London-based Caffè Nero Group Ltd, one of the UK’s largest coffee shop chains, has agreed to acquire the Harris + Hoole coffee shops with 43 outlets from Tesco PLC (LSE: TSCO), Britain’s biggest grocery retailer.
Caffè Nero is a privately-held European style coffee house brand founded in 1997 by American businessman Gerry Ford, its chairman and CEO. He earned a BA at Stanford, an MBA at INSEAD in France, and a PhD at Oxford. After starting out as a financial analyst at Hewlett Packard, he worked at private equity firm Apax Partners in the UK for three years. In 1991, he co-founded private equity firm Paladin Partners, which established Caffè Nero in 1997 in South Kensington, London, with five branches.
“The whole coffee house thing didn’t start in America,” Ford once told The Telegraph. “Starbucks started the more fast food element of it, but Europe has had quality coffee houses with quality coffee for a very long time.
Caffè Nero says it now “opens one new store a week” and runs more than 700 coffee houses globally with more than 5,000 skilled baristas and support team. In March 2001 Caffè Nero joined the London Stock Exchange under the symbol CFN. After a highly successful period on the London Stock Exchange, in early 2007, Caffè Nero was taken private in order to give it more flexibility to grow the business. From 2007 onward, the company has been expanding internationally: in Turkey in 2007, in the UAE in 2009, in Poland in 2012, in Cyprus in 2013, and in Ireland and the United States in 2014.
Caffè Nero has won many accolades for its high quality coffee. It was rated by Allegra Strategies as having the highest coffee quality among coffee brands in the UK for eight years consecutively. Recently, Caffè Nero’s coffee was rated best tasting among five major UK brands by experts at the independent consumer magazine Which?
In 2005 Caffè Nero was named the 20th fastest growing company in Europe by BusinessWeek. That same year, Caffè Nero retained the number one position in Allegra’s UK coffee rankings marking its fifth consecutive win (8 total), and Gerry Ford was named “UK Entrepreneur of the Year” by the Financial Times and London Stock Exchange. Caffè Nero continued to experience rapid growth and by January 2015 it had reportedly registered 69 consecutive quarters of positive sales and EBITDA growth. In 2013 and 2014, it was named in the Top Track 250 by The Sunday Times.
The company’s coffee beans are imported into the UK and then roasted at Caffè Nero’s dedicated plant in Battersea, South London. Much of the food sold at Caffè Nero has been developed in conjunction with Italian chef Ursula Ferrigno, who helps the company serve “high quality, interesting, artisan food” including “traditional soups, salads, fresh pastries and delicious cakes,” the company says. The company’s headquarters are in Covent Garden, London.
Tesco operates as a grocery retailer, and also provides retail banking, financial, and insurance services. The company operates in the United Kingdom, India, Malaysia, South Korea, Thailand, the Czech Republic, Hungary, Poland, the Republic of Ireland, Slovakia, and Turkey. It is the third largest retailer in the world measured by profits and second-largest retailer in the world measured by revenues. It has stores in 12 countries across Asia and Europe and is the grocery market leader in the UK (where it has a market share of around 28.4%). Tesco serves its customers through approximately 6,902 stores, as well as through the Internet. The company was founded in 1919 and is based in Welwyn Garden City, the United Kingdom.
Tesco invested in Harris + Hoole when it launched in 2012, taking a 49% stake with the rest owned by sibling founders Nick, Laura and Andrew Tolley. Tesco’s former chief executive Philip Clarke was continuing the company’s record of spreading its tentacles into apparent growth opportunities as consumer tastes moved upmarket and Britons started drinking more coffee.
Other analysts speculate that it was a desperate measure to lure shoppers to Tesco’s larger stores. Tesco’s investment in the company was controversial, as Harris + Hoole appeared to be an independent chain competing with major companies such as Starbucks and Costa Coffee.
Four months ago, under current chief executive Dave Lewis, Tesco bought out the Tolleys majority stake altogether. The Tolleys had already quit running the business in July 2015, in order to concentrate on their Taylor St Baristas chain. A few months earlier, Ethical Consumer had ranked Harris + Hoole the lowest in an assessment of the social and environmental impacts of coffee shops.
The sale of the artisan-style Harris + Hoole chain to Caffè Nero is Tesco’s latest disposal of one of several peripheral businesses that were bought in the past, often to the mystification of customers and analysts, as the company now seeks to focus on turning around its neglected UK grocery stores.
Earlier this month, Tesco sold the Giraffe restaurant chain to the owner of Harry Ramsden’s restaurants, Boparan, for an undisclosed sum. Last week Tesco sold Dobbies Garden Centers to a group of investors led by Midlothian Capital and Hattington Capital for £217 million.