Chocolate chain Max Brenner goes into voluntary administration

Article by Ben Graham /
News.com.au /
October 03, 2018  /
Click here to view original /

LUXURY chocolate chain Max Brenner is facing an uncertain future as it is plunged into voluntary administration.

A tough retail climate resulting in sluggish sales and rising costs are understood to be behind the dramatic decision — which was taken on Sunday afternoon.

The company’s directors appointed administrators McGrathNicol to undertake the urgent review and it is unclear how this will affect the chain’s 37 Aussie stores. However, the chain said it will be business as usual until further notice.

McGrathNicol is understood to be considering selling Max Brenner or recapitalising the business, which has about 600 staff.

A statement from the company thanked staff and customers for the support of the business over the years.

“Max Brenner Australia remains open for business as usual at this time,” it read.

“Chocoholics are respectfully invited to show their support by enjoying a hot chocolate or dessert as the Administrators assess the best solution to ensure Max Brenner Australia’s unique chocolate experience continues to delight millions of Australians in the future.”

Business trends expert Dr Lauren Rosewarne from The University of Melbourne, said there may be many reasons for the confectionary brand’s Australian decline.

She told news.com.au there may even be a political factor at play — as the chain began life in Israel which has copped criticism over its ongoing and often violent feud with Palestine.

However, Dr Rosewarne said she believes one of the main reasons for the chain’s decline is a change in Aussie food habits — which means the novelty of dipping a strawberry in liquid chocolate has faded for many of us.

“When Max Brenner opened in Australia in the late 1990s the food scene was very different,” she said. “Now, artisanal chocolate and associated shops and cafes are everywhere: the novelty of Max Brenner has largely faded.

“The rise of social media and our embrace of lining up for pop-up, limited edition food items that we can then Instagram has replaced the notion of dipping into a personal chocolate fountain which feels quite dated now.”

In Australia, the chain — which is known for its fondue, crepes, milkshakes, waffles, and hot chocolate — is owned and run by husband and wife team Tom and Lilly Haikin.

They opened their first cafe in Sydney’s Paddington in 1999 and the chain is now headquartered in Alexandria, in the city’s inner-west.

The pair, who made BRW’s Young Rich list in 2013 with a fortune of $40 million, branched out across the country soon after.

Now, there are 15 stores in NSW, 12 in Queensland, five in Melbourne, two in the ACT and Western Australia, and one each in South Australia and the Northern Territory.

However, Associate Professor Gary Mortimer from the Queensland University of Technology told news.com.au Max Brenner’s Aussie nightmare can be compared to struggles faced by other food groups such as Craveable Brands — which owns Chicken Treat, Oporto and Red Rooster — and Retail Food Group Limited, which owns Gloria Jean’s and Michel’s Patisserie.

He said Max Brenner wanted to open seven new stores in Australia this year — which he described as a “growth for growth’s sake strategy”.

“When you keep opening new stores in a market which is challenging it creates capital stress, because it requires resources and capital investment and that’s risky when the market is subdued,” he said.

He also said the “decadent chocolate” market is declining in Australia as health conscious consumers move to healthier alternatives.

“It’s a crowded market and consumers have changed their behaviour,” he said. “They’re looking for lighter options and healthier options. Even McDonalds has salads.”

Max Brenner was founded in 1996 in Ra’anana, Israel, by Max Fichtman and Oded Brenner who combined their names. The business began as a small shop selling handmade chocolates.

It is this humble Middle Eastern origin which may have ultimately played against its success overseas according to Dr Rosewarne.

“While it’s hard to determine whether it was a significant factor in Australia, Max Brenner — with its origins in Israel — has been, at various times, the focus of protests,” she said. “This was perhaps also a factor in its demise.”

Student activists even protested against the opening of an on-campus store at the University of NSW in 2013.

The anger stemmed from the actions of Strauss Group, which is among the largest food products manufacturers in Israel and Max Brenner’s previous parent company which publicly supported the Israeli military.

Strauss Group sold the chocolate company for around $7 million last year.

However, according to the founders of Max Brenner, the company has always just been about chocolate.

“Chocolate is not just about taste,” they said. “It’s a symbol of different aspects in our lives — of romance, of sensuality, of decadence. These aspects actually create the new chocolate culture of Max Brenner.”

The chain’s success has seen it spread as far as the US, Japan, Singapore, Russia and China.

It appeared the spread was showing no signs of slowing down in January, when the company told Inside Retail Australia it aimed to open as many as seven new local stores this year.

However, it was clear all was not well with the Australian side of the business when Sunstate Ceilings — a Queensland business — filed a wind-up notice against Max Brenner on June 29.

The Australian Financial Review reported that Glenn Wein, the former head of the Packer family’s Consolidated Press Holdings, was looking to put together a “rescue” package to save the business, which owed about $50 million at the time.

McGrathNicol issued a statement saying it is working closely with Max Brenner’s management team to some up with a solution to the chain’s financial problems.

“All Max Brenner stores will operate on a ‘business as usual’ basis with minimum disruption whilst the Administrators complete their urgent review of the operations,” it reads.

“We are assessing the prospects of completing a going concern sale of the business or a recapitalisation through the Voluntary Administration process.”