As Coffee#1 reaches the milestone of its 50th store, SA Brain chief executive Scott Waddington talks about what pubs can learn from coffee shops but why the company is certainly not seeking to emulate Whitbread.
The venerable family brewer is undergoing an image change – from attempts to muscle in on the craft beer scene, to forays into managed houses and hotels – but few have seen such a rapid change of direction in recent years as SA Brain.
Its Coffee#1 brand achieved a milestone last month with the opening of its 50th store – in Fareham, Hampshire – with plans to double that number by 2020 at the latest.
As it approaches critical mass, the company is now in an ideal position to enter the fledgling evening coffee shop market.
Scott Waddington tells M&C Report that the company is “watching with interest” to see how Pret A Manger and Starbucks fare with their trials in this area.
The chief executive of the Welsh brewer admits that Coffee#1 is offering far more opportunity for expansion than the pubs side, but he is very clear about where this is taking the company.
“When we bought Coffee#1 back in 2011, some people did say to me ‘So, you’re doing a Whitbread’. I can understand the assumption but let me be very clear, we are still a brewery, and beer and pubs are absolutely at the heart of what we do.”
Waddington insists Brains’ move into coffee has brought with it an education that has been ploughed back into the pub business. He says other pub operators would do well to pay attention to the seemingly unstoppable rise of the coffee shop.
He said: “There is a lot pubs can take from the sort of dedication and focus on serve that is commonplace in coffee. A pint and a cup of coffee are not a dissimilar price and both are readily available for people to drink at home. But with coffee shops, there is a real focus on the artistry of the serve and customers are willing to pay extra for that. Pubs and cask ale in general should be doing the same — focusing on how we serve it, how we present and what differentiates it from opening a bottle at home.”
He said the twin trading models gave Brains a “balanced business” because they flourished in opposing day parts and weather conditions.
Rapid expansion
But he said that while the focus for pubs is investment in the existing estate, Coffee#1 is set for rapid expansion.
He said: “We were attracted to the business because it appeared very scaleable and that is how it has worked out. When we bought Coffee#1 in 2011, there were 15 stores and we are now at 50.
“As you add 10 stores to an ever enlarging chain, it becomes slightly easier, so I would like to think we could accelerate our growth slightly but, in broad terms, 2020 seems a sensible target to reach 100.”
Waddington said he believed that milestone could be met within the company’s core geography – which takes in Wales and the south-west – as far south as Torquay and north to Pershore.
He added: “We have already learnt that the concept works pretty much anywhere we put it, so there’s absolutely no reason to think it couldn’t then expand beyond that heartland.
“We have very clear demographic models so that could be extrapolated across the country. It’s got huge potential.”
Asked if he would consider a franchising deal, Waddington said: “In order to franchise, you need to first have critical mass, and I don’t think we are at that level yet. I certainly wouldn’t rule it out and when looking at pushing into new areas that could be an option but it’s not one that’s right for us at the moment.”
On the decision by Starbucks and Pret to offer a separate evening menu, complete with alcohol, Waddington said: “It is a natural extension of what they do from a strategic point of view. They have got the premises. I think it would only work in certain locations but if you have got a site where you can stretch the day part then I can understand why you would do it. But I think you have to be careful.
“When we bought Coffee#1 we were asked the question and it wasn’t something we were planning but we said that we would watch the market. There is a logic to extending the day part, so our position remains that we will watch with interest what happens. If it’s appropriate we may well consider it. We would only do a trial in certain locations and there’s no way we would do it if we thought it would compromise the core coffee offer.”
He said while he has a lot of respect for his larger rivals on the high street, he does not worry about competition from stores such as Starbucks or Costa.
He said: “The coffee market is buoyant and there’s a lot of demand. We have had situations where we were alone in an area and then a Costa popped up near us and, by and large, it doesn’t have that much impact on us. It has some initially, but it all recalibrates. We are very clearly different from them.”
Focus on investing
Waddington said there were still “infill opportunities” for the pubs business in south Wales but that soaring property prices in the rest of the UK made expansion difficult.
He said: “We have done a lot of work on the key templates and how we evolve those and we have a new operations team in place.
“We are very much focused on investing in the estate and doing what we do better. We have acquired the odd site, but our acquisitions in pubs have slowed down a bit. We haven’t seen as many good opportunities on the pub side.”
With c250 pubs in its estate, Brains is very far from being primarily known as a coffee chain, but with its ambitious roll-out plans and the blurring of the lines between a pub and a café, it will be interesting to see how it is perceived in 2025. Maybe by then people will be asking Whitbread if it plans to ‘do a Brains’.
