RFG’s coffee sector maintains strong growth in 1H22

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Global food and beverage company Retail Food Group (RFG) has announced strong operational growth in its coffee-based brand systems in the first half of the financial year (1H22), despite the impacts of COVID-19.

In the report, RFG Executive Chairman Peter George says its performance was a reasonable one given the sustained and unavoidable impact of COVID-19 across its operations throughout the period.

“1H22 was a challenging period for the group, its franchise partners, and customers, and was essentially bookended by the Delta and Omicron waves,” he says.

The full impact of Delta-induced lockdowns, border closures, vaccine mandates and other trading restrictions took effect during the first quarter, particularly in New South Wales, Victoria and the Australian Capital Territory, which endured extensive and sustained lockdowns.

“Subsequent emergence of the Omicron wave and resulting close contact isolation requirements further influenced consumer shopping habits and operational effectiveness, including lost trading days or hours for many outlets,” says Peter.

“This was particularly the case amongst the company’s coffee-based brand systems which were predominantly based in shopping centres or metro locations, where worsening customer count declines were increasingly evident.”

Gloria Jeans’ drive thru operations, however, achieved strong operational growth, partially offsetting COVID-19’s significant impact on RFG’s coffee brand systems.

The report also states that Di Bella Coffee’s 1H22 underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $0.5million benefited from the positive impact of ongoing restructuring activity, offset by COVID’s impact on independent café and contract roasting customers and reduced gross margin attributable to lower volumes and increased raw material costs.

Peter says a combination of global freight costs and environmental factors contributed to a rapid increase in Arabica green coffee bean pricing to a 10-year high.

“RFG absorbed these additional costs for the majority of 2021 to provide additional support to our franchise partners experiencing extremely challenging trading conditions. Wholesale coffee pricing increases were however implemented in December 2021 across both franchise and foodservice customer bases, and we expect to see the positive impact of this during the 2H22,” he says.

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