Behind the Results: We talk exclusively with Retail Food Group CEO Tony Alford
Discussed progress of Project EVO, importance of coffee wholesale arm and acquisition strategy.
Following on from their half yearly results announcement, we spoke exclusively with Retail Food Group (RFG) CEO Tony Alford, who explains why owning their own franchise systems matters, what they are learning from their major chain overhauls and why the coffee wholesale business is so important to them.
QSR Media: How is Project EVO progressing vs expectations?
Tony: Project EVO is just one of the initiatives delivering growth across the entire network, with our Brand Systems showing positive weighted Average Weekly Sales and Average Transaction Value growth of 0.8% and 3% respectively in 1H14, driven by a continued investment and focus on product innovation, innovative marketing activity and backfill of Project EVO initiatives. Donut King's and Michel's Patisserie's Project EVO journey has progressed to the point where the platform is now fully mandated with both new outlets being commissioned and traditional stores refurbished to the EVO look and feel. These refurbished outlets are showing extremely positive results across both Brand Systems when compared with their pre EVO performance, providing affirmation of the platform and optimism as we continue to evolve traditional outlets.
QSR: As you are rolling out project EVO for new chains - what lessons are you learning?
Tony:: The process of Project EVO - which incorporates specific initiatives in each Brand System - provides the opportunity to evaluate the strengths of each Brand System, and create a strategy to enhance these strengths. The rollout of Project EVO concepts across our Brand Systems have allowed our teams to showcase their skills in time management, organisation and planning. While it is quite an undertaking to essentially rebrand an entirety of the Company's Brand Systems, our specialist Project EVO teams have excelled in formulation, strategy and execution.
QSR: Can you tell us a little bit more about your coffee wholesale business?
Tony: RFG's wholesale coffee business is a key priority for the Company. Not only does it allow for vertical integration, it represents a significant growth platform for the business. In 1H14, RFG's gross coffee revenues increased 8.4% on PCP to $11.2 million and contributed circa 25% to Group EBITDA. This growth was primarily driven by increased Franchise System coffee sales and enhanced third party wholesale activity. We are excited about the impending launch of the Company's second Australian roasting facility, which incorporates chocolate blending capabilities, and have put together a dedicated Australian wholesale coffee sales team in order to create greater growth opportunities for this segment of our business. Placed into perspective, annualised roasting throughput from the Company's Australian and New Zealand facilities is approximately 1.45m kilo's.
QSR: In terms of your acquisitive growth strategy; what kind of businesses appeal and why?
Tony: We look for complementary businesses - whether that be a Brand System or vertical integration opportunity - which will positively affect EPS for our shareholders, and are capable of generating increased revenue and cost synergies. Whilst we have a focus on Brand Systems capable of increasing outlets under RFG's stewardship, businesses which offer vertical integration opportunity (such as our acquisition of New Zealand's Evolution Coffee Roasters) are also viewed favourably. Another factor is intellectual property ownership - we are proud of the fact that each of our Brand Systems are predominantly Australian owned and developed, that we own the intellectual property relating to them, and therefore are not beholden to or fettered by foreign licensors and franchisors. This is best exampled by the fact that Project EVO would not be a feature of the Company's organic growth platform had the Brand Systems been licenced from others.
