The rise and fall of Coffeesmiths Collective

One of the more intriguing growth stories of the past ten years, Coffeesmiths Collective is the latest insolvency casualty of coronavirus, as parts of the business enter liquidation. 

Carl Jackson and Paul Zalkin of Quantuma were appointed liquidators at CCL 002 yesterday, the company previously known as Coffeesmiths Collective and the Department of Coffee and Social Affairs.

The development brings an abrupt end to an aggressive expansion streak which saw the coffee shop group acquire scores of rivals across the UK in group deals and pre-pack administrations.

The liquidation affects around 20 units operating under the flagship Department of Coffee and Social Affairs brand, including internal sites with JLL and Facebook, as well as Daily Goods Coffee in Camberwell and TimberYard in Seven Dials.

It also includes Filmore & Union, the North East-based healthy eating café group that Coffeesmiths acquired in a pre-pack.

Other parts of the business, including the Brighton-based Small Batch Coffee, are understood to be safe, with Coffeesmiths reported as no longer having significant control.

The proceedings bring an end to an exhilarating and sometimes head scratching run of acquisitions, which saw the group snap up scores of far-flung businesses, both individually and in group deals, under the ownership of enigmatic entrepreneur, philanthropist, City financier and royal trustee Stefan Allesch-Taylor CBE.

Chairman Allesch-Taylor founded the business in the early 2010s with New Zealanders Chris McKie and Tim Ridley, at the time one of several Antipodean-inspired third wave coffee shop operators in London.

While rarely if ever speaking about his coffee shop business, Allesch-Taylor is high-profile for his charity work, founding Afri-CAN children’s charity and chairing water charity Pump Aid, while as recently as last month the he was giving interviews about how to survive coronavirus. 

Speaking to City A.M. he told businesses to be “completely candid about their position to their creditors and stakeholders” and have a “reality check on their expectations regarding income recovery and growth”. He warned creditors to “avoid threatening approaches”.

The absence of interviews about the coffee business created an air of mystery around the ambitions for the group, but its intentions became clear in the latter part of 2018, as it embarked on a spending spree.

Acquisitions included Tap Coffee, Bea’s of London, Cafe2U mobile coffee business, Small Batch, Filmore & Union, Taylor St Baristas, Baker & Spice, Nordic Bakery and Urban Tea Rooms, as well a string of single site independents.

As the market was wowed by the rapid expansion, the strategy to roll out and acquire speciality coffee shops was spelled out on the Coffeesmiths website.

It would seek to preserve the “strong individual identities” of sites regarded as “local institutions”, while bringing “light touch economies of scale enhancing the customer experience and increasing shareholder value without altering the fabric of the uniqueness of many of its established assets”.

To manage this strategy industry heavyweights were brought in, with former Novus Leisure CEO Toby Smith coming in to lead the UK business, and former Draft House and Jamie Oliver finance guru Bharti Radix supporting him as CFO.

Meanwhile, Ashley Lopez continued to lead the global business as it deployed a similar strategy in her native US where the group was listed, and operated Dollop, Halfwit, Wicker Park, The Wormhole and Chicago Grind, as well as Department of Coffee.

If the industry was awestruck by the venture, it had good reason to be. Premium speciality coffee was still often considered the preserve of urban hipsters and not yet a mass market concern.

Few had found a way to make the economics work, with the low-ticket price and expensive product yielding low margins without an added food element.

Specialty peers likes of Grind and Caravan diversified into restaurants and bars, while the JV between Taylor St Baristas and Tesco, Harris + Hoole, failed to win over shoppers in sufficient numbers, before it was offloaded to Caffe Nero.

The Coffeesmiths estate had quickly become large and unwieldly, a spread of unnconnected shops dotted around the country, picked seemingly out of opportunism rather than consistent strategy, and difficult to integrate. 

The cracks began to show less than a year into Smith and Radix’s tenure, with both resigning unexpectedly in March 2020.

At the time, the group said that following a period of rapid expansion and growth the board had entered a “period of consolidation and [would] complete a review of its portfolio.”

Despite promising further details of this consolidation, none were forthcoming from company representatives.

There was speculation that having led the business from its early days, Allesch-Taylor protégé Ashley Lopez, a coffee expert but with little senior board level experience, was reluctant to relinquish management of the company she had helped establish to the experienced multi-site management team in the UK.

Smith and Radix worked well as a duo, and with Smith finding it difficult to execute his own strategy, Radix had little compulsion to go it alone.

Sources have suggested the company was struggling and was already on the verge of administration before the coronavirus struck, and this would appear credible given the news that large parts of the business have now entered liquidation.

Having dabbled in a segment of hospitality known more for its passionate advocates and independents, rather than gross profit margin and chains, Allesch-Taylor may understandably be keen to return to familiar ground in the charity sector.

Yet even this space might not be so cosy. A trustee of Harry and Megan’s trust Sussex Royal, the issues at Coffeesmiths may seem a peripheral, albeit costly concern, compared to the fervent attention garnered by the former royals.

Anti-royal campaign group Republic recently reported both Sussex Royal and The Royal Foundation - the Duke and Duchess of Cambridge’s organisation - to watchdog the Charity Commission.

It was in connection with alleged inappropriate use of funds, after money was transferred from the Royal Foundation to Sussex Royal.

Dimissing the claims as false, a spokesman for the Duke of Sussex described the allegations as “deeply offensive” and “defamatory and insulting to all the outstanding organisations and people he has partnered with”.