Outgoing CEO of New Food Experiences at Tesco Michael Holmes candidly admitted to a group of sector leaders at one of M&C Report’s Director’s Club dinners that he was the least experienced restaurant operator in the room, but yet found himself in a position of wielding significant influence over where many people went to eat out. Will his departure signal the retailer’s exit from the sector or is it not as simple as that?
Holmes’ talk that night gave the impression that his role was one of a facilitator; bringing expertise and brands together to create a new operational arm at Tesco. His key acquisition was that of Giraffe, which put the retailer’s intentions on the map and brought with it the key appointment of former M&B chief executive Adam Fowle.
Fowle brought with him a structure and more former M&B employees. On top of the Giraffe acquisition came the investment in Harris + Hoole, the development and roll out of Decks, the group’s own in-store casual dining brand, the acquisition and current transformational programme of its in-store cafes plus more recently further investments and tie-ins with fledgling concepts such as Fred’s Food Construction and Burrito Kitchen. Not the actions of a company that is just dipping its toe in the eating-out market’s water.
The appointment of new CEO Dave Lewis has brought uncertainty with regards to Tesco’s future strategy, but its retail business has taken precedence. The sense is that the group’s eating-out arm is down the list of priorities for the new boss, but not necessarily the obvious disposal option that many believe.
Tesco continues to roll out Giraffe sites in-store and build up a pipeline of openings for this year and beyond. Could Tesco spin the brand off? It is still a business in growth and should attract suitors, but would they be put off by a number of sites being housed in currently failing superstores.
The retailer also continues to tweak Decks, which currently stands at 13 sites, but has slowed its roll out to concentrate on the refresh programme of the 266 in-store cafes it acquired for around £9m near the end of last year.
The company is also watching closely the performance of Fred’s Food Construction, especially its first dedicated “food to go” Express site in the City, while it is set to enhance its convenience offer with launch of Burrito Kitchen units in an Express site in Villiers Street and a Metro store in the City. Both programmes are small scale for the group, but highlight that it is still putting resources and thought into its eating-out offer.
If any of its brands looks like a candidate for a sale, then it is Harris + Hoole. Launched at the end of 2012, the chain has group to c50 sites, but after a rapid phase of expansion the openings tap was turned off at the end of last year and currently one new site is set to open in the first half of the year at Stansted. Taylor St Baristas, the coffee chain launched by the team behind Harris + Hoole, raised £1.86m through the UK’s first crowd-sourced “Coffee Bond” earlier this year, with plans to have 30 sites by 2020. The move suggests that life after Harris + Hoole may already being planned for.
There is a sense that the founders and those in charge of the concepts mentioned above have themselves yet to get any indication of Tesco’s future direction. The departure of Holmes has certainly brought the retailer’s eating-out operation into the spotlight, but whether it decides to check out from all or parts of the division remains unclear.
