Truth about $30m feel-good business
It's the Melbourne-based social enterprise that aims to make you feel good about buying bottled water by pledging all of its profits to anti-poverty initiatives in developing countries.
But confidential financial statements reveal the company behind Thankyou water, personal care and baby products is falling short of its goal of giving "100 per cent" of its profits to "ending extreme poverty".
Although it has given away more than $6.2 million since its inception, Thankyou has failed to give away 100 per cent of profits, while racking up sizeable expenses and generous staff salaries.
Last year, the charitable business - which has an annual revenue of nearly $31 million - paid out less than half of its profits to charity.
Thankyou Group's 2017-18 financial statement shows it paid only $698,296, or 48 per cent of its $1.46 million profit, to the Thankyou Charitable Trust, while spending nearly $340,000 on travel and entertainment, and $4.56 million on fewer than 50 staff.
A Thankyou spokeswoman said the company aimed to distribute a 70 per cent dividend to its charitable trust and retain 30 per cent of earnings "for good financial stewardship".
She said all money would go to the trust should the company ever be wound up.
Thankyou first gained widespread public attention in 2013, riding the internet clicktivism wave embodied by the viral success of Kony 2012 with a social media campaign asking customers to bombard the Facebook pages of Coles and Woolworths urging the retailers to stock its products.
A registered charity since 2015, Thankyou Group is the "for profit" arm of the business that sells products to retailers across Australia and New Zealand.
It is 100 per cent owned by the Thankyou Charitable Trust, to which it pays out its profits as quarterly dividends.
But while the Thankyou Charitable Trust publishes its audited financial statements on the Australian Charities and Not-for-profits Commission register, Thankyou Group publishes only heavily redacted documents that black out any information - such as revenue, cashflow, salaries and other expenses - that could give an insight into how the business is run.
One industry source was critical of Thankyou Group for the practice, noting that charities receive generous tax breaks and in turn "have an obligation" to be fully transparent about their operations.
Unredacted versions of financial statements seen by news.com.au reveal that, over the past four years, Thankyou Group paid out an average of 67 per cent of its profit in dividends to the Thankyou Charitable Trust.
In 2017-18, it paid out $698,296 in dividends representing 48 per cent of its profit and finished the year with more than $2.6 million cash in the bank. In 2016-17 it paid $707,665 or 79 per cent, in 2015-16 it paid $1.2 million or 66 per cent and in 2014-15 it paid $649,250 or 75 per cent.
"While the final results were disappointing, our commitment to the payment of dividends (where it is financially prudent to do so) to our charitable shareholders was upheld," Thankyou Group said in its 2016-17 statement.
The spokeswoman said the company aimed to distribute a 70 per cent dividend to the Thankyou Charitable Trust and retain 30 per cent of earnings "for good financial stewardship".
"All funds are ultimately committed to the charitable purposes of Thankyou, which is to help end global poverty. If Thankyou entities were to be wound up, anything surplus would go straight through to the Charitable Trust," she said.
"The distribution was lower in 2018 given challenges the business faced when it launched into the New Zealand market whilst managing the existing category expansion and aggressive competitor activity."
She said the profit was held back "to remain solvent and ensure working capital for things like purchasing inventory and all other standard business costs".
The business also faces stiff competition from cheaper products.
"One of the challenges with our very low retained earnings is we are going against bigger FMCG (fast-moving consumer goods) competitors who have very deep pockets," she said.
"This is a challenge we've had to manage throughout the Thankyou journey. If the business were to ever cease operations everything would go to the Charitable Trust."
As of February 2019, the Thankyou Charitable Trust has donated more than $6.2 million to charities working in developing countries to provide water, sanitation, hygiene, child and maternal health services.
The statements reveal a relatively high wages bill.
In 2017-18, Thankyou Group recorded employment and personnel expenses of $4.56 million and finished the year with 47 staff - which averages out to $97,000 per head.
That represents an increase of nearly $10,000 on the previous financial year, when the company spent $4.28 million on employment and personnel and finished the year with 49 staff, an average of $87,300.
The Thankyou spokeswoman said the $4.56 million "covers training and education, WorkCover insurance, contractors, fringe benefits tax, payroll tax, long service leave and superannuation as well as salaries" and "therefore cannot be divided as a per head salary cost".
Thankyou Group does not reveal the salary of managing director Daniel Flynn, who founded the business in 2008 with partner Justine and best friend Jarryd Burns.
The spokeswoman said only that he is paid "in line with charitable sector standards as set out by Pro Bono Australia".
According to Pro Bono Australia's Salary Survey, chief executives of Australian charities earned total remuneration ranging from $111,000 to $177,000 in 2019, with the average CEO sitting on $154,000.
"Thankyou competes against the largest FMCG brands in the world in one of the hardest retail environments - mainstream FMCG," she said.
"So to tackle this and make the most money and raise the most awareness, it needs the best talent, the same as it is in the commercial sector. We've aimed to keep our total employee expenses in-line with the best performing businesses in Australia. Thankyou is not a donation-based charity."
She said Thankyou had recently raised salaries for some roles in line with the commercial sector after a review by PwC, but that "about 50 per cent of the team" including Mr Flynn were still paid in line with charitable sector standards.
"Historically at Thankyou, we paid staff in line with charitable sector standards as set out by Pro Bono Australia, but we were finding it difficult to retain and attract good talent, and also that the benchmarking for the charitable sector was not accurately representing some of the more commercial roles that were within our organisation," she said.
The statements show that, over the past two financial years, Thankyou Group spent nearly $580,000 on "travel and entertainment" and nearly $820,000 on "office expenses" for its fourth-floor Collingwood HQ.
The spokeswoman said the company "incurs business expenses as an FMCG trading entity in order to be an active, growing operation" and that "this means Thankyou deals with partners and suppliers in several countries".
"It is, therefore, important that we conduct thorough due diligence on all stakeholders which is reflected in our travel and entertainment budget," she said. "Travel and entertainment for Thankyou covers flights, accommodation, parking, tolls, meals and car hire."
The budget covers team members' interstate and international travel "for range review meetings with retailers and suppliers, auditing and checks on manufacturing and print factories".
It also includes visiting charity projects Thankyou donates funds to, "which is part of our partnership model and due diligence to ensure the funds are going where they are allocated and the project is sustainable".
"In previous years, our entertainment and travel has grown as the business has grown, and with the launch into New Zealand in FY18," she said.
"Like most organisations, we have an internal travel policy in place that states if employees are required to travel, they are to complete a request form with sufficient lead time so as to avoid incurring unnecessary travel and accommodation costs."
WATER DRYING UP
The statements also highlight how the company, which began as Thankyou Water, is shifting away from the category where it is unable to compete with deep discounting by the supermarkets.
"Bottled water as a category in the supermarkets became the subject of a carefully designed and deliberate deep discounting strategy, especially in the area of home brands," Thankyou Group said in its 2016-17 report.
"Whilst Thankyou believe in ensuring we offer our consumers value for money, competing on a deep discount basis is not a sustainable market position. Accordingly, a number of products in this category were withdrawn from the shelves of our retail partners, resulting in the underperformance in this category."
The industry source said Thankyou had "kind of disappeared from the water market".
"They have a 1.5-litre in Woolworths, a small amount in 7-Eleven but sales are low, and that's it," he said. "The rest of the market, Coles, Aldi, (no longer stock) it. Bottled water is very price competitive."
Thankyou's 1.5-litre water retails for $2.10, more than two-and-a-half times the price of both Coles and Woolworths' equivalent homebrand versions at 80 cents.
In 2013, Thankyou Water stopped donating to evangelical Christian group Samaritan's Purse, which had been criticised for spending nearly 80 per cent of its budget on religious activities and just 11 per cent on aid and disaster recovery.
An ACNC spokesman said he was unable to comment on "specific circumstances of individual charities" due to secrecy provisions in the legislation.
"A charity can apply to have certain information withheld from the charity register," he said. "There are limited circumstances in which the ACNC may agree to withhold a charity's information from publication, (including) where the information is commercially sensitive and publication could cause harm to the charity or a person."