Dean Merlo on taking Merlo Coffee to infinity & beyond

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Dean Merlo of Merlo Coffee on taking many first steps in the Queensland coffee industry and how the market has evolved over the past 20 years.

Few families have had quite as big an impact on Queensland coffee and hospitality as the Merlos. Dean Merlo founded Merlo Coffee in 1992, and started roasting his own coffee in 1996, helping spearhead a new wave of quality coffee in the state. But it was actually his father, Gino Merlo, who brought espresso coffee to Queensland.

“He started a restaurant called Café Milano in 1958 and brought the first espresso machine into Queensland. It was a big commitment and when it came time to service it, he had to fly someone up from Sydney, which wasn’t cheap in those days,” Dean says.

“I remember drinking coffee from an early age and had always been interested in it. Coffee was only one part of what Café Milano offered though. My dad was more into wine, and the restaurant was well known for having Australia’s best wine cellar at the time.”

It was an offhand comment from his father, while driving Dean to school, that would motivate him to focus his pursuits on coffee.

“As a casual throwaway line, he mentioned ‘I love the coffee business, there’s great margins in it’. That was all he said, but it really stuck in my head,” Dean says.

“Quite a few years later, I was travelling in the United States and saw these fantastic cafés sitting at the bottom of large city buildings, mostly serving the people working upstairs. No one had really thought to do that before in Australia, to cater to the corporate customer. I came back and started my first café at the bottom of 344 Queen Street in Brisbane.”

Although Café Milano had been sold to new owners by that time in 1992, the new Merlo Coffee bar was located just down the street, so it was like coming home for Dean.

“It delivered exactly what Brisbane was looking for: an honest little café with great coffee and simple Italian flare. It was an espresso bar in every sense of the word,” he says.

“I worked in that café every day for three years, then opened another on George Street with a few partners. We were getting coffee roasted for us at the time, but were finding it a bit inconsistent, so we decided to do it ourselves.”

Dean and his partners bought a 30-kilogram Petroncini roaster and set it up at a site in Fortitude Valley. They even tracked down one of the people that used to roast their coffee and brought them into the business.

“Whatever money we were making from the two stores was poured into the coffee company, and it wasn’t making headway for quite some time. But the cafés in the city were basically marketing the coffee brand, which helped us pick up one customer after another until Merlo Coffee became what it is today,” Dean says.

Merlo Coffee now operates 13 cafés across Queensland and one in Melbourne, with more than 1200 wholesale partners across its home state and a handful more throughout the country. Dean says Merlo Coffee’s growth has been mostly organic, however, there were a few things it did first or differently to get its name out there.

“There were tricks I’d seen in the States that no one was doing here yet. A big one was giving away wind barriers and umbrellas to customers who used our coffee, which gave us a strong visual presence,” he says.

“We were also the first company serving coffee with a logoed cup. They were made of Styrofoam in those days, but we still went to the trouble of finding a supplier that could put the logo on both sides of the cup, so no matter how the customer was holding it, people could see where they got it. I remember having to order 25,000 in the first lot and thinking ‘look at all the money I’m spending’ and ‘where am I going to put them?’ Now we use more than 20 million per year.”

Going through so many coffee cups has also raised the importance of being sustainable to Merlo Coffee. Among other initiatives, Merlo Coffee has shifted all of its takeaway cups and lids to compostable alternatives. 

“No one likes to use cups that end up in waste. It’s terrible and the reality is, while the cups can be composted, unless they’re disposed properly, they all end up in the same place. We go to a lot of trouble to operate our own composting service at our cafés, where everything we use from the cutlery and serviettes to food packaging and coffee cups are compostable,” Dean says.

“Everything is thrown in a compost collection bin, which we have to pay extra for, but it’s important to us. It’s amazing how much waste we’ve saved in the last couple of years.”

Merlo Coffee is also improving its energy usage, with solar panels installed at its two main roasteries in Bowen Hills and Eagle Farm. That Eagle Farm site has recently undergone an upgrade and renovation, with the installation of a Brambati processing line and 360-kilogram-batchsize roasting machine.

“We bought a big 120-kilogram Brambati six or seven years ago and had it blessed by a priest in a big ceremony, which was a tremendous amount of fun,” Dean says. “The new machine is being commissioned as we speak, and I look forward to throwing a big party with another priest coming down. I’m still in awe of the size of the new roaster. It seems massive, but I know we’re going to keep it busy.”

Another celebration Dean looks forward to is the next annual Merlo Barista Championships. Within a set timeframe, competitors from Merlo stores across Queensland must set the grinder from scratch, then produce four espresso, four lattes, and four piccolo lattes. Those 12 coffees are then taken to a judging panel in another room. The best barista on the day wins the grand prize of two tickets to the next Melbourne International Coffee Expo. Dean says it takes a special degree of skill to win the competition, with factors like grinder calibration really adding to the challenge.

Competitions like this keep the Merlo Coffee team at the top of their game, which Dean says is crucial in an industry as fast paced as hospitality.

“It’s an interesting business, because as a coffee roaster, in some ways we’re selling to our competitors. But we don’t really see it that way,” Dean says.

“There are so many reasons a café is successful, it’s not just the brand of coffee they use, it’s the food, opening hours, systems and processes they have in place, ‘orientation to the morning sun’ and so on. Many factors are involved, so we have no problems selling the same coffee we use to other cafés – provided they’re not right next door.”

One of the biggest changes Dean has seen in the Queensland coffee industry over the past 20 years, that really applies across the nation, is the number of companies big and small looking to get involved.

“It’s always been a very competitive business, but even more so right now. I’ve seen a lot more coffee roasters accumulating, buying their own machines and starting small businesses. On the other end, these big companies are coming and buying up the more established brands. I’ve never seen so many mergers and acquisitions,” Dean says.

“I think everyone in the industry has been approached at one point or another. Massive figures are being thrown around that are hard to pass up. For us, we’re a private family-owned business and I love what we do. We’re not in the market to sell, but we are considering opportunities interstate that would help us expand in a more efficient way.”

Looking ahead, Dean says Australian coffee drinkers are starting to experiment beyond their traditional hot milk and espresso type coffees, and Merlo Coffee is  already responding.

“I’ve noticed our customers are starting to look for coffees with lighter roasts. Some people really love their AeroPress and more are discovering filter coffee. A slightly lighter roast really works with that style and brings out a lot more aromatics,” Dean says.

“Cold brew is another big trend we see growing in the industry. We’ve released our new canned cold brew range and worked hard on that, because we decided not to enter that market unless we had a product we were really proud of.”

While COVID-19 and everything that came with it has hit some coffee businesses harder than others, Dean believes the coffee industry has come out stronger, with demand just as high as ever. He predicts coffee will continue to become a bigger part of people’s lives and routines.

“I think people are turning away from alcohol as their main social lubricant. They’re using the local cafés to conduct more business meetings and catch up with friends and family,” Dean says.

“You can get an honest cup of coffee and a nice meal and be out of there for as little as $30 to $40 for two people, so it’s a bit more cost effective than a restaurant too. But there’s more to it than price. Sitting down and having a great cup of coffee is a wonderful experience for everyone.” 

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This article appears in the June 2021 edition of BeanScene. Subscribe HERE.
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