To paraphrase Rudyard Kipling, if you can keep your head when all about you are losing theirs, and throw in some investment and an experienced management team, then you can still produce growth out of two established Italian-led restaurant brands.
In a climate where its peers – Jamie’s Italian, Carluccio’s, TRG and Strada - are either retrenching or taking stock, the Bridgepoint-backed Azzurri Group is going against the tide and outperforming the majority of the market.
Yesterday, the company reported that its sales increased 12.5% to £262.8m for the year ended 2 July 2017m with adjusted EBITDA growing by 8.6% to £38m. The c280-strong group reported good like-for-like growth and the fifth consecutive year of like-for-like and EBITDA growth for its core brands Zizzi and ASK Italian. In short, and taking a note from Wagamama, the company has outperformed the Coffer Peach Tracker for 64 consecutive weeks.
The group doesn’t disclose like-for-like sales figures, but Holmes is happy to say that performance has been really strong, with all three of the company’s main brands (including Coco di Mama) in growth. Holmes says: “This is a combination of organic and non-organic growth, it is an all round group performance rather than being led by one of them.
“We have a philosophy that you must always have a proposition that is relevant to the customer and we haven’t changed that even in the good times. We always invest; we always try to challenge our design teams to come up with something new, we don’t want to take a cookie-cutter approach; we continually invest in our food and food innovation; we change our menus twice a year; we were the first to market with rustica pizzas in 2009, first to market with vegan cheese so we could serve all our vegetarian pizza as vegan 18 months ago. Consistency of product, A well invested estate, friendly teams, serves you well in the more challenging timeS when people are less likely to gamble on where they spend their money. It also highlights the good work we have put in across the business over the Past two to five years.”
A key issue for the company down the years was providing a clear gap between Zizzi and ASK in the mind of the sector and consumers. Holmes says: “We’ve worked really hard to make them complimentary but differentiated. Zizzi today is a modern, rustic, sub 35s, Friday-Saturday night, go out have a cocktail and rustica pizza concept, whereas ASK is still young, but it’s more authentic, more Italian, more family, it serves twice as many children as Zizzi does and Zizzi sells twice as much booze as ASK.
“Whereas ASK is much more about family-focused food, for Zizzi how the food looks is just as important as how it tastes. We have invested a lot in making the food look good and changed all our tables and plates, so the food can be presented well in this social media/Instagram age. Zizzi is about style, presentation and taste, while ASK is a little bit more authentic, more Mediterranean, more a sunny vibe and more for families.”
Importantly for the company’s continued expansion plans, this differentiation means they also work well near each other. “We have just opened a new ASK in Chelmsford near the existing Zizzi, and that is doing phenomenal money,” says Holmes. “We have also opened an ASK opposite a Zizzi in Worcester and both are trading well. We have doubled the revenue we could get from that location.”
Average spend per head for both brands is around £19. Holmes says: “How people use the brands and the occasion is different, but the price point and what they buy is very similar. So you have two brands where the foundations and the economics are very similar but the occasion is now nicely different, so having them both in the estate is an advantage.”
Holmes admits that some of the best property deals the company ever did were in 2009, during the last downturn, “so we would be foolish not to look at opportunities as and when they arise” he says. “We are not going to go silly, we have a measured expansion plan. We look to open eight Zizzi a year and that will probably be the same for the coming 12 months, we will also look to open three to five ASKs. What we might be is a little bit more opportunistic if good property deals present themselves to us.”
The company reported that its margins had fallen slightly from 15% to 14.5% as a result of higher food prices and the living wage. Holmes says that Azzurri had not raised menu prices but had tweaked ingredients to include more food supplied by British producers, which limited the impact of a weaker sterling.
The group currently operates 17 Coco di Mama sites in London, with two more to open before the year end. Average spend across the brand is currently less than £5. Holmes says: “We would like to try transport hubs and concessions before we push outside London. It is quite hard to do company-owned sites in transport hubs, which is challenging, but something we are looking at. There is still further opportunity for the brand to grow in the City and we would like to do a couple more in the West End. I think it could work very well outside London, but when the time is right. At the moment we are continuing to invest in the brand and in the infrastructure to make sure it is ready for that opportunity. I don’t think it will be long before we make that step. I can see the good people of Manchester, to give one example, enjoying what the brand has to offer.”
The company recently extended opening hours in seven of the group’s Coco di Mama sites, pushing the offer into the evening, and Holmes said that trading was going well in these units, especially through delivery. He was also happy that the brand was able to work in close proximity to existing sites. He says: “People tend not to walk more than three minutes for their lunch in the City, so we have looked to add sites in between existing locations where that is prevalent and not, as yet, seen any cannabilisation of trade.” At present, former Bill’s chief operating officer Roberto Moretti is overseeing the brand and Holmes said there was currently no movement on appointing a permanent managing director.
In terms of adding further concepts to the Azzurri stable, he says: “We are a platform and always intended to add further concepts. We are not looking at anything at the moment, but if good opportunities, whether that is acquisitions or start-ups, arise we will look at them, something where we could add value, not for the sake of it.”
The last addition to the group’s estate was pizza concept, Radio Alice, which has two sites in Clapham and Shoreditch. Holmes says: “We want to make sure, like with any new business, that the foundations are good and then look to grow it further. The first two have been well received.”
In the meantime, Holmes believes there is more to come from the delivery side of the business. He says: “From a business that didn’t existing two years ago it is now worth several million pounds to us. It sits at 5% of total sales compared to close to zero 18 months ago, a very similar mix to what we sell in the restaurants, pizzas, pastas, desserts and even bottles of wine. This is being driven by younger Millennials who want to replicate the restaurant experience at home.”
Holmes expects it to be a “tough year ahead for the sector” but with Azzurri better positioned than many to ride out the storm. It opened 17 new sites during the year and refurbished 31 restaurants, which he says meant that every restaurant in the estate had now been revamped in the past five years. The business is also set to benefit from an experienced and stable management team. A recipe for further success for a group that has proved its manhood.
