Breville Group: Brewing Growth Beyond Espresso

Australia | Feb 14 2025

Breville's latest earnings reaffirmed the group's global success across multiple geographies with product innovation and premiumisation driving growth.

-Coffee underpins strong results
-Managing the Trump tariff risks the second time round
-China and Middle East direct entry growth potential
-Beanz means recurring revenue streams

By Danielle Ecuyer

An Australian Consumer Success Story

Breville Group ((BRG)) is a true Australian consumer discretionary success story. The company was founded in 1932 and initially manufactured radios and mine detectors during World War II. By the 1960s, management had shifted to home appliances, and in 1974 the company became synonymous with the toasted sandwich maker. Further success came via the Kitchen Wizz food processor.

Since listing in 1999, the company has expanded internationally, making strategic acquisitions including Seattle-based food and tech company ChefSteps in 2019, coffee grinder Baratza in 2020, and the Italian espresso equipment company Lelit in 2022.

Breville's products are sold globally in 70 countries under various brand names, including Sage in Europe. Breville's product suite spans juicers and blenders, ovens, air fryers (the latest must-have gadget in the kitchen) and microwaves, to grills, presses and toasters, cookers, water and tea appliances, food preparation tools, air products, and specialty appliances.

The company is expected to generate almost $1.7bn in revenue in FY25 and has a market capitalisation of $5.2bn.

1H25 Earnings and Global Expansion

The 1H25 earnings report gives investors an insight into Breville's corporate strategy to continue growing earnings. Analyst consensus swung to Breville's 1H25 results coming in better than expected, albeit slightly, on the back of revenue growth of 10% and net profit growth of 18% over the previous corresponding period.

Impressively, global product revenue advanced 13% in constant currency terms, with Americas up 10.9%, APAC up 16.3%, and EMEA rising 15.4%.

Macquarie points to the strength in Breville's coffee products as a key driver of global growth and details how North American sales growth was achieved despite store closures at Hudson Bay, Amazon issues with Mexico, and US revenue growth exceeding that of Canada and Mexico.

Management manoevres on tariffs and growth plans

Tackling the looming issue of potential US tariffs on China, Breville management noted this is not their first rodeo, so to speak, having navigated the 25% tariffs during President Trump's first term.

Macquarie points to an increase in North American inventory, a rise of 16.8% to $443m, ahead of the China tariff implementation on March 7, which should alleviate pressure on 2H25 margins and cost of goods sold.

While manufacturing partners are moving 120V capacity to Southeast Asia and Mexico, the company is targeting a shift of around 90% of production out of China in relation to US sales by January 2026.

Acknowledging the strength of Breville's earnings report, analysts were most upbeat on the targeted growth strategies for the company. If the humble toasted sandwich maker, which sold 400,000 units in the first year, was a mark of Breville's success, then the broad-reaching "coffee" offering is the growth lever of the late 2020s.

Unanimously, analysts were upbeat on management's announcement to expand directly into China and Middle East markets.

Citi explained Breville's experience in South Korea offered an insightful backdrop to the Chinese market. Both economies are highly digitalised, with over 98% of Breville products in China sold online. The South Korea experience went from entering the market in June 2022 to exceeding NZ's gross profit dollars in 2H24. Citi believes Breville has established a method that is successful for online transactions primarily.

Goldman Sachs estimates the China espresso coffee machine market at around US$322m, above the UK at US$237m and broadly in line with the US at US$317m. The analyst highlights the China market embraced the espresso coffee machine during covid and views Breville's growth potential as exceeding Euromonitor's estimated compound average growth rate of 5% over the next five years.

Macquarie explains expansion into new geographies post covid has advanced 36% for the company, suggesting, at least, management has a strong track record.

The Chinese market offers considerable revenue growth potential, with direct entry into the market in 2H25, though building a brand takes time. The direct launch into the Middle East took place on January 1. Breville estimates entry into these markets will increase direct market disposable income by 35%.

Competitive Positioning and New Growth Drivers

Addressing the issue of rising competition in the coffee segment, Breville management believes it has been able to capitalise on higher awareness of espresso machines from increased marketing spend by competitors. Although new entrants have gained market share, so has Breville.

Thinking laterally, it is not a leap of faith to suggest market share should be coming from alternative espresso coffee suppliers like coffee shops and chains such as Starbucks, with consumers becoming more cost-conscious in the face of elevated cost-of-living pressures.