This time last year, Coffee#1 had 15 shops. Today it has 24 spread across Wales and the South West and by Christmas it will have two more. In the next year it plans to do the same again. It’s as if Coffee#1 has had one too many of its own espressos.
The man driving this phenomenal growth is Gareth Johns, head of estates and acquisitions at SA Brains, the Cardiff-based drinks company that bought Coffee#1 last year.
When Johns took over, it was a £5m business, an independent that had grown from an idea by founder James Shapland, to an award-winning business big and interesting enough to catch the eye of Wales’ biggest brewer. Now he has plans to super-charge it even further.
Brewers becoming baristas isn’t all that new. Whitbread bought out Costa back in 1995, and then Coffee Nation in 2011. For Brains, the business case was easy. More coffee was being sold through its pubs and, checking the social pulse, it decided to move some of its business to the softer side of the drinks industry. “The coffee market is showing significant growth and we’re managing to capitalise on that by acquiring [the business],” says Johns.
You can hardly walk two steps down any high street without stumbling upon a coffee shop. According the Food and Drinks Innovation Network, the UK branded coffee chain market, including the likes of Costa Coffee, Starbucks Coffee Company, Caffè Nero, Pret A Manger and EAT, has shown incredible resilience. Increasing sales by 10% to achieve an estimated turnover of £2.1bn, the market has doubled since 2005.
Because of its independent roots, Coffee#1 claims to be slightly different from the ubiquitous chains. Johns says it offers a more relaxed approach to coffee, encouraging people to stay in the shop. “You only need to look the stacks of takeout trays in Costa and Starbucks to see they are not looking for dwell times.”
One of its more radical decisions was not to offer Wi-Fi, allowing customers to drop out of the constant information barrage – perhaps a little ironic for a brand with a hashtag in its name. Johns is unapologetic. “It means taking yourself out of the speed of all the stuff going on around you and relaxing – what our marketing people like to call a third space,” he says.
Finding room for that third space will be the next challenge. The business is very much focused on high streets and town centres, shying away from out of town and retail parks, looking at 1,500-2,500 sq ft. It is happy to trade on first floors, but likes “nice clean boxes”, says Johns. “The programme is moving at such a speed that we are looking at turning around and fitting out a unit in three to four weeks.”
With vacant units littering the high street, you might think finding premises is like shooting fish in a barrel. But Johns says: “I’d say the market is saturated with available retail space, but finding that sweet spot is where the skill lies.
“Look around the high street, and with the demise of even the big names, we are having to be discerning about where we go, but the coffee market is showing significant growth and we are managing to capitalise on it.”
Brains is drawing heavily on its pubs experience. Having a portfolio of 252 pubs and bars means Johns and his team know the geography inside out. The proposition is slightly different for the coffee business, but not much. “We’ll literally stand outside a site and count the number of people coming past, check the types of people and check the neighbours, the things going on around you – bearing in mind that we want a relaxed coffee shop,” he says.
“Also, if a particular area is awash with coffee, we might think twice, but we’re not that concerned. We have opened one store directly across from a Costa, and we would set up store next to a Costa, Nero or Starbucks.”
Of course, the Brains covenant is going a long way towards securing deals. “We’ve got a good record and that is opening ears and eyes and landlords are prepared to do deals,” says Johns.
“You don’t get any baulks at the breaks and the concessions are forthcoming. Some towns seem to be recession-proof – Cirencester, Cheltenham, Bath – and in those, you’re only getting reduced rent in year one.”
For the moment, growth will centre on Wales and the South West, with Johns keen to keep a tight hold on managing the business from Cardiff. Taking a point at the end of the Severn Bridge, the business has thrown a line out in a 50-mile radius, he says. That is likely to extend very quickly to 65 miles for the right demographics or, if there is a motorway that allows quick access, he will consider that.
It can only be a matter of time though before Coffee#1’s caffeinated expansion spreads its wings a latte further
