
acquired the company to stabilize it further.
5. Resolution effective to stakeholders or not
I think The SPC settlement of disputes was not beneficial to most of the stakeholders. First,
because the decision to merge it with Ardmona reduced their shares and was not their original
intention. Furthermore, the decision to buy out the organization to Coca-Cola relinquished
any ownership that existed before. But for the case of the employees, the decision was
beneficial because they could regain their pay cuts and continue to work in a thriving
company even though acquired by different owners who also guaranteed job satisfaction. To
the government as part of the stakeholders, the decision was beneficial because the company
could still generate tax for the state as before.

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The SPC dispute shows that conflicts about industrial relations if not handled properly can
impact other organizational ties. This conflict suggests that employee relations are complex
and interconnected with various parties of interest such as the unions, government, employees
and the management.

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References
Bailey, J. and Peetz, D., 2015. Australian unions and collective bargaining in 2014. Journal
of Industrial Relations, 57(3), pp.401-421.
Ball, L.M., 2014. Long-term damage from the Great Recession in OECD countries (No.
w20185). National Bureau of Economic Research.
Bray, M. and Macneil, J., 2011. Individualism, collectivism, and the case of awards in
Australia. Journal of Industrial Relations, 53(2), pp.149-167.
Buddelmeyer, H. and Wooden, M., 2011. Transitions out of casual employment: the
Australian experience. Industrial Relations: A Journal of Economy and Society, 50(1),
pp.109-130.
Department of Industrial Relations 2013, Enterprise Bargaining in Australia, Commonwealth
of Australia, Canberra.
Farrar, J., Hiscock, M. and Lo, V.I. eds., 2015. Australia's Trade, Investment and Security in
the Asian Century. World Scientific.
Hattersley, L., Isaacs, B. and Burch, D., 2013. Supermarket power, own-labels, and
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in the fruit canning industry. Agriculture and human values, 30(2), pp.225-233.
Hiscock, M., 2015. Shepparton Preserving Company: The Tomato Processing Industry and
the National Interest. World Scientific Book Chapters, pp.83-94.
Steel, K.M., 2013. Point of View: A Significant Regional Industrial Dispute from a Novel
Perspective. Provenance, (12).
Stewart, A., 2011. Fair Work Australia: The Commission Reborn? 1. Journal of Industrial
Relations, 53(5), pp.563-577.
Townsend, K., Wilkinson, A. and Burgess, J., 2013. Is enterprise bargaining still a better way
of working?. Journal of Industrial Relations, 55(1), pp.100-117.

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