Australian Parallels

What associations arise in a person's head when he hears the word "Smorgon"? Most people who grew up in Eastern Europe and the republics of the former Soviet Union associate this word with a town located in the northwestern part of the Republic of Belarus. But what concerns the inhabitants of Australia, New Zealand and Southeast Asia, the word "Smorgon" is associated for them primarily with a family of industrialists living in the city of Melbourne.

Where did they get that surname? A family tradition says that Smorgon is a surname of Jewish origin. The family previously lived in the city of Melitopol (now the Zaporozhye region of the Ukraine). Why does the family have such a surname? What connections does it have with the town of the same name located on the territory of Belarus? There is no answer to this question. It is known that the Smorgons in Melitopol ran a shop for the production and sale of kosher meat.

Brothers Norman, Moses and Abram Smorgon, along with their families, left the Soviet Union in the 1920s. After living in dire poverty, they were determined to start a new life and sailed to Melbourne aboard a ship converted to carry cattle. The brothers, who spoke little English, set up a shop to sell kosher meat in 1927. The store was successful and the three brothers opened several new butcher shops.

At that time in Australian meat industry there were very few enterprises holding a monopoly on the production and sale of meat on the wholesale market. This did not prevent Norman Smorgon's son, Victor, from starting to develop his family business. He demonstrated his business acumen when, with two Australian pounds borrowed from his father, he bought six chickens at the local market and then quickly resold them for three times the price.

By the late 1930s Smorgon had transformed the firm into a small but growing meat processing company. The decisive moment for the development of the company was the Second World War. Shortly after the war began, Victor Smorgon went to the Prime Minister of Australia, Ben Chifley, and told him the story why his family had left the Soviet Union. He also told the prime minister his plans to build a company, asking for a license to export meat to the UK. Chifley was impressed by the story and helped Victor obtain an export license.

A new market allowed the company to develop rapidly during the war years. In 1941 the Smorgon company that included Victor's brother Eric built a new full-scale meat processing plant in the suburbs of Melbourne. The facility included slaughterhouses, a cannery, freezers, boilers and boiler rooms. The company also introduced its patented freezing system, which set a new standard in local meat industry.

At the end of World War II, the Smorgons began to diversify their business. Staying close to their main meat business, they began to spread influence in other areas of food industry. In the early 1950s the family began producing canned fruit and processing rabbits. The company began exporting processed rabbit meat to the United States.

England's participation in the development of the European common market created the preconditions for the next evolution of the Smorgons’ business. Victor Smorgon realized that the company would soon face intense competition from meat suppliers from continental Europe. As a result he decided to diversify his activities in order to reduce his dependence on meat exports.

The company's diversification, begun in the late 1950s, also provided the company with new opportunities to challenge the dominance of some other Australia's industrial companies. For the first time Victor Smorgon focused on paper and packaging industry that also provided opportunities for integration with group food processing companies. The company launched the production of paper and paperboard materials as well as finished products such as egg cartons made from recycled paper. After his father’s death Victor Smorgon took the main role in the management and development of the company.

By the mid-1960s the company had already become a rising star in Australia, and in paper and packaging industry they defeated the monopoly held for a long time by other Australian papermakers. The growth of the company led to the fact that it sold its share in canned fruit industry in 1967 in order to focus on the one hand on its core meat business and on the other hand on growing interests in the production of paper. However, this did not prevent Smorgon from developing other business interests. In the 1970s - 1980s the company, known as Smorgon Consolidated Industries, continued to grow in such industries as glass, timber, paper and others.

By the early 1980s the Smorgons’ industrial group had been Australia's largest family-controlled diversified business. Having successfully placed himself in several industries, previously controlled by monopolies, Victor Smorgon decided to conquer another one - steel industry.

Until the early 1980s, the Australian steel market was completely controlled by one company, the Broken Hill Propriety Co, later known as BHP. However, BHP neglected the new and rapidly growing steel market that was based on the mini mill technology. Instead of producing steel from raw ore using traditional blast furnace manufacturing methods, a new type of mill that was less expensive to build and operate, used a new type of electric arc furnace to process scrap metal. At the same time BHP's control of the market made it complacent with its customers, who had to contend not only with the company's tight pricing policy, but also its inability to offer flexible production schedules.

But a difficult task of entering a completely new industry did not frighten Smorgon. He said: “Steel is nothing. This is an industrial process and we are good at processes. It looks like sausages". In another statement at that time Smorgon noted: “The point is that as a family we are natural producers. We understand manufacturing. We can attract experts to develop electronics and technology. And if you ask: "Why steel?" The thinking is simple: follow the monopolies, fight the monopolies, the more they are, the better for us, we are light, they are heavy".

In 1981 Victor Smorgon began the construction of an electric mini-mill in Laverton, near Melbourne. In 1983 the production began at the plant. It first bought scrap metal from the nearest collector. Smorgon quickly imposed his products on the market, offering lower prices and adapting his production schedules to customer needs. To maintain profitability the company also bypassed the traditional steel distribution market in Australia to work directly with overseas customers. By 1984 the company had already begun expanding its steel operations by purchasing used rolling mill from Pittsburgh Jones & Laughlin’s Steel Corp. The group's initial investment in steel industry was only 60 million dollars.

Success in steel industry led the company to agree to sell its stake in steel industry to Humes Ltd, which operated its own production and distribution of steel products called ARC. Humes Ltd was also Smorgon's largest client. In exchange Smorgon took a 46% stake in Humes Ltd.

Smorgon's steel interests have grown significantly within Humes Ltd, including a significant expansion of the production capacity of the metallurgical plant. However in 1988 Smorgon launched a proposal among shareholders to redistribute shares within Humes Ltd itself, resulting in full control over it. This purchase was a starting point for the emergence of Smorgon as a leader in Australian steel industry.

In 1994 at the age of 80 Victor Smorgon resigned as chairman of the company. Now the head of the company is Graham Smorgon, Moishe's grandson. Recognizing that the share capital structure had become more cumbersome, Graham Smorgon began to plan the future of the company.

He decided to focus his future entirely on steel business and began selling and divesting other assets. From 1999 to the present the structure of the company looks like this: Norman Smorgon’s descendants, including Victor and Erik Smorgon, control 75% of the company, Moishe’s descendants - 20%, and Abram’s descendants - 5%. Under the shareholder pact the family agreed to keep their shares for a two-year period following the public offering and refrain from starting up competing businesses.

The members of the family were not allowed to invest in takeover offers for the company. These measures helped experts to estimate the wealth of Smorgon at more than 1 billion dollars. The company immediately began to scale up, buying up competitors - Australian National Industries (ANI) in 1999. Graham Smorgon also oversaw Metalcorp, a leading recycler of scrap metal in New South Wales. This acquisition finally came to fruition in 2000. Joining Metalcorp that handled nearly 600,000 tons of scrap metal each year meant that Smorgon now have covered almost all of their own raw material needs for steel production.

After falling demand for steel in Australia, after the end of the 2000 Olympic Games the Smorgon Company began to develop as a steel exporter, especially to China as well as to other markets in Southeast Asia. This development was followed by transition to expansion, namely the purchase of foreign steel producers. The Smorgon Company has taken leading positions on steel market in Southeast Asia thanks to operations in Hong Kong, Malaysia, Thailand and the Philippines

Today the number of people having the surname Smorgon in Australia is about 100 people.

Pavel KARTAVIK,

chief curator of the funds of the Local History Museum