Poland is cream in the cup for Coffeeheaven

When Richard Worthington launched his Coffeeheaven chain in Poland nine years ago, the takeaway paper coffee cup, so loved by urbanites in the US and the UK, was nowhere to be seen on the streets of Warsaw. The idea was even frowned on by some Varsovians.

“We got people saying ‘I don’t want to drink coffee from an American paper cup’. They were used to drinking from porcelain and the only way we could make our business profitable was if we were to develop takeaway.
“But then we had a bit of luck. A popular magazine featured a cup of coffee with our logo on it describing it as cool. So it became acceptable and fashionable to be seen in the street with a paper Coffeeheaven cup.”

Mr Worthington spotted his opportunity on a business trip to the Polish capital in the late 1990s when looking for a place to buy a cup of coffee.

The dearth of ristrettos in comfy, western-style surroundings gave the former Estée Lauder executive an idea that he has since turned into a business of 89 stores spanning eastern and central Europe and the Baltic states.

According to Allegra Strategies, a research consultancy, the regions in which he is operating have become thirsty for western habits and products, especially upmarket coffee.

The Aim-listed company does not have operations in the UK nor does it plan to. Instead it has focused on eastern and central Europe and the Baltic, where it believes it has plenty of room to expand.

coffeeJeffrey Young, Allegra managing director, says: “Eastern Europe is virgin territory in terms of coffee bars . . . success is associated with the west and so there is an appetite for western things.”

While Coffeeheaven has ridden the growing wave of demand for branded coffee, more recently it has also benefited from the surge of the Polish zloty and the Czech koruna.

In Poland, Coffeeheaven’s biggest and most advanced market, it runs 53 stores and controls just over a fifth of a still-fragmented market, according to Allegra. It also runs 36 stores across the Czech Republic, Bulgaria, Slovakia, Hungary and Romania.

The Polish business is described as “very profitable”. For the year to March 31, like-for-like sales grew 16 per cent and operating profits were £2.1m.

Coffeeheaven’s growth has not gone unnoticed by some of the world’s larger operators and in recent months there have been rumours of the company being a takeover target.

Whitbread’s Costa Coffee has launched in the region, although with mixed success. Its Polish franchise partner is looking for an exit, although Whitbread says it is trading well. Starbucks has a handful of stores in the Czech Republic and Romania.

Shares in Coffeeheaven have were buoyed by speculation, hitting a high of 43¾p in June, but they have since dropped back to 36½p. Mr Worthington refuses to comment on whether the company has been approached and says that when he started out there was no big game plan to get the business up and running and then sell.

He is scathing of the “push-button” approach of big operators such as Starbucks. “I am not convinced that coffee bars work as truly ‘global businesses’. Coffee bars are very personal and individual – very much ‘your place’ – and by definition it’s difficult to personalise something that is global.

Coffeeheaven is set to expand, but it has drawn criticism for not advancing at a ristretto- fuelled rate. “We have always had a target of 350 stores but it could be 200 and it could be 500. We’ve never put a time scale on it.”

Mr Worthington cites the example of Gerry Ford, founder of Caffè Nero, who faced the same criticisms in the early stages of building his business.

“If we could open 500 stores we would have done it. In some of these markets you’re never going to build 200 stores in two years, maybe in 10 years. The market just isn’t ready. It’s taken us eight years to get to nearly 100 stores in seven countries. Some markets are at different stages. Romania is where Poland was in 1999. It’s a long-term game.”
Source:ft.com