Fresh grounds for growth

14 November, 2008
Page 14 
At the European Coffee Symposium held in London recently, Paul Ettinger, head of international food and beverages at Caffè Nero, said Britain's coffee shop sector needs to look at new ways of minimising the impact of the recession, including attracting more evening trade, selling more iced drinks and, possibly, selling alcohol.
Ettinger said it had taken time to become comfortable and get the premium Italian-style brand right. "What works in London does not necessarily work elsewhere," he said.Ettinger also said the reasons for Caffè Nero's success were that they stuck to their business model 100%, including creating partnerships with suppliers as opposed to adversarial relationships, having an open-door policy, so any staff can talk to top management, creating an entrepreneurial spirit, but also making work fun. "People don't just come to work to make money, but to have fun."He added that no-one in the company had big offices, boardrooms or company cars. And where else should meetings take place than in a coffee bar?The food offering is a key element of the company's success. Ettinger added: "I present baked food to the rest of the board each week. It's at the heart of Caffè Nero."Chairman and founder Gerry Ford told delegates that a major part of the coffee retailer's success was also due to the fact that it had never got into high rents, despite what its competitors were doing. "That means we have to be disciplined and sometimes have to opt for secondary sites with a smaller footprint," he said."High rents will become even more important in the current climate. If margins go down, due to decreasing sales, and your rent is not too high, you can still do OK."Ford added: "We have never closed any stores, so I believe it is all about getting the property choice right from the very beginning." And he spelt out five key success factors for coffee shops in order: coffee, food, business model, people and culture.== Internationally local ==In Dubai, where Caffè Nero is opening its first shop, largely with expats in mind, it is sour-cing local ingredients and local bakers to make its paninis, Viennoiserie and grab-and-go offering. The company's coffee will still come from the UK via its supplier, Coburgs.Turkey, with 11 shops, is another country where the company is expanding. Caffè Nero Group, founded in 1997, is currently the largest independent coffee retailer in the UK, with over 360 stores from Brighton to Glasgow.In addressing the symposium, organised by Allegra Strategies, Vicki Fuller, head of McDonald's' McCafé's format, prolific in Germany, said the company had over 800 cafés in Europe and was aiming for 1,000 in total, but stated that there are no current plans to establish the McCafé chain in the UK.== Freshness and purity ==Other speakers at the symposium included Paul Passmore, strategy director of SSP in the food travel sector, who said that the company had outlets in 130 international airports and 270 UK stations. Best-known names include Caffè Ritazza, Upper Crust, Burger King and Millies Cookies. He told delegates that while health, well-being and convenience still topped consumer trends in research, health actually dropped down in reality compared with flavour, purity of ingredients and freshness as being the real drivers.Recession-wise, Passmore said: "We are in uncharted territories. China has 97 airports in the pipeline, but some airlines will not make a profit this year and we have seen others go under. Also, it is more important these days to think about mindset rather than nationality. That is what helps you target your audience."Philippe Sanchez, MD of Starbucks in France - the land of 47,000 cafés - said: "When we set up in France, we set out not to compete 'with coffee' but 'for people' and to create an environment where they feel safe and welcome. Most of our customers are women and we aim to give everyone 'a daily inspiration' - in other words, an armchair if they wish, a brand and a welcome."Sanchez said: "It was this aspect of 'service' that we had to get across to our French staff."He told British Baker that the French loved cheesecake, because it is not normally served in France, where cheese itself is revered. However French customers discovered they really liked it.Murray Leslie, of Gala Coffee, said the company is the fourth-largest roaster in Britain with companies such as Greggs and First Choice Coffee on its client list. He said the company had built a strong relationship with clients, helped by its ethical approach of working with Fairtrade and Rainforest Alliance coffee suppliers.Nestlé Professional MD David Field put the case for soluble coffee, which can still deliver great taste in a very short time without a barista. Customers, he believes, should be offered a choice because soluble coffee is still very popular with many customers in a number of environments.== Smaller footprint ==Elaine Higginson, of First Choice coffee equipment, works with leading food retailers and providers where coffee is a major choice. Supplying 24 outlets in a half-mile area of London the company offers bean-to-cup equipment ranging from grinders to brewing machines. The latest trend, she said, was for smaller footprints and reduced cleaning.Jeffrey Young, of Allegra Strategies, said the main concerns of retailers were high rents and rising food costs. Asked what makes a successful shop, he answered that consumers had cited location 51%, coffee quality 50%, service 27% and atmosphere 27%, while 13% (ninth out of 10 on the list) said an exciting and innovative food menu.Tony Waters, of Solo Cup Europe, said a cup is an advertisement for anyone's business. But as well as carrying the name, his company had come up with the unspillable lid, compostable coatings and cups plus a smoothie blender, which enable users only to rinse the blades, not clean the whole machine between servings.During symposium breaks Dawn Foods provided muffins and cupola cakes, which it also supplies to customers including SSP, McDonald's and Delice de France. Dave Roberts, Dawn's national accounts controller, said: "We are an own-label manufacturer and focus on added-value and good ingredients." He said customers could choose between reduced-fat blueberry muffins or the low-fat version with less than 3% fat. A popular flavour at the moment was apricot and raspberry, he added. ----=== Branded coffee chains, UK ===Number of outlets April 2007 to October 2008Brand April October Units added Annualised 2007 2008 Apr 2007 growth to Oct 2008 Apr 2007 Coffee-focused café retailers to Oct 2008Costa Coffee 555 800 245 29.4%Starbucks 540 700 160 19.8%Caffè Nero 305 388 83 18.1%Caffè Ritazza 170 170 0 0.0%BB's Coffee & Muffins 140 168 28 13.3%Other players 528 578 50 6.3%Total coffee-focused segment 2,238 2,804 566 16.9%Bakery café retailersPret A Manger 158 193 35 14.8%O'Briens 133 126 -7 -3.5%Bakers Oven 95 105 10 7.0%EAT 65 92 27 27.7%Druckers 42 40 -2 -3.2%Other players 189 216 27 9.5%Total food-focused segment 682 773 90 8.9%Total branded chain market 2,920 3,577 657 15.0%Source: Allegra Strategies - UK Coffee Shop Market, October 2008 ©



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