Will Bell Tea & Coffee soon be brewing in Australia?

First appeared in Fairfax NZ Business on October 14, 2013

If you’ve been to Melbourne lately you may have heard whispers of a new coffee shop down a cobbled lane and up the unmarked stairs, through a bespoke tailor’s showroom.The coffee is brewed for three days prior, using a bean roasting technique first developed by the Mayans on the steps of Chichen Itza. There’s a waiting list to pick up your cup and you must arrive between 9 to 9.30am. I may have made that up.

If you know Melbourne, and Australians in general, we are obsessed with our hot beverages. In fact on both sides of the Tasman our love of coffee borders on religious.

Tea drinking also has its fair share of zealots. The premium tea space in particular is a very lucrative market, with new tea brands and brews featuring fantastical names and flavours popping up as both on- and off-trade options.

I didn’t think it possible, but consumption of hot beverages in Australia is increasing. According to research firm Roy Morgan, in the last five years visits to Australian cafés rose from 38 to 48 million across all age groups.

Hot drinks are big business in Australia, and I’d stake my skinny chai latte on New Zealand’s Bell Tea and Coffee Company wanting a piece of the action. In fact it surprises me that New Zealand’s beloved and established brand has yet to brew its ‘‘feel alive’’ flavour over here.

Now that Foodstuffs has sold the 115-year old company to Pencarrow Private Equity, I imagine expansion through exports will be a major part of the growth strategy. Pencarrow will be conducting its due diligence as we speak, reviewing how Bell’s portfolio of tea and coffee brands can best be played across international borders.

Bell has a house of brands structure, meaning the sub brands it owns maintain their individual identities. In coffee, there’s Burton’s, Gravity and Jed’s. In tea, it has Bell, NZ Live and Twinings (for which it is  agent and producer in New Zealand) and the tea-based cold drink, Native Infusions. The company is also the agent for La Cimbali and Jura coffee machines.

The range of products in Bell’s portfolio means it has something for you whoever and wherever you are – gourmet tea or coffee from your favourite café, and affordable tea or coffee for home when you’re dashing through the supermarket.

As it stands now, the Bell Tea and Coffee Company has a strong skew to New Zealand. This has been a great strategy to date and has meant Bell dominates the Kiwi tea market with 39 per cent share in 2012. Nestle is the dominant player in New Zealand and Australia when it comes to off-trade, mostly supermarket-bought coffee like Nescafe and Nespresso (which is experiencing large growth here in Oz).

Euromonitor’s current stats and predictions for hot drinks shows that while Kiwis are still tending to be cautious and buy more product to brew at home, Australians aren’t letting a little thing like an economic downturn get in the way of a good strong cup. They’re buying more and are willing to pay more for it, too. In fact, ‘premiumisation’ is a big driver of the industry right now. One of the world’s biggest tea companies, Unilever, just paid an undisclosed sum to buy Australian cult tea brand T2.

Bell will have to do some rejigging of its brands’ positioning to break into Australia. I could see Jed’s doing well here, as it has that look and simple messaging that stands out on supermarket shelves. With the right distribution and marketing strategy to niche cafés, Gravity and Burton’s could be successful – there are certainly the café volumes here to grow those businesses fairly substantially. Perhaps there’s an opportunity to create a distinct Australian blend, because there’s certainly the capability.

The one that may have the most difficulty in gaining traction is Bell Tea itself. The affordable tea market is very saturated. and I counted more than 20 tea brands on the shelves in my local Woolworths.

It’s highly likely that Bell and Pencarrow will be on the acquisition trail in Australia for premium tea and coffee businesses to join its family. Australia’s Madame Flavour? New Zealand’s Avalanche coffee? The company recently secured a deal to sell through 757 Coles stores. The Avalanche guys may want to keep their phones handy.

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