There is a new giant on the Australian coffee scene.
Retail Food Group spent $163.5 millionon Friday to buy the Gloria Jean’s Coffees chain and in the process secured a position as Australia’s biggest coffee player measured either in terms of franchise brands, store counts or market share.
The company already ran 519 coffee outlets in Australia and 183 internationally under the brandsMichel’s Patisserie,Esquires,BB’s,Coffee Guy and Cafe2U.
Snapping up ofGloria Jean’s upped its store count by 358 domestically and 420 around the world, making Retail Food Group the “clear leader in retail food franchises specialising in coffee”, said chief executive Tony Alford.
The acquisition triples its roasting capacity, but Gloria Jean’s will retain its usual coffee blends and flavours.
“Each of our Brand Systems has a specific, unique blend which does differ,” he said. “Our capacity to deliver … unique coffee flavour profile further strengthens opportunities for differentiation between brands.”
The coffee chain is expected to rake in $11.8 million in earnings before interest and tax in the 2015 financial year and $6.3 million in profit. It has long been the target of the company.
“We have recognised the opportunity to capitalise on coffee excellence, while also expanding into freshly prepared food lines as major elements to drive franchisee sales,” Mr Alford said.
Nabi Saleh,executive chairman of Gloria Jean’s, said talks about the “all encompassing purchase” had been going on for “a few months”. The purchase includesintellectual property rights to the Gloria Jean’s and It’s a Grind brands andwholesale coffee roasting operations in Australia and the US.
Mr Saleh will be retained for two years, as well as senior management and support staff.
“We saw value in the partnership, that it would benefit both brands,” he said.
Franchised coffee operations are expected to struggle as consumers increasingly flock to small and specialised businesses, which they link with “better quality, ambience and experience”, said IBISWorld.
The Coffee Club, the only cafe franchise owned byMinor DKL Food Group, has 5 per cent market share, followed by Gloria Jean’s with 3 per cent, its report shows.
“Retail Food Group and Withers probably want to pivot these coffee chains towards the mass market as opposed to fight for a place amongst the Australian boutique coffee culture that’s dominated byindependent, smaller guys,” said senior IBISWorld analyst Ryan Lin.
“These guys are tuned into mass marketing as opposed to the locally brewed, cup of elusive coffee the working professional and the younger drinkers are flocking to.”
Retail Food Group-owned cafes would therefore offer “similar coffee experiences”, he said.
IBISWorld predicts the coffee industry’srevenue will grow by 2.8 per cent a year over the next half decade, to total $5 billion.
The Gloria Jean’s brand was founded in the US in 1979 and opened its first Australian outlet at Miranda in Sydney’s Sutherland Shire in 1996.