Selling a lifestyle
Błażej Karwowski: Do you and Tchibo coffee bars compete for the same customer?
Richard Worthington: I don't know. What I would say is that they have their shops on the first and second floor; we have ours on the ground floor. If you go to Arkadia you can see that, if you're going to Blue City you can see that - there is a certain pattern. The only shopping mall where they have a really good position, and that was particularly because they went there before we came into the market, was at Klif. It is a very nice shop indeed. I'd love to have that store and I make no bones about it. That's their advantage of being first in the market, because they were there before us. So that's Tchibo.
Don't those companies [Tchibo and Nestle] have a certain economy-of-scale advantage over you?
I guess they have capital return requirements like all other companies. Just because you have money from a mother company, it doesn't mean you don't have to show profit. The great example is Starbucks in the UK. Starbucks has over 500 stores and they are losing a fortune, no matter how many outlets they open. And there's a little rival, such as Café Nero, with half the number of stores making good money. That shows you that it's not just a question of throwing money at something.
Do you think the forecast of two to three companies in 2007 is a probable scenario?
The classic business model is, as the market matures, you have a lot of niche players and a few, maybe two, leaders. Whether that will happen, I have no idea. What I do know is that the first wave of development probably is over, but that was really on the back of new shopping malls. That gave people the opportunity to take pole positions. From now on, you're going to open a store in Lublin, but it's starting now to be filling in.
Whether one of the big companies will come to Eastern Europe, I don't know how many stores can they build. If Starbucks comes in...
The rumors are they will, although it is officially denied...
I think they have bigger markets to go after. The Polish market is competitive, but then, if they find a franchise that is willing to put a lot of money into it, then good luck to them.
What differentiates your target consumers from those of the competition?
At the end of the day, consumers really decide for themselves. What we are experiencing today is expanding the affordability. In other words, if you take a sort of a pyramid of consumers, the top of the pyramid would be very wealthy consumers. We are very interested in taking it further down that pyramid. We don't want to be elitist in terms of price. We are making it as flexible, as consumer friendly as we can. The truth of it is, we are attractive to the younger, professional female. Another reason for that is our no-smoking policy.
Your latest site, at the Hortex building in ul. Świętokrzyska was pretty expensive. When do you expect the net income to show?
The most important thing in a developing business is the cash flow. We have a very strong cash flow, it's very robust. You have a choice, you either grow or you start earning money. Our focus is to build the Coffeeheaven brand and obviously we are now starting to invest in new markets very heavily.
Coffee consumption is still relatively low in Poland. Is the coffee-bar business bound to expand?
First of all, there are problems with economic data like that. It's very useful, but actually not very helpful in terms of looking at our particular business. Coffee consumption so far in our outlets is relatively small. We have 30 stores. We are as much about lifestyle and entertainment as about coffee.
The macroeconomic data is very encouraging. The retail sqm per capita is very low, even with all the new shopping malls. All that is very good for us. With EU membership, all new things are very positive and that's the reason why we are here.
Interview by Błażej Karwowski
Richard Worthington: I don't know. What I would say is that they have their shops on the first and second floor; we have ours on the ground floor. If you go to Arkadia you can see that, if you're going to Blue City you can see that - there is a certain pattern. The only shopping mall where they have a really good position, and that was particularly because they went there before we came into the market, was at Klif. It is a very nice shop indeed. I'd love to have that store and I make no bones about it. That's their advantage of being first in the market, because they were there before us. So that's Tchibo.
Don't those companies [Tchibo and Nestle] have a certain economy-of-scale advantage over you?
I guess they have capital return requirements like all other companies. Just because you have money from a mother company, it doesn't mean you don't have to show profit. The great example is Starbucks in the UK. Starbucks has over 500 stores and they are losing a fortune, no matter how many outlets they open. And there's a little rival, such as Café Nero, with half the number of stores making good money. That shows you that it's not just a question of throwing money at something.
Do you think the forecast of two to three companies in 2007 is a probable scenario?
The classic business model is, as the market matures, you have a lot of niche players and a few, maybe two, leaders. Whether that will happen, I have no idea. What I do know is that the first wave of development probably is over, but that was really on the back of new shopping malls. That gave people the opportunity to take pole positions. From now on, you're going to open a store in Lublin, but it's starting now to be filling in.
Whether one of the big companies will come to Eastern Europe, I don't know how many stores can they build. If Starbucks comes in...
The rumors are they will, although it is officially denied...
I think they have bigger markets to go after. The Polish market is competitive, but then, if they find a franchise that is willing to put a lot of money into it, then good luck to them.
What differentiates your target consumers from those of the competition?
At the end of the day, consumers really decide for themselves. What we are experiencing today is expanding the affordability. In other words, if you take a sort of a pyramid of consumers, the top of the pyramid would be very wealthy consumers. We are very interested in taking it further down that pyramid. We don't want to be elitist in terms of price. We are making it as flexible, as consumer friendly as we can. The truth of it is, we are attractive to the younger, professional female. Another reason for that is our no-smoking policy.
Your latest site, at the Hortex building in ul. Świętokrzyska was pretty expensive. When do you expect the net income to show?
The most important thing in a developing business is the cash flow. We have a very strong cash flow, it's very robust. You have a choice, you either grow or you start earning money. Our focus is to build the Coffeeheaven brand and obviously we are now starting to invest in new markets very heavily.
Coffee consumption is still relatively low in Poland. Is the coffee-bar business bound to expand?
First of all, there are problems with economic data like that. It's very useful, but actually not very helpful in terms of looking at our particular business. Coffee consumption so far in our outlets is relatively small. We have 30 stores. We are as much about lifestyle and entertainment as about coffee.
The macroeconomic data is very encouraging. The retail sqm per capita is very low, even with all the new shopping malls. All that is very good for us. With EU membership, all new things are very positive and that's the reason why we are here.
Interview by Błażej Karwowski
