Shott Beverages targets 2022 after logistics woes delay US entry

26 Nov 2021 11:30 AM | Mike Hearn (Administrator)

After Covid delayed the opening of its new multi-million dollar Auckland factory, Shott Beverages is now battling logistics lags in order to make its long-awaited entry into the American market.

Its New Zealand-made coffee syrup products were scheduled to launch into foodservice in the US this month, according to chief executive David Shearer, but were “caught in the logistic woes” en-route to Los Angeles.

“It’s only shipping up there now as we speak. It was supposed to be a 1 November launch but there’s a three-week waiting line at the port of Los Angeles before it even gets trucked to where it needs to go,” said Shearer.

He expected the stock to be available for sale in American cafes and restaurants by January 2022, with two new sales and marketing hires at the company’s newly-opened US office expected to hit the ground running with distributors as soon as the product was on the ground.

Shott Beverages opened a multi-million dollar factory in Auckland in August, which was originally scheduled for May 2020 but came 14 months later after crucial equipment built in China and Germany was caught up in factory and then shipping delays.

The opening of its second factory, alongside its original Wellington base, boosted production capacity by 300% unlocking the volumes that were required for its entry into the US market.

“We’ve had a lot of interest [from America] over the years, but we’ve turned it down literally because we haven’t had the capacity,” said Shearer, a 4.9% company shareholder.

“We’ve heard horror stories of businesses going to America, winning a contract and not being able to supply them. We wanted to ensure we had ample capacity before entering that particular market.”

The company first sent stock abroad in 2014 into South Korea, “a coffee-drinkers market”, where it found success when global cafe chain Starbucks started using its syrups for speciality drinks in its premium Starbucks Reserve cafes.

Exports now delivered around 70% of the group’s revenue, and South Korea was still its top export market, followed by the United Kingdom and Australia.

“An export-motivated brand”, Shearer hoped to expand its global distribution beyond its current distribution into around 20 countries across Asia Pacific, Europe, the UK and now the US.

“Our job is to make sure we have enough manufacturing capacity in New Zealand to keep up with what those four offices are doing.”

While the Auckland plant pumped out export products, its eight-year-old Wellington factory continued to manufacture its retail brand, QuarterPast, for at-home coffee drinkers.

By channel, foodservice was 60% of Shott’s group revenue, with the balance coming from retail largely under its QuarterPast brand, which has been a boon for business during lockdown.

“It’s been one of the things that offset how hard the poor old foodservice channel has been doing. A lot of coffee consumption went to home consumption,” said Shearer.

“[Australian sales saw] double-digit growth last year, even though one of the quarters we were down over 50% we still managed to get double digit growth by the end of the year.

“Our Australian business is growing at three figures, 100s of percent growth at the moment.”

Shott’s domestic business made up around 30% of annual revenue, the “backbone of the business still”, but Shearer said an export push over the next five years – particularly in North America – could see the percentage of New Zealand revenue come in at closer to 10%.

Shearer added that unlike many of its competitors, the company does not heat-treat its products which allowed them to market the fruit syrups as free of artificial flavours, colours and sweeteners. This hybrid of fruit juice and jam manufacturing without the heat, was the company’s “point of difference”.

“We believe we pioneered a new way of manufacturing these syrups and the category’s open for disruption and that’s what we’re working towards,” he said.

“That means high growth for a number of years if we play our cards right and hopefully that will stimulate more jobs in this country and create what we hope will be another successful New Zealand brand.”