GLASGOW-based roaster Matthew Algie has highlighted fierce competition in the coffee shop market after recording a sharp fall in profits.
The company revealed that its gross profits fell by 14.6 per cent, to £12.9 million, in 2018 amid pressure on sales.
Total revenues fell by 8%, £3.3m, to £37.7m during the year. Matthew Algie said the reverse was “primarily due to reduced sales to a single customer” but declined to name the client concerned.
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The reverses were disclosed in a statement in which Matthew Algie noted it had faced headwinds during the latest year.
“Challenges to top-line performance, allied to a tough commercial environment with continued volatility on raw material prices, supplier pressure and uncertainty in respect of dollar and euro rates, led to a fall in Profit after tax,” said the firm.
Matthew Algie’s experience highlights the scale of the challenges faced by importers in Scotland following the fall in the pound since the Brexit vote in June 2016.
The exchange rate has fluctuated in response to developments in the tortuous negotiations regarding the UK’s planned exit from the European Union.
Matthew Algie was acquired by Tchibo of Germany in August 2016 in a deal thought to have been worth tens of millions of pounds.
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The company yesterday also drew attention to a complication caused by the boom in coffee-drinking in the UK in recent years.
It noted the number of coffee outlets was estimated to have increased by 5.8% in 2018.
While total revenues rose 7.9%, leaving the market worth £10.1 billion, coffee shop operators had to work increasingly hard to stand out from competitors.
Giants such as Costa and Starbucks have huge marketing clout and buying power to match.
“Our customers face continued pressure and competition in the market,” said Ewan Reid, managing director at Matthew Algie.
He added: “As consumer expectations rise, we have to help our customers improve quality and differentiate from everyone else on the high street.”
By way of example, Mr Reid noted that Matthew Algie recently launched Blak Nektar. It says this features delicious espresso alongside seasonal micro-lots from some of the coffee world’s most innovative farmers.
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The company sources coffee from farmers in African countries such as Ethiopia and Rwanda and South American states including Honduras and Peru.
Mr Reid noted customers also take a keen interest in questions of sustainability.
Matthew Algie launched an annual sustainability report in 2018, which includes details of the work it is doing with farmers.
It has supported the Glasgow Cup Movement, which aims to reduce the prevalence of single-use drinks cups.
The company made a gross profit of £15.1m on sales of £41m in 2017.
Greenock born Matthew Algie founded the business that bears his name in 1864. It began life by supplying tea brought to Glasgow on Clipper ships to retailers in the city.
The company started selling coffee after the Second World War.
Before Tchibo bought the firm Matthew Algie had been run by the family trust of David Williamson, the company’s former managing director, who died aged 42 in 2008 following a short illness.
Mr Williamson had been the sixth generation owner of the business.
The company says it works with cafés, bars, restaurants, hotels and businesses across the UK and Ireland.
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