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Back to the Future


Back to the Future

By Russell Muldoon and Roger Montgomery

Growing up in inner Melbourne in the 1970’s I cannot tell you how many post hockey-game lunches my mother trotted out on the ‘Breville’. The original scissor action Breville Sandwich Toaster was released in 1974. It sold 400,000 in its first year and reached 10% of Australian households. It was quickly improved in 1976 with the release of the Breville Snack’n’Sandwich Toaster (pictured) which was the first sandwich toaster to cut and seal sandwiches in half. It was a revelation and became an icon of the appliance world – we could eat a sandwich while riding our BMX’s without the contents of the sandwich spilling everywhere. And Mum was happy because a healthy and warm lunch was done in a few minutes and while it was being made, she could get the carpet sweeper out and do a quick run up and down the hallway or throw a slipper at any kid that was mucking up because they were hungry!

To celebrate my recent memory of these lunches, filled as they were with baked beans, cheese and ham, Breville is rolling out a retro model called “The Original ‘74”. I reckon it will be a cracker because it will appeal to all the 1970’s kids (now in their late thirties and early forties) who want to share the experience with their own kids (perhaps not the carpet sweeping or slipper throwing). I will be lining up to buy one when it is released later this month and I never queued for an iphone.

Its products like these that impress us about Breville, the company that is the subject of this post.

We recently had the pleasure of meeting with the CEO and CFO of Breville Group, a business we have held in both THE MONTGOMERY FUND and THE MONTGOMERY [PRIVATE] FUND. We think the business will continue to enjoy bright prospects with just 10% of their current Australian product range (about 300 SKU’s) being retailed in the United States (about 50 SKU’s). Management stated that along with product revamps, they aim to launch 5-10 new products over the next 3 years which will mean a 30% to 60% lift in products for sale at the premium end of the US market. And whilst Australian sales will plod along, we reckon its time to watch the growth in America in coming years. But don’t get too excited about a decline in the Aussie dollar. There are costs to consider for the company as well.

The core growth engine of the business which is driving margin expansion and ROE uplift is nevertheless the US. Its expansion that appears to have legs for at least the next 2-3 years and according to Skaffold.com, this will see the business’s valuation step-up meaningfully in coming years if they can pull it off.


Roger is the Founder and Chief Investment Officer of Montgomery Investment Management. Roger brings more than two decades of investment and financial market experience, knowledge and relationships to bear in his role as Chief Investment Officer. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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  1. Hi Roger, inherited breville (The shares not the appliance!!) from my father, they still produce sensible divs and are a well run company – so let’s keep them!
    Loved the market article too. Tony

  2. I have been following Breville on Skaffold for a few months now and finally had enough funds to purchase some shares this week @ $6, much more than when I first started my research, but I agree with Roger’s comments regarding the re-launch of the original ‘Breville’ Toasted Sandwich Maker, which we all loved as kids and I am sure my baked bean mad son will love very soon. I think Breville is a great Australian company and with their products’ very reasonable price point and high quality, will have some very exciting years ahead.

  3. Nice post Roger/Russ,
    Companies, which can turn their name into a verb and become synonymous within popular culture are ones to watch. Think Google, Hoover, and to a lesser extent Cochlear .

    In a relatively simple sense it shows a competitive moat.

    Breville, with their sandwich maker has achieved ‘verb status’.

    It is also interesting that they are re-releasing the retro classic and as you mentioned Roger I think it will sell for a number of reasons:

    nostalgic reasons
    People who are looking for that retro look. Think Kitchen aid mixers.
    Low price point for discretionary spend item.

    The timing of the re-launch just before xmas should also underpin sales for for the product here in AUS.

    Although Breville and its synonymous brand are well known here in Australian I wonder if the company will have the same impact in the States… not sure if the American’s like Bake Bean Brevilles!

    As you mentioned, the two funds have held the business in the past and the key growth engine is linked to the consumer dollar in the US (ie 70% of US GDP). Any meaningful and sustained uptick in US retail sales should impact the businesses bottom line, notwithstanding their FX exposure.

    With US retail sales showing signs of improvement (increasing over the last three months to Sept 2012) Breville will be one to watch, The Company that is and not the toasted sandwich!

  4. I thought you sold at about $4.20? – seems irrational to buy it a few months later for $6, though I think the irrational part was selling – it was not expensive at $4.20.

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