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Rosella closes down

Iconic tomato sauce manufacturer, Rosella, will close down after nearly 120 years in business.

After its parent company, Gourmet Food Group, was placed in receivership back in November 2012, administrators Ferrier Hodgson have reported that they have been unable to find a buyer for the Rosella business, and had no choice but to cease trading. The company’s 70 remaining Sydney-based workers will lose their jobs in the next few weeks.

Gourmet Foods Group’s snack food business, Waterwheel Industries was recently sold to Green’s General Foods, another Australian food manufacturer, for an undisclosed price.

Manufacturing Workers Union spokesman Tim Ayres says he is hopeful Rosella products will stay on the shelves. “It would be great to see it bought out by an Australian company and continue to make this iconic Australian brand in Australia.

The blame for Rosella’s collapse is likely to be laid at the feet of our two giant supermarkets, Coles – owned by Wesfarmers Limited (ASX: WES) and Woolworths Limited (ASX: WOW). Both companies have been increasing their range of private label products, and many brand name products have been pushed off the shelves.

Patties Foods (ASX: PFL), make of Four’n Twenty pies, Herbert Adams and Nanna’s pastries and frozen snack foods and desserts, recently reported increasing pressure on its margins on products its supplies to supermarkets, and reported a 12.7% fall in net profit.

Likewise, health supplement supplier, Blackmores Limited (ASX: BKL) also reported a 4.8% decline in net profit, thanks to pressure on its margins, and increased marketing and trade support expenses.

The Foolish bottom line

With high relative expenses including labour and other input costs, Australian manufacturers are struggling to compete against imported and home brand products. Rosella is unlikely to be the last producer to succumb to the pressure.

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The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King owns shares in Woolworths.

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