Coffee and tea prices are on the increase due to supply challenges and growing demand from China. Meanwhile the local arm of Dutch tea and coffee firm JDE Peet's is making higher profits from NZ consumers. Photo / Getty Images
Coffee and tea prices are on the increase due to supply challenges and growing demand from China. Meanwhile the local arm of Dutch tea and coffee firm JDE Peet's is making higher profits from NZ consumers. Photo / Getty Images
As coffee and tea prices spiral on global markets, one of the world’s largest manufacturers has revealed a big jump in profit from New Zealand, outperforming most other regions.
Jacobs Douwe Egberts, a subsidiary of Dutch giant JDE Peet’s, has reported financial statements from its New Zealand arm,showing a net profit of $19.19 million for the December 2023 year. This is up 40 per cent on the $13.75m reported in 2022.
Revenue came to $156.19m, up 13.5 per cent on the previous year’s $137.66m.
Based in East Tamaki, Auckland, JDE’s brands sold in New Zealand include Moccona, L’OR, Harris, Pickwick, Ti Ora, Bell Tea, Jed’s Coffee and Hummingbird Coffee.
The New Zealand result contrasts with JDE’s worldwide performance, with the multinational’s profit halving from €761 million ($1.35 billion) in 2022 to €364m in 2023 due to a write-off on its Russian business, according to its Euronext Amsterdam stock exchange filings.
Adjusted operating profit for 2023 was €1.13b, down 8.1 on a reported basis but up 1.1 per cent organically (due to the company’s effective operations).
In Asia-Pacific the company witnessed sales growth of 2.1 per cent, on the back of a 4.9 per cent price increase as volumes fell 2.8 per cent.
“Performance was geographically broad based, with notable strong performances in countries such as Malaysia, Thailand and New Zealand,” JDE noted in its full-year result announcement.
The results came as coffee and tea prices surged on global markets. Wholesale coffee prices have risen more than 20 per cent since January, after crops were hit by extreme weather in key producing countries, including Vietnam and Brazil.
Tea costs jumped 34 per cent in March due to rising industry costs and the Red Sea crisis affecting container ship movements.
Prices have also been fuelled by increasing demand from a growing middle class in China and the rest of Asia.
London robusta coffee futures, an international benchmark for beans used mostly for instant coffee, hit an all-time high of US$3497 per tonne in March and have remained high.
New York Arabica futures, the benchmark for higher-quality beans used at cafes, also reached their highest price in 14 months during December.
The profit that coffee and tea distributors can make depends on how much additional costs they can pass on to consumers. Photo / 123rf
Tim Morris, a director and analyst at Coralis Research in Auckland, said in the prevailing inflationary environment, the profit that coffee and tea distributors could make depended on how much additional costs they could pass on to consumers.
“Everyone’s profit in some sense has gone up by the amount of inflation — if they are able to pass on those price increases,” he said.
“If the cost of coffee beans goes up, and then your local cafe puts their prices up, then they make more money.”
On the demand side, he said the simplest way to look at this segment was that the Chinese used to drink tea. Now they have started eating chocolate and drinking coffee.
“The world needs to produce more of those things and the challenge is that the raw materials come out of highly politically unstable countries and constant unrest, and the ability to produce more is restricted.
“There are also climatic challenges through the centre of the Earth. So prices for these products are rising.”
Both coffee and tea were recession-proof to a large extent because few people stop drinking it altogether, Morris said.
“What people do is they shift their patterns of consumption. They may shift from going out for coffee to consuming at home. But both coffee and chocolate are addictive. People don’t give up coffee, they give up other things. It’s a great product to be in.”
For the 2023 financial year, Jacobs Douwe Egberts (NZ) paid a dividend to its parent company of $17m and income tax of $7.35m.
Bell Tea's warehouse and offices at 305 East Tamaki Rd. Photo / Supplied
The company expanded in New Zealand through the acquisition of BrewGroup, which had owned Bell Tea and Hummingbird, Jed’s and Gravity Coffee.
Bell Tea was founded by Norm Bell in Dunedin in 1895, and is touted as New Zealand’s most popular tea brand.
After Foodstuffs sold the business to private equity company Pencarrow in 2013, it became part of BrewGroup, and in 2016 acquired Christchurch’s Hummingbird from the Cowper family.
Jacobs Douwe Egberts purchased Brewgroup in 2017 for more than $100m.
