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  • on 1435281986:
    Hi admin Couldn't read the article as I'm not subscribed to that site. Can you give us a brief on what it's about?
  • The Australian coffee barons who are taking on the world   Cafe society has exploded in recent decades. But it’s not the baristas who’ve got rich from our taste for $4 lattes, macchiatos and piccolos; it’s those who roast, grind and supply the beans. Now our home-grown coffee barons are pushing their caffeine addiction offshore. Phillip Di Bella says Retail Food Group paid $47 million for his Di Bella Coffee business. When a wave of European immigrants arrived on Australian shores in the 1950s with stove-top coffee makers packed deep in their luggage, they faced the challenge of sourcing decent coffee to fill them. It proved to be a small but vital early step in a now booming local industry. There have been diversions along the way, not least a flirtation with instant coffee, but over the past 20 years Australia has earned a global reputation for building powerhouse coffee brands. During the 1970s, when foreign-owned companies were caffeinating the country with instant coffee, our newest citizens were quietly roasting beans in small batches, waiting for the worm to turn. And it did. Plunger coffee was bigger in the 1980s than shoulder pads. But it was in the next growth stage, as the main battlefield shifted from supermarket shelves to food service, that local roasters really started stealing market share from the multinational coffee producers. As cafe culture took hold, the coffee sector not only exploded but also fragmented as cafes started seeking out boutique coffee roasters. Les Schirato, head of Cantarella Bros, launched its Vittoria coffee range in the US last year. Researcher IBISWorld calculates that 6700 businesses operate in the $4.3 billion Australian cafe and coffee shop industry. They are fuelling demand for coffee and, in the process, etching names such as Toby's Estate, Di Bella and Five Senses on our coffee-drinking psyche. Notoriously secretive with figures, or, in the words of one coffee executive, "an industry short on digits", they cannot hide the obvious. In recent times, the bean dream has made some Australian coffee players very wealthy. Buyouts are in the tens of millions of dollars and the bigger Australian companies valued in the hundreds of millions. There has been no single path to success. Many operators concentrate exclusively on roasting, others combine roasting and cafe ownership. A noticeable shift has been the number of companies heading offshore, investing in roasting facilities and cafes in emerging markets, particularly across south-east Asia. Some are even dabbling in coffee plantations and foreign mills in an effort to shore up supply. With a global commodity as big as coffee, there is always the next big thing. Powerhouse Australian brand Vittoria is a reliable barometer of market shifts, and its play for capsules is telling. Driven by double-digit growth, the Australian capsule sector has come from nowhere just a few years ago to top $100 million in the 12 months to May. It's just one of the stories in this rapidly changing, caffeine-charged industry. The pay-off When Phillip Di Bella's pay day arrived late last year, the sale of his coltish coffee business illustrated how far, and how quickly, the one-time cottage coffee industry had come. "Yes, $47 million is accurate," says the Queensland coffee king of the price paid for his Di Bella Coffee by Retail Food Group, an ASX-listed company that also has coffee retailer Gloria Jean's under its umbrella. Di Bella's business has been more of a quick boil than a slow percolate. When he started out in 2002 aged 26, the youngest son of Sicilian immigrants had $5000, some leased overnight hours on a borrowed coffee roaster and two customers. The commerce student-turned-roaster remains at the helm of the business despite selling out. "Obviously, the deal [with RFG] is based around us staying on track with our strategic planning, but they are plans I've set and I'm staying on as managing director," he says. While Di Bella refuses to discuss revenue, he claims Di Bella Coffee - which primarily sells coffee to cafes - is responsible for 3 million cups of coffee a week. "We'd like that to be 5 million cups a week by 2017." Di Bella has built his domestic brand on the smaller margin, bigger volume wholesale model, believing retail customers shouldn't have to worry about their coffee supplier opening in competition around the corner. "My philosophy is coffee isn't just a big bag of beans, 90 per cent of the 1000 cafes we supply around the country are owner-operators, so we help them with their businesses," he says. That means helping with staff issues, building and design contacts and giving legal advice on leases. While the business model has worked in Australia, it needed to be tweaked when Di Bella expanded offshore. The brand is in five countries, including China and India. It opened an office in Shanghai in  2010 and cafes in Mumbai and Hyderabad in 2011. "In emerging markets, there's an education role," he says of opening cafes in India. Not that he's finished domestically. Di Bella plans further expansion into Western Australia and NSW, and to push into the potentially lucrative capsule market, which he maintains is producing "double-digit growth off a low base". The entrepreneurial bean man, who was 19th on last year's BRW Young Rich list with estimated wealth of $100 million, has never been far from the headlines, not all of them good. He was stripped of his 2014 Telstra Queensland Business of the Year award after making offensive social media remarks during a State of Origin match, one headline labelling him the "Gaffe-ine king". Now 40, Di Bella says he's matured, and that includes his coffee philosophy. Where he once dreamed of creating a business to hand down to the next generation, he decided to accept the RFG offer because it offered him a platform to grow. "We never dreamed we'd build the size of business we did. It's a beautiful monster. While I've got a marketing degree, I'm self-taught. So now we can tap into their resources and keep on growing." The high roller If you want to pick up the scent of the next big market mover in the Australian coffee industry, then follow the beans. And the smart coin for decades has been with Les Schirato of Cantarella Bros, which these days trades as Vittoria Food & Beverage. Schirato started working at Cantarella in 1972; other than a short stint at Fiat, it's the only place he's worked since school. Appointed group managing director in 1993, he elbowed his Aussie-flag-waving Vittoria onto supermarket shelves previously dominated by multinational coffee brands. Then in the noughties he declined the advances of Coca-Cola Amatil. As a result the NSW-based company remains majority owned by Schirato and his wife Luisa, daughter of one of the Cantarella brothers who founded the company in 1947. What began as a business importing Italian mineral water, cheese and pasta became a coffee roaster in the late 1950s. It now sends product in the other direction as a coffee exporter. Cantarella launched in the US last year, slowly building the Vittoria label in cafes and restaurants with an initial focus on the west coast. The longer-term strategy is to enter American supermarkets when the brand is more established. Nine years ago, Cantarella had a turnover of $138 million. Schirato says it's today between $210 million and $220 million. Its website boasts responsibility for 1.3 million cups of coffee a day. "As the market leader in Australian pure coffee, we need to look at export for long-term growth," he says. The US move is like the early days for Schirato, who has transformed Cantarella from an importer into a powerhouse with its own $20 million coffee-roasting plant. Having a fat cheque book with which to fuel expansion hasn't hurt. "I'm not sure we'd have been able to spend [$20 million] if we'd been a public company or been bought out." Cantarella's coffee portfolio includes spin-off labels such as Caffe Aurora and Chicco D'oro. The company has made a multimillion-dollar investment in equipment at its Silverwater headquarters for the growing capsule sector. The impeccably tailored Schirato believes much of the capsule market's growth has come at the expense of instant coffee. He wants to be the top capsule player in the country and is moving quickly (and successfully) against deep-pocketed, established international competitors like Nespresso. In the early days, the then cash-strapped company had to rely on guerilla marketing to get its brands noticed. Now Al Pacino is the advertising face of Vittoria. But some things don't change: the 60-year-old Schirato still drinks six cups of coffee a day. Would he ever sell? "I can only talk for my shares. I'm not interested, I love what I do." International roast In the six years since Singapore-based sauce and spice maker Cerebos took a majority stake in Toby Smith's boutique Australian roaster and retailer, Toby's Estate, the founder has been true to his word. At the time of the 2009 deal, Smith stressed he was keen to grow Toby's Estate by tapping into Cerebos's presence in south-east Asia. And tap he has, expanding Toby's into Singapore and the Philippines. Smith has stuck firmly to his model of being a tandem roaster and cafe operator. Toby's Estate has taken a bite out of the Big Apple's competitive coffee sector, too, opening three cafes and a roasting facility in New York since 2011. On the way, Smith has charted a business plan deliberately out of step with his bean scene competitors. The common conception is that coffee barons must choose sides; retail or wholesale. Smith has deliberately snacked on both, plus opened espresso schools and punted on a sector typically considered a balance sheet no-go: coffee production. "Being a roaster and a cafe has been our formula since day one in 2000," Smith says. "Starting out as a pure wholesaler is harder. It's nice to have the cash flow of a cafe as you build a fan base [for your coffee]." Smith aims to start a wholesale business from his Manila roasting facility, which services his five cafes in Manila and one in Singapore. Three years after opening in the US, the New York wholesale business, with its heavier investment in roasting and distribution, moved into the black in 2014-15. "Wholesaling is a numbers game, you have to have the volume - there's always someone clipping at your heels," Smith says, pointing to a "tenfold" rise in domestic sector competitors since 2000. "I wouldn't do it now [wholesaling in Australia] if I was starting out," says the 46-year-old. So where is the money these days in coffee? Smith has looked at the capsule market, but is deterred by high set-up costs. He tips cold brew - coffee steeped in cold water - as a future boom sector. The self-confessed risk-taker continues to sell down his share in Toby's domestic arm to Cerebos, which owns other coffee businesses such as Mocopan and brings buying power to the brand. He won't say what Cerebos paid for its slice, but confirms he still has a say in how it's run. In 2013, Smith fulfilled a long-term dream by buying a coffee plantation in Panama. The plantation produces the geisha bean variety, one of the most expensive in the world. While farming is tough, having direct access to these beans makes it worth the punt. "People value high-quality coffee, they'll pay $7 to $9 for a cup of geisha. It is a totally different market than existed a few  years ago and we want to be part of it." The long shot from the west As an expat school principal working in Papua New Guinea, Dean Gallagher was looking for a way to fund his return to Australia when he stumbled on the idea of exporting local coffee beans. With little more than a few beans grown by the parents of some of his students in PNG, the educator peddled his coffee around the cafes of Perth. Beans soon morphed into roasting, and a coffee business was born. That was 15 years ago. Gallagher's Five Senses is not the biggest or most recognised brand on our list, but it has spread from coast to coast, become a coffee equipment importer, export roaster, international coffee mill owner and user of premium beans from around the globe. "We occupy a large portion of the Perth specialty market and we're probably seen as one of the world's best roasters," Gallagher says. When it comes to raw figures, he shows school principal-like skills for deflection. "Everyone in this industry is cagey about raw tonnage," he answers. Five Senses holds an Australian distribution licence for Seattle-made Synesso coffee machines. It also imports other coffee equipment, runs a national barista academy and supplies coffee to some of the coolest cafes in Australia, from La Veen in Perth to Melbourne's Barry and Excelsior Jones in Sydney. Two years ago, Gallagher made a business decision that shocked the coffee world when he built a coffee mill in Sumatra, then gave equity in it to local growers. "The intention wasn't to make money, but it does have benefits in shoring up vertical supply." Gallagher, who has had many inquiries from prospective buyers of Five Senses, has taken a different approach. Mindful of his lack of formal business training, he handed over the daily running of the company to an executive team four years ago. "The big guys have got to respond to their shareholders, I don't," he says. "The business is still 100 per cent mine, and this way I can still be involved in strategy." That strategy has made Five Senses join the Aussie coffee push into south-east Asia with cafes and coffee wholesaling, a joint venture in Singapore and a start-up in Bali. He says Asia provides better upside than more mature markets. "They love adopting new things in Asia. I think coffee there is going to get to where Australia has in a quarter of the time it took us." But Gallagher says his overall game plan will shy away from retail. "We like to fly under the radar," he says.
  • That's very interesting.  Thanks for sharing!  $47mill and I still couldn't finish his book!  More fool me perhaps ;)
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