Mark Wingett talks to Tragus chief executive John Derkach about his first year at the helm of the Café Rouge, Strada and Bella Italia operator. The former Costa Coffee managing director talks about how Bella is primed for growth, Café Rouge is going through a process of reinvigoration and working to make Strada special again, while touching on some wider sector issues.
It has been just over a year since you joined Tragus, what has surprised you and disappointed you most in that time?
The main thing that has surprised me is the potential for Bella Italia and how powerful it can be. Of our three main brands it has the highest margins and highest sales per square foot and has potential growth, that is a plus I hadn’t expected. The other thing I found is the untapped potential within the whole organisation, we have some great people working in our restaurants and I felt that the company needed a sense of direction and impetus to take the business forward. It is an exciting place to be, it’s got its challenges, but it is an exciting place to be.
What have been the major differences in heading up Costa and Tragus?
First of all the restaurant sector is a lot more interesting than the coffee shop sector. Coffee shops are a pretty straightforward beast. It is a sector with phenomenal growth. Competitors despite their global size and dominance seem to have been asleep at the wheel for the last few years, so it was a great place to operate. The restaurant sector by contrast is a lot more fragmented and I think that makes it more interesting. It is a category with a huge amount of variety that makes it more interesting and it is a friendlier place. Jonathan Kaye the other day bought me a meal at his new Cleaver site, I can’t remember anyone at Starbucks ever buying me a cup of coffee in all the years I was at Costa, if they had I wanted have drunk it! It is great to be back in the restaurant sector.
Can you take us through the different challenges and opportunities faced by each core brand, Café Rouge, Strada and Bella Italia?
The state of the three brands is very different. As I touched on before Bella has tremendous growth potential. It was a little bit neglected by Tragus, which had been very focused on Strada and Café Rouge. I think getting to grips with the potential for Bella Italia is our single biggest opportunity going forward. We have opened new look Bellas on leisure parks with phemonal success. So we know where we are going with that.
With Café Rouge we are going through the process of updating and revamping a much loved brand which had probably become a little bit tired. Next year is its 25th anniversary. I think there are some Café Rouge sites that were opened in the last five years that look like the ones opened 25 years ago, that’s a testimony to the brand’s longevity but also really a demonstration of the fact that we really need to move a bit more with the times. The work we have carried out on around a dozen sites now in really transitioning the brand demonstrates we can get spectacular high double-digit sales growth out of long-established Café Rouge sites, and that is really exciting. We have a long way to go but the potential is fantastic and the returns really strong.
I think the challenge with Strada is to make it special again. I think we need to take the brand back to its roots by offering the world’s best pizza, very focused on doing that and put back into the brand some of the things that made it special. It is a great a competitor, but in a very competitive and congested market, and I think in order to differentiate we have really got to put some special things back into Strada. We have got some new menus out right now, which set out to do that, again the early results are positive.
So the three big brands are at different places. Bella is primed for growth, Café Rouge going through a process of reinvigoration and Strada we need to make a bit more special.
Blackstone is believed to have backed you to open up to 30 sites a year over the next three years, how easy have you found it to find the right sites?
Blackstone is committed to growing the business. We can find sites and have brands that fit into most locations, but we must make sure the pace of growth is matched by the qualityof the people we are bringing into and through the business. The issue is making sure that the pace of growth doesn’t compromise on the quality of people in the company. Finding sites is pretty straightforward, getting the right sites is more difficult and getting good people to run them who are better than those working in our competitors is the main challenge for all of us in the industry.
What can you tell us about the future of non-core brands, Ortega, Huxley’s and Belgo?
There won’t be much of a future for Ortega. We only have a couple of those and it never really worked as a brand. Trying to make a tapas operation work with kitchens the size of broom cupboards wasn’t a good idea. We have one site that trades really well so we wont do much with that. Huxley’s is great, it has all the things on the menu that I like to eat, steak and chips, lots of stuff with chips. It doesn’t make it great expansion opportunity but we will do a few more of them. Belgo’s is fantastic and the opportunity for that brand is very strong.
What is your description of today’s consumer and eating-out sector?
It is an exciting place to be. What has taken place over the last few years is a tremendous amount of innovation and investment in the sector. There are a lot more new brands, concepts and restaurants than ever before and that makes it an exciting place to be. This means that the consumer has got a lot more choice, although I am not sure if that choice is good or bad. I think the way that the way that companies have responded to the recession with an excessive focus on discounting has diminished the extent to which customers use the the choices available to them, some brands have lost that differentiation.
Those brands that have differentiated, have intregrity around their story and provide a compelling reason for consumers to visit them will standout. I am quite old fashioned in the fact that you have to make food great and that at least some part of the menu stands out so people can articulate as to why they go to that restaurant. Café Rouge has done that with its steak frites and we have made them dramatically better than they used to be, as a consequence sales of the dish have gone up by 40% in less than a year. And we need to make sure the same things happen with the other brands.
What more does Tragus have to do to fit into that market?
We are part way there to where we want to be and further advanced on some of the brands than others. Our food is substantially better than it was a year ago, it wasn’t bad but we have made some of the items genuine reasons for the consumer to go and visit the restaurant. Bella Italia we are where we want to be and there is an investment opportunity to grow faster, Café Rouge we know exactly where we are going. There is a bit more work to do on Strada partly because it is in a more competitive marketplace, but we will get there.
