CHINESE COFFEE LOVERS TO BE COVERED WITH 'GLORIA'

Written on the 21 January 2015 by Nick Nichols

CHINESE COFFEE LOVERS TO BE COVERED WITH 'GLORIA' RETAIL Food Group (ASX: RFG) is seizing on a growing Asian appetite for coffee by teaming up with a local partner to expand its newly acquired Gloria Jean's chain into China.

The joint-venture with the GouBuLi Group, which already operates two Gloria Jean's outlets in China, is initially worth $6 million to the Southport-based RFG.

RFG will hold 20 per cent of the joint venture, although details have not been revealed about what the venture is expected to deliver to the company's bottom line or how many store openings will be targeted by the venture.

China's growing affluence has seen a surge in café numbers across the country, with figures from market researcher Mintel finding they doubled to more than 31,000 between 2007 and 2012.

US coffee giant Starbucks says it is on track to have 1500 stores in China this year - this from a market whose population drinks an average of five cups of coffee a year. In the US, the world's largest coffee market, an average of 400 cups per capita are consumed each year.

RFG chief executive officer Tony Alford says the $6 million licensing fee has been received from GouBuLi and that the terms of the joint venture are being finalised.

"The joint venture represents the culmination of a 12-month engagement between the Gloria Jean's Coffees brand system, Tian Jin Sen Yong Tai Co (a GouBuLi subsidiary) and their respective associates, and affords RFG immediate revenue in terms of the initial licence fee paid, together with the scope for future earnings by way of profit share and supply-side opportunity," Alford says.

"Importantly, the joint venture unites RFG with a substantial and motivated local partner, well able to apply sufficient resources, retailing experience and resolve to ensure the success of the enterprise."

Alford was not available for further comment.

The latest deal expands RFG's offshore interest further after snaring Gloria Jean's late last year for $164 million.

The company says its $30 million buyout of Brisbane's Di Bella Coffee, revealed in December, is also on track to settle on January 31.

RFG has previously reported that the Gloria Jean's acquisition is expected to add $24 million to RFG's earnings before interest and tax in FY16, and is poised to boost the company's bottom line by 36 per cent to $50 million in FY15.



Author: Nick Nichols

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