READING THE ROOIBOS LEAVES
Red Espresso’s founders recognised the potential of the health and wellness market before it became a worldwide phenomenon. Today, the family-owned business is considered a global pioneer in healthy café culture. And more good things seem to be brewing
n 2005 Pete and Monique Ethelston were on honeymoon in Nepal when they received the e-mail that would change their lives. Long-time friend and business partner Carl Pretorius wrote how jittery after his sixth cuppa joe but still keen for something more he’d torn apart a rooibos tea bag and put the leaves through his home espresso machine. The results weren’t half bad.
Over the next few months, using high-quality rooibos and tinkering with the exact grind, Pretorius was able to produce something that mimicked a real espresso right down to the frothy “crema” on top but without the caffeine.
“Let’s take this to market,” he wrote to the Ethelstons.
Pretorius started out as a partner in the business (he’s since exited), but he knew that Pete, who’d had a successful career as an SAP consultant for major fast-moving consumer goods (FMCG) brands, and Monique, with all her experience in beverage marketing, were the people to take it forward.
Monique’s brother Nic Reid has also been involved from the start, and to this day Red Espresso remains a privately owned family business.
“We have had a lot of interest from potential buyers,” says Pete, who admits that the family members “always sit down and chat ... Mainly just to reassure ourselves that we’re doing the
Iright thing for the whole business by keeping it private.” He adds: “We’re lucky that the next generation is also involved now, so we have a built-in succession plan.” It was these values that struck Vida e Caffè CEO Darren Levy in his first dealings with Red Espresso in 2018.
“We started selling rooibos cappuccinos before we had a relationship with Red Espresso, and they contacted us to say that there were potential trademark issues,” says Levy. “From that moment on we’ve worked closely together.”
Today, Red Espresso supplies all 280 Vida branches with the ingredients for their trademarked Red Cappuccinos and it has teamed up with the café brand to create custom health drinks such as rooibos lemonade and vanilla oat milk red cappuccinos. It also produces instant cappuccino and instant chai powder for Vida’s “at home” retail range.
“We are delighted to support a local brand that shares our values,” says Levy. “We work great together and we’re always looking for ways to grow each other’s businesses.”
But back to 2005. In the early days, the Ethelstons’ biggest challenge was getting people to actually try their product. At the time, health and wellness was still very much a fringe market and rooibos was the furthest thing from cool. They couldn’t even dream of approaching major retailers with their left-field product.
The only way to convince people that they needed Red Cappuccinos in their lives was to get them to try them. So they started knocking on café and restaurant doors with some success. The marketing strategy “has always been about putting taste first”, says Monique. “We’ve now managed to break into the mass retail market ... But every product still starts with quality ingredients and superior taste.”
The Ethelstons realised early on that high-altitude, hand-harvested rooibos just tasted better, and they were willing to pay a premium for it.
Once they’d settled on their preferred suppliers they sat down with the farmers and agreed on a pricing structure based on fair-trade principles. They also spent more than R1m on intellectual property rights, taking out worldwide trademarks on names including Red Espresso and Red Cappuccino, and global patents on their grind. Even once they had made it onto the menu of a few independent cafés and restaurants, they still had to convince people to order their products. But Pete knew they were onto something big: “Coffee doesn’t agree with me, so for years I didn’t go to cafés,” he says. “Now I could drink a cappuccino that tasted really great and was actually good for me.” In addition to being naturally caffeine-free,
Red Espresso contains aspalathin, a powerful antioxidant (found only in rooibos) that fights free radicals caused by the sun, pollution and stress, and helps to prevent premature ageing, heart disease and cancer. And because it’s naturally sugar- and caffeine-free it’s suitable for the whole family.
Carolina Tristao, the Brazilian coffee guru who now markets Red Espresso in the US, says: “It’s a superfood that’s indulgent ... I’m still waiting for the downside.”
Red Espresso’s big break came in November 2005, when Woolworths added Red Cappuccinos to its café menu. It was the beginning of a “special relationship”, says Monique one that increased Red Espresso’s brand recognition and helped it segue into retail.
By 2008, Red Espresso had been voted best new product by the Speciality Coffee Association of America. As a result of this, it received offers from retailers, including US behemoth
Whole Foods.
The Ethelstons, however, remained firm in their conviction to build the brand “one drink at a time”. Back then, they sold only ground espresso powder. And they felt that, without consumer education, it would have been lost in the Sargasso Sea of retail.
The global shift towards health and wellness expected to be a $7-trillion industry by 2025 made things a lot easier. “We used to have a hard time convincing people to try our product,” says Monique. “But we now find consumers and cafés very open to the idea of a naturally caffeine-free coffee alternative.”
This isn’t the only area in which the Ethelstons have been proved right. Their decision to build a green factory in 2014 has reaped rewards too. The impact of the 2015-2017 Western Cape drought was mitigated by the rainwater system they’d installed. And now, as load-shedding bites, they’re (relatively) comfortable, with 75% of their electricity needs supplied by rooftop solar.
They’ve also shown a commitment to uplifting communities in the high Cederberg. Since 2015, Red Espresso and its chief supplier have helped the subsistence farmers of Heuningvlei with seedlings, ploughs and farming knowledge.
More farmers have come on board every year, and Red Espresso now pays premium prices for about 40t of topnotch rooibos from 20 different subsistence farmers.
One of the first to join the Seeds of Hope project was Barend “Ghal” Ockhuis, who has used his newfound earnings to replace his rickety horse-drawn cart with a second-hand Toyota Hilux.
“I am a businessman,” says Ockhuis. “I can look after a family.”
And Ockhuis is by no means alone. For the first time in decades the youngsters of Heuningvlei have a reason to stay in the Cederberg.
Red Espresso has come a long way. The company recently achieved gold status on global supply chain assessment platform Sedex a big deal in international FMCG. It has also taken the bold step of making its entire supply chain carbon neutral. Partly due to these developments, exports now make up 20%-25% of the business. That’s quite something when you consider that most foreigners have never even heard of rooibos.
Red Espresso has also branched out into products such as superfood lattes (the company is South Africa’s biggest importer of Japanese matcha), vegan chais and gourmet hot chocolates. Providing private-label products for a major retailer has also helped it diversify, to the point where rooibos now makes up about half of sales.
Red Espresso has spent the past decade or so trying to make inroads into the retail market, investing heavily in product development, manufacturing and distribution. The pivot paid off when Covid hit and people were forced to make their
Red Cappuccinos at home.
Over the course of the pandemic the company’s retail division grew 33% and exports jumped 30%. During the first lockdown, when few others were building, Red Espresso went ahead with a R10m upgrade to its eco-friendly factory in Paarl.
Of course, Covid dealt a devastating blow to the food services industry. As he watched long-time customers suffer,
Pete decided to carry the book for his smaller clients. He notes, with a smile, that he ended Covid with almost zero bad debt from this customer base.
Now that the dust has settled, retail makes up almost 50% of Red Espresso’s business.
Of course, getting bigger comes with its challenges especially in the current economic climate. Covid, the war in Ukraine and load-shedding have all wreaked havoc.
“We’ve invested heavily in solar, but we’re still spending a lot more than we’d like on diesel,” says Pete. “And then you’ve got to factor in waiting months for imported ingredients ... Every delay costs us money.”
The other dark cloud on the horizon is rising food inflation, now at 13%. It’ sa number that is “not an option” for Pete. “So far, we’ve been able to keep our increases at about 6% ... But it’s got to come from somewhere.”
Against this backdrop, the Ethelstons are hoping to maintain the double-digit growth trend they’ve enjoyed since 2018. While they’re the first to admit “this will be a challenge”, the company’s track record suggests it’s one they’ll be able to surmount.