Vittoria Food & Beverage Managing Director Rolando Schirato talks about the reality of navigating a business post-pandemic, top issues impacting roasters, and where to next for the third-generation company.
The global pandemic was a time of reflection, reinvention, and rejuvenation for many businesses. For some markets, it meant consolidation, and for others, it brought renewed attention to the value of being local, such as Vittoria Coffee, who has helped pioneer the development of Australia’s coffee industry since 1958.
“We remain a family business, 100 per cent privately owned, Australian owned, Australian roasted,” says Managing Director Rolando Schirato. “Sometimes there’s a perception that we’re a big multinational that operates offshore, but we’re proud to be family operated. We produce locally, we roast locally, we try to use local suppliers as much as possible.”
While the COVID-19 pandemic rattled a few businesses, for those that have seen growth and strong performance since, Schirato says there’s been little reprieve.
“I think everyone was hoping to have a bit of respite after COVID, but actually this year has probably been harder than the past two years,” Schirato tells Global Coffee Report.
“Coffee pricing is definitely the number one issue coffee roasters are facing at the moment. Coffee is priced in US dollars and they’re the highest they’ve been in over 10 years. We experienced the same situation about 12 years ago but that time, the United States dollar was pretty much at parity with the Australian Dollar, which helped us and many other Australian roasters. This time, we’re seeing coffee pricing at similar levels or higher combined with a weaker Australian dollar, currently at US$0.64 cents today (at time of interview). The combined effects of foreign exchange and rising coffee prices are the two biggest variables and impacts to any roaster’s bottom line.”
Prices are one thing, then add on freight increases, inflation, supply chain disruptions, and a whole raft of other headwinds right after COVID-19 where sales were affected. Thankfully, Schirato says Vittoria Coffee has been lucky to bypass any major green bean shipment delays.
“We’ve been an importer of green beans since we started roasting in Australia 1958, so a strong supply chain is one of our core competencies. Like most Australian roasters importing green beans, we’re having to deal with missing shipping vessels and other disruptions. Collectively, this makes for tough conditions for coffee businesses,” Schirato says.
Vittoria Coffee has never wavered on the quality of coffee it sources, using only 100 per cent Arabica coffee. On top of the normal base price and stock exchange, the company is buying specialty coffee from multiple different origins. Schirato says this cost compounds compared to some of Vittoria Coffee’s competitors and smaller roasters who can potentially buy cheaper coffees or substitute origins to mitigate cost increases, which Schirato says Vittoria Coffee can’t, and won’t do.
The business has absorbed a “significant amount” of price increases, only passing on a relatively small amount to the market.
Schirato says he feels for business operators who are struggling to pass on cost increases because of pre-existing customer loyalty and fear of sale decreases.
“It’s hard. My advice for our customers, like everyone else experiencing significant cost pressures, is that they need to pass those things on or it very quickly catches up with you, and you’ll find yourself in trouble,” he says.
To speed up the flow of service and manage reduced labour, Vittoria Coffee encourages café customers to invest in equipment innovation and automation, from espresso machines to automated milk steaming and dispensing, something it heavily advocated pre-pandemic.
“The role of a roaster these days is not just supplying beans in a bag. It’s about being an extension of your customer’s business,” Schirato says. “It’s about differentiation and how you work with your customers from an operational perspective, helping them with service flow, labour, training, equipment, and marketing support to help them grow. It’s about how you actually partner with your customer in a way that is meaningful, and beyond just supplying coffee.”
Schirato adds that while it’s relatively easy for anyone to start a coffee business these days, making it sustainable and successful is another obstacle altogether.
“Any challenging business environment or recession will weed out some operators who weren’t running a tight enough ship. But in the Australian landscape, I think consolidation will definitely take place. There will be people that drop out, and those that will get acquired, as we’ve seen happen – you’ve got private equity acquiring brands in some spaces, and huge multinationals like JDE Peets acquiring brands like Campos Coffee. And then you have brands like Toby’s Estate who have been acquired for the third time by UCC Ueshima Coffee Co in Japan. I think we’ll see more of that,” he says.
In the meantime, Vittoria Coffee continues to run its own race and used the past two years to expand its offering into other segments in the retail sector.
“We launched into the instant market for the first time in our 75-year history. We went into the premium, small-sized 100-gram segment, which went exceptionally well. In just around four months we’ve been able to take around 30 per cent market share just with that size segment, which has been very promising. That category has been owned by the big guys – JDE Peets, Nestlé, Nescafé and Moccona – who have been long-term staples, but with coffee evolving everywhere else, we thought we could do something better,” Schirato says.
Due to its success, Vittoria Coffee is looking to launch into the large-size instant segment. Schirato estimates the category to be valued roughly at $400 million in the grocery sector, similar in size to the pure coffee category representing capsules, whole beans, and ground coffee. “It’s a big market we’ve never played in before which presents a huge opportunity for us,” Schirato says.
The brand continues to monitor market trends and adapt accordingly.
“At the start of 2020, Vittoria Coffee became one of the first Australian manufacturers to produce Nespresso-compatible aluminium capsules in the Australian market,” Schirato says.
This year, it also launched a dedicated coffee blend in the grocery market to pair specifically with plant-based milk, and 12 months ago, it released a range of Vittoria coffee bags, which now account for almost 40 per cent market share, Schirato says.
“We never sit idle. We want to continue to innovate and provide products that suit different consumer needs and drive our category growth to offer customers what we believe is a better option,” he says.
“We want to best position ourselves to support our customers, providing the highest quality coffee for every coffee occasion. Expect to see more from us in the next few years.”