How Darrell Lea went from a melted mess to a billion dollar company

Darrell Lea owner, Quadrant, is looking to sell off their ownership as record high cocoa prices start to fade.

You’ve likely had a block of “Rocklea Road” but you don’t see the Willy Wonka-like Darrell Lea shop fronts around anymore, that’s because back in 2012 they faced voluntary administration, which led to a complete restructure of the business. Just over a decade later and the price tag is expected to be around the $1 billion mark.

How did they recover from this fall?

Here’s the story:

The rocky road to Voluntary Administration

Darrell Lea has been around since 1927 but it’s turnaround story begins in 2003, when Cadbury opened up a legal battle over Darrell Lea’s use of the colour purple. Darrell Lea eventually won the case, with the judge announcing that he was “not satisfied that such usage has resulted, or would result, in ... purchasers of chocolate being misled or deceived”, however this case had caused significant distraction to the team for five years.

There was also reports of in-fighting between the siblings over the family empire, adding to the distraction. This wasn’t a new issue faced by the Lea’s, back in 1962 Jason Lea took over the business and went on a tear, laying off family members who he thought were unqualified or unsuitable for their roles in an effort to rapidly grow the business.

Their eyes were off the ball and the market was undergoing a significant shift towards a premium chocolate offering, with many competitors producing a line of fair trade and organic chocolate.

Revenue fell 13% over the four years following the closing of the lawsuit and Darrell Lea was reportedly losing $200,000 a week. Voluntary Administration was the only option.

Restructuring - anything but a picnic

When the news came out that the darling of Australian confectionary was facing Administration, Australia rallied around Darrell Lea:

• Sales increased by 400% in the first week with seven weeks of Rocklea Road being sold,

• Several public figures, including the Prime Minister and Hugh Jackman, made statements supporting the business,

• A “Save Darrell Lea” social campaign was launched on Facebook

But they were aware that public support was only going to last so long and significant restructuring was performed to prepare for sale.

In July 2012 Tony and Christina Quinn, who generated their wealth through founding VIP Pet Foods, acquired Darrell Lea for $25 million. In an effort to turn the business around they:

• Closed the remaining Darrell Lea stores to instead sell in supermarkets, news agencies and post offices,

• Reduced staffing from 800, of which 400 were in retail, down to 150,

• Cut 80% of their product SKUs to focus on the most profitable products

The reduced overhead and increased focus was expected to improve the bottom line, and as you can probably guess: it worked. The new business model was profitable in just six weeks and, after six years, in 2018, the Quinn’s sold the revived Darrell Lea business to private equity firm Quadrant, for $200 million.

Quadrant hoping to pull off a 5x return

Six years on from Quadrant taking control and Darrell Lea is now pulling in $70 million in EBITDA and they will be targeting a doubt digit multiple, bringing the valuation to the region of $1 billion.

Pretty impressive considering the $25 million acquisition back in 2012.

Thanks for reading,

Archie Sampson, Founder of Prepped