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Breville Group Ltd: 4 reasons to cook up profits

I like cooking at home and have the same amount of appliances as an average kitchen would have. They’re the kind of products you casually buy as you need extra cooking work, like a food processor versus a chopping knife. There is one company that has been making these electric wonders for decades, and still keeps wowing us with new innovations and growing earnings.

Breville Group Ltd (ASX: BRG) is a developer, marketer and worldwide distributor of kitchen appliances and operates under several brand names. It has licensing agreements for distribution of Philips products and started a new brand of premium products in the UK called Sage.

Market presence in stores

It’s pervasiveness in the appliance business intrigues me because kitchen goods are not big ticket items like larger electronics goods such as TVs, but they seem to be in many stores and in many kitchens, and as an investor that always attracts me.

Growing revenue and profits

Looking at its financials, the attraction is not only on my part. Revenue in 2013 rose 13.7 % to $486.5 million, and NPAT of $50.5 million was up from $45.8 million, for a compound annual growth rate of 21.1%. It has very low debt and negative net gearing, meaning its cash position is more than its total debt, so no shaky finances there.

Product innovator

People may think electrical appliances are not hot, but for an innovator, they can drive sales as people become “foodies” and whip up delicious foods at home. The company’s Sage product line was developed with the function and utility input of UK chef Heston Blumenthal, who endorses them in ads and videos as well. Also, to keep up with coffee machine development, it entered into an agreement with Nestlé to distribute a co-branded Nespresso machine in Australia and New Zealand.

As you can see, staying in front of the consumers’ eyes and creating new products are the reasons for growing sales.

Driving brand names

The company markets its brands using food “ambassadors” like Blumenthal, and collaborates with other company brands like Nestlé to establish alliances for further international growth and name recognition.

Foolish takeaway

When a company can take simple things like toasters, which have been in kitchens for decades already, and turn them into something fun to use, buyers get excited and look forward to the next innovation. That’s a recipe for success in cooking, business and investing.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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