Ernest Hillier chocolates goes into voluntary administration

Australia's oldest chocolate maker, Ernest Hillier, has collapsed, disappointing a generation who journeyed to Collins Street for its chocolate nut sundaes, malted milks and elegant Easter eggs.

The 101-year-old business appointed voluntary administrators earlier this week, who say it is too early to determine the cause of the collapse and the company's debt load.

But Ernest Hillier continues to trade and administrator Bruno Secatore, of administrators Col Cordis, said he had already received two inquiries on Wednesday morning.

Mr Secatore said Ernest Hillier - which employs 60 people and has six Melbourne locations, including a manufacturing and packaging plant - would be put up for sale within three weeks.

Ernest Hillier has no retail outlets and Coles and Woolworths are its two major customers.

"It certainly needs an injection of funds," Mr Secatore said. "There has been some restructuring but it needs more."

Ernest Hillier is owned by a British private equity firm, which bought the business only one year ago from Salvatore Piedimonte and Carmelo Piedimonte, of the Melbourne grocery family, the Piedimontes. The owners, Re:Capital, said then that Ernest Hillier had a strong brand, high-quality products, and it planned to take it overseas and explore new markets locally.

The collapse follows a spike in cocoa prices in September, increased competition from international products, and the growing popularity of free trade products and niche premium brands such as Koko Black.

Australians spent $2.47 billion on confectionery in the 2013-14 financial year, up 5.4 per cent on the previous year, at Coles, Woolworths, IGA and FoodWorks supermarkets.

According to a recent report from IBISWorld, Australian chocolate and confectionary manufacturing is worth $6 billion a year, has 349 businesses and employs about 13,000 people.

Cadbury's owner Mondelez Australia Holdings has 34.5 per cent market share, it said, followed by global giants Nestle (18.2 per cent) and Mars (13.9 per cent). Cadbury makes chocolate bars and Easter eggs in Ringwood and Mars manufactures its chocolate bars in Ballarat.

IBIS said the industry would perform modestly over the next five years, underpinned by steady demand from supermarkets and stable growth in discretionary income.

"However, shifting consumer preferences are likely to remain a challenge for domestic manufacturers over the next five years," it said. "Domestic demand growth is expected to moderate over this period, reflecting general market saturation across several of the industry's product segment."

"Increasing health consciousness has required manufacturers to be innovative with their product lines and adapt to shifting consumer demands.

"In addition, consumers have demanded ethical and sustainable production methods, resulting in the significant growth of fair trade and organic chocolate products."

The collapse follows the September 2012 collapse of 85-year-old chocolate and confectionary company Darrell Lea. Darrell Lea was bought by Queensland pet-food BRW Rich Listers Tony and Christina Quinn, who had spoken of a desire to go up against Nestle and Mars.

Darrell Lea sales were believed to have fallen below $100 million before its collapse, and its collapse was blamed on the distraction of a long-running lawsuit from rival Cadbury over its use of purple, inefficient manufacturing, outdated products and failure to cut costs.