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Mattress company Koala cuts 30 Australian jobs over economic uncertainty

Mattress company Koala cuts 30 Australian jobs over economic uncertainty

Popular Aussie bedding and homewares company, Koala, has laid off 30 local staff due to unstable economic conditions.

The company shot up in popularity, particularly during the 2020 and 2021 lockdown periods, due to its competitive pricing, being all online and offering four hour delivery to metro areas.

However, just like many other companies, supply chain issues, inflation and surging interest rates have all taken their toll.

A Koala spokeswoman told The Sydney Morning Herald and The Age that uncertain economic conditions had resulted in 30 Australian staff members being made redundant last week.

Describing the former staff as “amazingly talented”, she said the company was supporting them with an outplacement service and professional connections.

According to the company’s website, Koala has “more than 200” employees.

The company also confirmed it had consolidated its offices in the inner-city Sydney suburb of Alexandria after previously also having employees located in the CBD.

News.com.au has contacted Koala for comment.

But it isn’t just the Australian staff that have been impacted, with 10 roles also being made redundant in South Korea following an expansion to the region last year.

The spokeswoman again told the publications “economic uncertainty” was behind the move, along with the need to “reduce our start-up cost in the market”.

“For the near term, our operations in Korea continue as we explore more efficient ways to serve the market,” she said.

The Sydney Morning Herald and The Age also cited claims from multiple industry sources that Koala had explored the possibility of listing on the Australian stockmarket, before abandoning the plan amid the recent the recent technology downturn.

The spokeswoman for the company strongly denied these claims.

“Like any private company with proven success as a market leader in our categories and markets, we are fortunate enough to receive countless inbound introductions from potential investors,” she said.

“They see the opportunity for Koala to continue to disrupt the global furniture market.”

She did not offer specific figures, but said Koala’s margins were double those of some of its competitors, adding that the decision to offer furniture and other homewares has led to “incredible growth” in non-mattress sales.

“We will continue to invest in our operations across Australia and Asia,” the spokeswoman said.

In October 2020, Koala copped significant backlash after announcing it would cease manufacturing its mattresses domestically and make them in China instead.

Staunch supporter of Australian-made products, Harvey Norman executive chairman Gerry Harvey, previously slammed Koala’s move, saying the name of the company implies the product is made domestically.

“Anyone selling imported mattresses are doing it because they can make more money,” Mr Harvey said.

“The marketing is dishonest… they are pretending they are Australian.”

The retail giant’s co-founder said overseas imports made it harder for local companies to compete in bedding and furniture.

Mr Harvey said his store predominantly sold made-in-Australia bedding, supporting local companies such as Sealy, SleepMaker and AH Beard.

When it was established in 2015, Koala marketed itself as a retailer of Australian-made furniture with a strong focus on sustainability.

However, most of its manufacturing has now moved to China and Europe, with the company deregistering itself in 2019 from using the Australian Made trademark.

“The decision to cease production of mattresses in Australia will provide significant innovation and quality improvements to help drive our continued growth across Asia-Pacific,” a company spokeswoman said at the time.

Koala said the move offshore would mean it would have greater influence in cultivating “sustainable behaviours” in its manufacturing and supply chain.

“We are always in search of the best manufacturers, suppliers, and makers around the world who meet or exceed our environmental and sustainability standards and conduct assessments to support this,” a spokeswoman said.

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Categories
Business

Price of packaged beer set to rise as brewers pass on higher production costs

Pouring a pint of beer on tap at the pub

Brewers have warned that packaged beverages will become more expensive and could increase by a larger margin that pints at the pub.

Independent and larger-scale brewing companies across Australia are feeling the pressure of a recent increase in excise tax, as well as a spike in aluminum and ingredient prices.

Wilson Brewing Co founder Matt Wilson said brewers had tried to keep prices as low as possible, but it was inevitable they would rise.

“You’re not only going to see an increase in pint prices at the pub, you’re actually going to see a larger increase of packaged product that you would purchase and take home to drink,” he said.

Excise tax strain

The alcohol excise tax increases every six months, and the most recent hike of 3.84 per cent for full-strength beer was the largest in 20 years.

Mr Wilson said brewing costs had ballooned by about 60 per cent over the past two decades, and that flowed on to consumers.

“You might see a $5 to $10 raise in carton prices coming up around Christmas time or even before,” he said.

“The unfortunate thing about excise taxes, it never goes backwards.”

Man behind bar at the pub with a beer
Mr Wilson says carton prices could rise by up to $10 by around Christmas time.(ABC Great Southern: Sophie Johnson)

Everything is going up

There are multiple inputs that go into crafting and brewing beer, all of which have inflated.

Mr Wilson said aluminium, used to package cans of beer, was rising in cost.

“Grain, barley especially, is the highest spec of barley of grain that a farmer can grow to … so their direct energy input costs is directly reflected on the price that they’ve charged for their grain,” Mr Wilson said.

“grain [is probably] our third biggest input.”

Bird's eye view of header harvesting a paddock of barley
The cost of barley production is affecting the ingredient price for brewers.(ABC Great Southern: Tom Edwards)

GrainGrowers chief executive David McKeon said Australian barley prices were trading above historical averages.

“Right across Australia, we’re looking at bids anywhere into the low to mid three hundreds for for barley [dollars per tonne] … it’s a fairly strong price,” he said.

He said it was important to not only consider the raw price of barley going into an end product.

“We are seeing a lot of other factors influencing a lot of our processors, manufacturers and retailers … some of those [being] challenges around supply chains, freight costs, labor costs, and energy costs,” Mr McKeon said.

Resource analyst Tim Treadgold said aluminium, a popular material choice for packaging, was an expensive item to produce due to the amount of energy it required.

“In order to get the can through the plant onto a truck off to the bottling or packaging depot … the trucks that haul up there are running on liquid fuels, which are also expensive,” he said.

“The energy input into the whole process has gone up substantially in all facets of production.”

Taps of beer at a bar
Packaging takes up more than 20 per cent of Mr Wilson’s input costs.(ABC Great Southern: Sophie Johnson)

Worse than COVID-19

Independent Brewers Association chief executive Kylie Lethbridge said she had concerns for the industry.

“We fared … relatively well out of the last two years of the pandemic, but by no means are we in recovery mode, in fact, some feel that this is more of a challenge,” she said.

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Why is everything so expensive?

She said skill shortages, material shortages and challenges such as freight costs would be applicable to any business in the country.

“If those waves keep hitting, then there is only so much a business can stand, and sadly, that may mean we lose… some independent breweries around the country.”

“The challenge … for the consumer is that the price of beer will rise, whether you drink it in the pub from a tap, or whether … you pick it up from the bottle shop,” she said.

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Categories
Business

Cost of living crisis: Milk costs $9.20 in remote indigenous township of Kaltukatjara

Cost of living crisis: Milk costs $9.20 in remote indigenous township of Kaltukatjara

With grocery bills rapidly increasing due to supply chain issues and rising inflation, all Australians are feeling the pinch. But in remote Aboriginal communities, the situation is even more dire.

A social media post of a receipt from the Docker River store in the remote indigenous community of Kaltukatjara, in the Northern Territory – where many families already live close to the breadline – showed a 2L bottle of Pura Milk cost $9.20.

While supermarket chain Aldi has warned grocery prices will “inevitably” continue to rise after the inflation rate surged to 6.1 per cent, by comparison, at a Sydney Woolworths, the same product this week cost $3.10.

In the post from April 26, Facebook user Spirit Walker pleaded with former aboriginal affairs minister Ben Wyatt to step in to help those living in the small township, southwest of Alice Springs.

“!!!Getting close to $10 dollars to pay 2L milk out in Aboriginal communities soon!!!” he wrote. “You need to do (some) more work aboriginal affairs minister Ben Wyatt because this is going beyond the joke now uncle?

“(Help get this food price back down low again out in community.)”

He added: “Prices like this for everyday goods has been the experience for Aboriginal people since the first stores opened.”

Back in December 2021 during the Morrison government’s Food Security inquiry, Mr Wyatt said “Improving food security and making affordable, fresh and nutritious foods more available in remote indigenous communities is an important part of improving the health and wellbeing of Aboriginal and Torres Strait Islander people .”

But Spirit Walker insisted since then “nothing has been done” to resolve the cost of living crisis.

The post hit a nerve on the social media platform, receiving 602 reactions, 346 shares and 183 comments, with one Facebook user branding the hefty price tag “highway robbery”, while others stated the situation was “disgusting” and a “disgrace”.

“That’s completely unfair and taking advantage of people that are living under the poverty line, it’s inhumane and as far as I am concerned it’s against basic human rights to not be able to access fairly priced food, goods and services,” one wrote.

Another commented, “I have a feeling it’s going to get a lot worse, the entire supply chain relies on a fragile system and finite energy sources. Time to decentralize again and look to community farming.”

The indigenous township of Kaltukatjara had a population of 355 at the 2006 census.

One social media user defended the store, stating: “The shop has to supply BBQs for the whole community throughout the year.

“It has to provide food hampers for Xmas and other occasions when community members need to attend other communities for funerals, etc. The shop has to pay for the bus service to get them there. The last one I knew of was $6000.

“How are these services to be provided if the shop doesn’t make a profit …”

Donna Donzow, an operations manager for the non-profit EON Foundation which helps grow and supply fresh produce to communities in Western Australia and the Northern Territory, told 7NEWS.com.au she noticed a mixed salad pack was $17 in Minyerri, a town 240km southeast of Katherine, in June.

The same product cost a mere $3 at a Sydney Woolies this week.

Guardian reported that a 2021 Amsant report showed groceries were 56 per cent more expensive in remote communities than regional supermarkets in the Northern Territory due to poor quality roads and long supply chains.

According to Rob Totten, store manager of a supermarket in Maningrida, Arnhem Land in the Northern Territory, the price of some food products had “gone through the roof”.

“Baked beans have gone from $29.95 to $33.80 a carton. One carton of corned beef was $151 in April and it’s now $176,” he told TheGuardian.

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Categories
Australia

Interest rates: RBA raises cash rate by 50 basis points to 1.85 per cent

Interest rates: RBA raises cash rate by 50 basis points to 1.85 per cent

For the fourth consecutive month the Reserve Bank of Australia (RBA) has hiked interest rates as inflation runs rampant.

At 2.30pm during the RBA’s monthly meeting, it increased Australia’s interest rate by 50 basis points, or by 0.5 per cent.

The decision brought the cash rate from 1.35 per cent to 1.85 per cent, largely in line with economist’s predictions.

This marks the first time the RBA has lifted the rates for four months in a row since the introduction of the two to three per cent inflation target in 1990.

This follows last week’s increase in annual inflation, which hit 6.1 per cent, which was its highest level in 21 years since 2001.

Tuesday’s rate rise means those paying off the average home loan of $500,000 will need to cough up an extra $140 a month.

And the August hike isn’t expected to be the last, with economists forecasting that interest rates could peak up to two per cent by the end of the year.

As soon as news of the interest rate rise broke, Treasurer Jim Chalmers weighed in and acknowledged it was a tough time for Australian borrowers, saying the announcement would “sting”.

“It’s another difficult day for Australian homeowners with a mortgage,” he said.

“The independent ReserveBank has just announced its decision to increase interest rates by another 0.5 per cent, bringing the cash rate to 1.85 per cent.

“Australians knew this was coming, but it won’t make it any easier for them to handle.

This cycle of interest rate rises began before the election in response to inflationary pressures that began accelerating at the beginning of this year.

“Average homeowners with a $330,000 outstanding balance will have to find about $90 a month more for repayments as a consequence of this decision today, on top of around $220 extra in repayments since early May.

“For Australians with a $500,000 mortgage, it’s about an extra $140 a month, in addition to the extra $335 they’ve had to find since early May.

“As I said, Mr Speaker, this decision doesn’t come as a surprise. It’s not a shock to anybody, but it will still sting.

“Families will now have to make more hard decisions about how to balance the household budget in the face of other pressures like higher grocery prices and higher power prices and the costs of other essentials.”

‘Misleading’: Calls for bank boss to resign

Ahead of the interest rate rise, there were growing calls for the RBA’s board and its governor, Philip Lowe, to resign after a series of missteps.

Chief among them was the promise that interest rates wouldn’t rise until 2024 which one top economist said was “misleading” for borrowers.

Critics also pointed out that the rapid rate rises could inadvertently lead to a recession while at the same time inflation is running rampant.

Warren Hogan, chief economist at both ANZ and Credit Suisse, told The Daily Telegraph that the RBA was guilty of some “pretty bad errors” in recent months.

The RBA lowered the cash rate to 0.1 per cent at the end of 2020 amid the Covid-19 pandemic – the lowest it had ever been – and throughout the pandemic said they didn’t plan on raising the cash rates until 2024.

When it lifted the cash rate for the first time in May and then every month since, Mr Hogan said it was “misleading people, basically”.

He also said Australia’s central bank had taken on risky strategies including spending lots on insurance and sinking funds into a bonds program which had not paid off.

Mr Hogan, who was also the former principal adviser to federal treasury, said: “It’s unforgivable. I think they should resign – the whole board.”

Mr Lowe “should have the character to stand down,” Mr Hogan added.

RELATED: Find out how much the rate rise will cost you

Mr Lowe said the cash rate would remain at its record low of 0.1 per cent until at least 2024, but the rapid rise in inflation this year – caused in part by Russia’s war in Ukraine and supply chain issues on home soil – prompted the monthly hikes .

It comes as Australia’s cost of living crisis is worsening, making borrowers even more cash-strapped than usual.

In the last quarter, transport costs rose 13.1 per cent as the price of fuel rose to record levels for the fourth quarter in a row.

Meanwhile, grocery shopping is also causing hip pocket pain, with Australians outraged to find lettuce heads selling for $10 a pop and capsicums marked at $15 for a kilo.

Interest rates in Australia reached an all time high of 17.5 per cent in January 1990. Since then, they have averaged 3.93 per cent.

Before this year, the last time the RBA hiked up rates was in 2010. It has only been going down ever since.

As a result, more than one million home borrowers have never experienced an increase in mortgage rates, because they bought a home after 2010.

The official cash rate has been at a record low of 0.1 per cent since November 2020 in response to the Covid-19 pandemic until May 2022.

– with NCA NewsWire

Read related topics:Reserve Bank

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