From blood and guts to crypto: inside Smorgon’s family office

It started in a butcher shop

The Smorgons are one of the great dynasties in Australia. As CEO of the family office, Edwards manages business interests including hedge funds, steelmaking, D’Vine Ripe tomatoes and teen fashion at General Pants.

It is estimated that the family is worth $2.7 billion and that everything comes from a kosher butcher shop in Carlton. It was opened by Victor’s father, Naum, who had fled the last years of Russian tsarist rule. Naum and his family, from the small town of Heidelberg in an area of ​​Ukraine inhabited by Germans, were crushed by the bloodshed and famines that accompanied the Russian Revolution and the ensuing civil war.

Fifteen relatives, including 14-year-old Victor and his three siblings, departed Mariupol in 1927 on a converted troopship and arrived in Port Melbourne, with money hidden in the heels of their shoes. The butcher’s shop on Lygon Street proved to be the breeding ground for Victor’s entrepreneurial spirit. He learned to run the operations, expanding into meat exports and eventually a wide range of manufacturing.

Peter Edwards: “I probably learned more by waiting for my grandfather to drive me home than by working in the factory.” Nicole Reed

The Smorgons would make a name for themselves as a powerful business family. They challenged companies such as Australian papermakers (now Amcor), BHP and ACI, often buying a small player and investing in technology and processes to undermine the monopolies and duopolies that were ubiquitous in the 1970s, 1980s and 1990s.

Victor was known to be obsessed with reducing man-hours per ton of steel, paper and agricultural products. They were the disruptors of their time and Victor was always focused on preserving the family’s wealth through the generations.

Victor and his wife, Loti, had four daughters. Peter Edwards was born in 1970 to Bindy, their second oldest. Edwards remembers Victor as a hard-core first-generation entrepreneur, who softened over the years as his demanding succession plans rolled out and the family wealth remained intact.

“It’s impossible for anyone other than a first-generation entrepreneur to carry that imprimatur or drive to keep the business alive,” Edwards said. The Australian Financial Review Magazine

“And if you’re not that person, you can’t push your weight because you haven’t created everything. People will accept some harsh behavior from the creator, but not from the manager, and that’s fair enough.”

Kids get their hands dirty

Edwards was literally pushed into the business; he started working as a seven-year-old, along with his siblings and cousins, at the West Footscray family meat factory. “We all started in the slaughterhouse room,” Edwards says. “We sorted everything that wasn’t blood, bone, fat or flesh.”

They worked under the watchful eye of a supervisor named Jimmy Martin. Animal guts weren’t for everyone, so a few kids splintered into the fiberglass shop, or the paper mill, office, cafeteria, or laundry room at the family conglomerate known as Smorgon Consolidated Industries.

Growing up, Edwards left the slaughter room, went to the deboning room, then the slaughter room, remembering being small enough to fit through pipes to clean them.

Victor and young Edwards were always close, and the Patriarch drove him to and from the office during school holidays. “Those car rides were the best part of the day,” he says. “I probably learned more by waiting for my grandfather to take me home than by working in the factory.”

Rich list 2022

Out May 27: The definitive list of Australia’s richest people, now in its 40th year.

By the time he finished high school, Edwards was fairly handy with equipment. He skipped college, completed an internship and began running factories in Sydney, Melbourne and Tasmania.

The sprawling nature of the Smorgon business was ubiquitous in the children’s lives. But Edwards says there was never an expectation that they had to be there. “People had different inclinations for different things and went their separate ways,” he says. “We didn’t have to participate if that didn’t fit our personality.”

While he gets his hands dirty, he admits that people treated him differently because he was a Smorgon. Factory colleagues in a factory at one point persuaded him to join the union. But when he showed up to a meeting, he was told, “Get out, you’re management.”

Ultimately, Edwards says, getting out of the family was important for some people and not for others. “The truth is, you have access to an ear that others don’t,” he says. “That can make people anxious.”

A firm look to the future

In 1995, Victor decided that Smorgon Consolidated Industries, then valued at $1.5 billion, had become too unwieldy for the family to manage. With a heavy heart, he decided to split the company and divide it among the seven branches of the family. “It broke his heart to do that, I think,” Edwards says.

But the family remained linked by steel: its stake in Smorgon Steel Group – Australia’s second largest steel producer and listed on the ASX in 1999 – was transferred to a newly created family office, the Victor Smorgon Group.

Edwards, then 25 years old, and Victor, 82 years old, became the managing director and executive chairman respectively; a pairing that Edwards said worked because of their double fixation on the longevity of the family. Succession planning was at the heart of the new venture; indeed, one of the directors is always specifically focused on succession planning.

Over time, a family council emerged – a model that still works. Each of Victor and Loti’s four daughters is represented by nominated directors. Every family member is required to serve on the council for at least three years. “We’re doing it very formally,” Edwards says. “Essentially we have our corporate governance and our family governance.”

Although the same information is presented to both groups, the types of conversations that emerge from the meetings vary, and the family strictly adheres to long-term decisions that will preserve and increase wealth.

“Think about it this way, I have three kids,” Edwards says. “If I want my three children to live like I do, I have to triple my money. We need to keep the benefit for the family in the long run, in the same way we do for us.”

But Edwards’ kids hang out in the modern-day equivalent of the slaughterhouse room? “That’s the hardest thing,” he says. “You get further and further away from the first-generation entrepreneur.” To counter this, board meetings are held in the evenings so that younger family members can listen in.

Edwards says his closeness to his grandfather has led to an appreciation for the work ethic and a determined look to the future. Watching his grandfather at work, he delved into the ways businesses must evolve and change over time, and how technology can unlock new opportunities and growth.

“Just sitting there waiting to go home for three hours while the meetings were going on, I just picked up vocabulary and got a sense of what was going on. And then I could ask all my stupid questions on the car ride home.”

Edwards’ investments in cryptocurrencies and his desire to position the Smorgon family to join the next wave of innovation, he thinks, is in keeping with family tradition: take an old-fashioned way of doing things and shake it up. “It’s about moving things forward.”

Find out who the richest people in Australia are in the Financial overview Rich list 2022 out on Friday, May 27.

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