Australia’s long-hailed "king of coffee", Phillip Di Bella, is back in the big time.
The colourful businessman has been appointed by troubled franchisor Retail Food Group to run its coffee roasting operations, supplying beans to its well-known chains Gloria Jeans, Michel's Patisserie and Donut King.
Philip Di Bella runs Australia's second largest coffee roasterCredit: Glenn Hunt
But the appointment just before Christmas has invited controversy as insiders point to his ownership of a company that RFG pays about $1 million a year for raw coffee beans, and allegations of aggressive behaviour.
Mr Di Bella is accused of warning RFG staff they would be thrown "out of a window" if complaints about the quality of the beans he sells to the group did not stop.
He allegedly made the threat last year when still a consultant to RFG, but it was Mr Di Bella’s appointment as "executive chairman" of Di Bella Coffee that has heightened concerns from company insiders about perceived conflicts of interest.
Mr Di Bella started the Di Bella Coffee business in Brisbane in 2002, and it grew rapidly supplying cafes and restaurants across Australia, before he sold it to ASX-listed RFG for $47 million in 2014.
My concerns are that an individual in a position of influence is benefiting personally from supplying products to people who are already doing it really, really tough.
Company source
By supplying RFG's large cafe network, Di Bella Coffee has become the country's second largest coffee roasting company.
Documents obtained by The Age and The Sydney Morning Herald show Di Bella Coffee buys about $90,000 of raw coffee beans a month on average - or about $1 million a year - from International Coffee Traders (ICT).
Corporate documents show that ICT has two co-owners and co-directors: Mr Di Bella and his wife Gianna.
ICT's sales are destined for RFG's roastery in Brisbane, which makes beans sold to independent cafes, and for RFG's cafe brands.
“If he is making the purchasing decision at Di Bella, what kind of commercial terms is he getting for ICT?” said one company source, pointing out the RFG's franchisees are contractually bound to buy the product.
“My concerns are that an individual in a position of influence is benefiting personally from supplying products to people who are already doing it really, really tough.”
It is claimed Mr Di Bella reacted explosively when issues around the quality of ICT beans emerged in middle of 2018.
Several people have told The Age and SMH they witnessed Mr Di Bella yell at staff at RFG's Brisbane roasting plant, and warn them that “someone is going to get thrown out of a window” if ICT's beans continued to fail quality assurance tests.
RFG owns Gloria Jean's, Michel's and other well known brands. Credit: Jessica Shapiro
Several staff formally complained about Mr Di Bella’s behaviour. He was subsequently put in charge of RFG's entire coffee bean business.
Asked about the alleged incident, Mr Di Bella said: "That's not true." RFG declined to comment on the issue.
With aspirations of overseas growth, RFG's coffee bean business is one of the company's most important divisions as it fights for survival.
The company, which also owns the Crust Pizza and Brumby's Bakery chains, has been in crisis since late 2017 when The Age and SMH revealed that many of its franchisees were struggling to survive and raised questions about the sustainability of its business model. That has seen RFG’s share price crash from $4.40 to 20¢ today, slicing its market value from $800 million to $37 million.
RFG says that its combined Di Bella Coffee operation is Australia's second largest coffee roaster, supplying 3000 cafes and recording total sales of $53.7 million last financial year, when RFG posted a $306 million loss.
Insiders questioned why Mr Di Bella was leading Di Bella Coffee’s push into the United States while also being involved in his own American roasting business, Abbotsford Road, based in New York.
Mr Di Bella has been consulting to RFG on coffee matters since it bought his business and said on Thursday the RFG board told him that in the new job he would be "empowered and in a position to run the business".
He said there was no conflict of interest between his positions at RFG and ICT, and was not involved in the latter's day-to-day operations.
ICT has had to compete with other bean suppliers for RFG contracts since July 2017, Mr Di Bella said, with RFG given transparency around ICT's pricing because of his position consulting to the company.
There is no conflict as long as everything’s transparent. It doesn’t matter who owns the business, you follow procedures and systems.
Phillip Di Bella
"Everything is transparent, which means they get to see the buy price, the cost price and the margins," he said.
“There is no conflict as long as everything’s transparent. It doesn’t matter who owns the business, you follow procedures and systems.”
RFG said it had policies in place to ensure conflicts of interest were managed appropriately including competitive tendering with multiple suppliers evaluated for availability, pricing, security and quality.
"All transactions between International Coffee Traders and RFG are carried out on a transparent and commercial basis, at arm’s length," she said.
RFG said that ICT had supplied about 7 per cent of its green bean purchases this financial year.
Seven per cent of the 3.6 million kilograms of coffee beans RFG bought last year, sold at an estimated average price of around $5 a kilogram, would easily surpass a $1 million in sales for ICT.
Mr Di Bella said the total was much lower than that but declined to provide a number.
RFG said Mr Di Bella was leading the coffee bean business and was an "integral part of the leadership team", but had not been made a director of RFG or any of its subsidiaries.
RFG did not alert investors to the departure of Di Bella Coffee’s former chief executive Darren Dench, a member of its senior executive management.
The company said it was "not assessed as information warranting market disclosure".
Mr Di Bella started his coffee business in Brisbane in 2002 and by 2014 had amassed a $100 million personal fortune, according to the BRW Rich List.
The 44-year-old was presented with Telstra's Queensland Business of the Year Award that same year, however was stripped of the award over offensive social media posts made during a State of Origin rugby league match played the following day.