Profile: Gerry Ford - the American entrepreneur behind Britain’s coffee house boom
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It may seem remarkable now that just 11 years ago Seattle Coffee Company was opening one of the first branded coffee houses in the UK, says the FT. The subsequent explosion of “coffee culture” is usually exemplified by the expansion of Starbucks.
But while Starbucks’ rampage across Britain has been backed by a hefty $5bn US parent, Gerry Ford has built Caffè Nero from scratch into one of the country’s three biggest coffee-house chains. It’s a classic David and Goliath story and investors can’t get enough of it: Caffè Nero shares have more than quadrupled since 2003.
Old world, new world
Caffè Nero has certainly demonstrated that, “with the right recipe, the English can be lured away from tepid beer and milky tea”, says BusinessWeek. So what is that recipe? Better-than-average coffee, a “slick Italian theme” and a “jovial” Californian founder.
It’s easy to see where Ford, 48, gained his entrepreneurial streak. He grew up in San José, capital of what is now Silicon Valley, and used to ride his bike in an orchard that subsequently became Ebay’s head quarters. “At university [Stanford], we would set up our own companies,” Ford told The Daily Telegraph. “It was ‘if you didn’t have a desire to start up your own business and be creative, then what was wrong with you?’.”
The young Ford combined this exposure to American can-do with several formative spells in Europe – thanks to the lengthy sabbaticals his university professor father took in France and Germany. After studying politics and international relations at Stanford (where he knew US Secretary of State Condoleeza Rice) and cutting his business teeth at Hewlett-Packard, it seemed a natural move to head back to Europe, where he took a PhD at Oxford and an MBA at Insead.
Defying the sceptics
A stint at London-based private equity firm Apax Partners convinced him that his future lay in business. In 1992, he left to set up his own venture capital group, Paladin Associates. Five years later – a year before Starbucks invaded Blighty – he launched Caffè Nero.
The genesis of Ford’s “dream of continental-style espresso bars” grew from the many hours he’d spent hanging out in European coffee houses while writing his PhD, says The Independent. “He liked the atmosphere and wanted to create it, en masse, in the UK.”
By 2001, the fledgling chain had created enough momentum to float. But getting the City onside proved an upward battle. “The whole market was tanking,” says Ford. There was “a dismissal, a non-belief… no matter what we said”.
Gathering steam
The turning point was the growing conviction that, far from being a frothy bubble, the coffee house was here to stay, says the FT. In the meantime, Caffè Nero built itself a niche as a cooler, more laid-back venue than its main rivals, Starbucks and Costa Coffee. A USP for many regulars is the chain’s toleration of smoking.
Ford does his best to personify the brand’s edgier qualities: his favourite film is The Godfather and his preferred means of transport is a Piaggio scooter. Growth, meanwhile, continues unabated: Ford expects the current tally of 250 stores to reach 450 within the next few years, mostly opening in provincial towns. There has been talk of international expansion – the Middle East and eastern Europe are target markets – but for now, Ford prefers to focus on Britain. “We’re riding on a lifestyle change here.”
How Ford drives from nought to profitability in just three months
Back in 1997, “investors chuckled at Ford’s conviction that people would pay upwards of £2 a day for a cup of coffee”, says BusinessWeek. The continued success of Caffè Nero, in the teeth of Britain’s recent retail slowdown, demonstrates that, for many, this “little daily luxury” has become a daily necessity.
Sheer size has pushed Starbucks to the top of the coffee-bean heap: it has 26% market share versus Caffè Nero’s 12%, according to retail analysts Allegra Strategies. But for the past five years, customers have rated Caffè Nero top for coffee quality, atmosphere and service. Sales growth has reflected this: up 7.5% in the past six months – a “stunning performance”, says the Investors Chronicle.
With coffee sales predicted to continue their exponential growth and in a city “where a cappuccino is more expensive than a line of cocaine”, the situation looks rosy, says the Evening Standard. But with a new coffee outlet opening every week – and outfits such as McDonald’s, Tesco and Wetherspoon muscling in on the action – “the war between the coffee lords is growing ever fiercer”. How will Caffè Nero hold its own?
First, says Ford, there’s the quality argument: customers have a “radius’’ in which they will choose their preferred outlet. ”If you’ve got a Starbucks or a Costa on the corner, but a Caffè Nero a block away, and you like our coffee more, you’ll go to the Caffè Nero.” More than 30 of the chain’s stores are located next to Starbucks. Secondly, the chain has demonstrated it is second to none at controlling costs. “Rent discipline is a key success factor for us,” says Ford. So is speedy profitability. Ford boasts that he can drive each new opening from nought to profitability “in just three months”.
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