What happens when your local independent coffee shop scales into an international brand? The answer looks a lot like Caffè Nero, which since 1997 has blazed a trail through the UK café market and successfully expanded across 11 countries. Allegra Group Founder and CEO Jeffrey Young sat down with Caffè Nero Group Founder and CEO Gerry Ford to discuss how one of the world’s most successful café brands was developed and why staying true to its founding principles has been Caffè Nero’s greatest asset
Main image: Caffè Nero’s Nişantaşı store, Istanbul, Turkey. Inset: Gerry Ford, Caffè Nero Group Founder and CEO
In his book, The Infinite Game, leading thinker Simon Sinek proposes the most successful, innovative, and enduring businesses are driven by a Just Cause – a noble purpose beyond the pursuit of material gain. Caffè Nero is an exemplar of this mindset. Founded by Gerry Ford in 1997, the London-based coffee house brand has placed premium coffee and authentic Italian café experiences firmly at its centre. Since its inception, Ford has always espoused Caffè Nero’s objective to make a positive difference in people’s lives.
Today the business operates 1,100 stores across 11 international markets, employing over 9,000 staff from 105 nationalities. Having achieved 88 consecutive quarters of positive like-for-like sales growth, Caffè Nero is projected to achieve revenues of US$630m in 2020. Yet, becoming a global phenomenon was never Ford’s founding mission. Instead, he still views the business as a hugely successful start-up that never lost sight of its own Just Cause to deliver quality, invest in people, and build community. “My early vision was to build a half-dozen, very high-quality Italian coffee houses in London serving the best coffee and premium food. It is what people would now say is an ‘independent coffee’ approach – that was all I wanted to do,” Ford explains.
Nevertheless, over 23 years Caffè Nero has undergone a remarkable evolution from London-based independent to world-class café group – all the while maintaining its independent philosophy and brand integrity. Today, 95% of all its stores are company-owned and a remarkable 98% are profitable.
The early years
In the late-1990s, the UK was a veritable melting pot of nascent café brands vying to grow their share in the burgeoning coffee shop market. While early contenders, such as Madison’s, GoodBean, Café Nescafé, and Jacqmotte were acquired or exited the market entirely, other prominent brands, such as Coffee Republic, Caffè Ritazza, and Puccino’s never grew beyond their 1990s heydays.
More than two-decades hence, just a few café brands have emerged intact from those early years to scale into successful UK businesses. None have followed Ford’s success in building Caffè Nero into a highly respected international coffee house brand.
Two years before Starbucks arrived in the UK and when Costa Coffee numbered just tens of stores, Ford first conceived the idea of Caffè Nero in 1996. Launching in 1997, the brand was among the very first in the UK to champion the appreciation of premium coffee and catalyse the British public’s curiosity for European café culture.
“I believed from the beginning that people were absolutely the most important asset we had”
It may be taken for granted today, but Caffè Nero’s authentic Italian proposition, with its inviting, high dwell-time stores and award-winning espresso prepared on Italian-made Faema espresso machines, was revolutionary 22 years ago. As one of the original drivers of the UK’s coffee revolution, Caffè Nero is a near unique example of a café brand that has enjoyed continuous leadership while thriving both in its home market and globally.
The coffee house connection
A true citizen of the world, much of Ford’s childhood was spent in Silicon Valley just outside of San Jose, California. But it was during his formative years living in Europe and frequenting the coffee houses of Italy, France, Germany and Austria that he forged a lifelong appreciation for European café culture.
“I have lived in Europe for 70% of my life. I grew up with a passion and deep understanding of what makes great coffee and a great coffee house,” he says.
Ford’s passion for culturally authentic cafés is complemented by impressive academic credentials and business acumen honed during a successful career in venture capital. First attaining a degree in Politics and International Relations from Stanford University, he went on to receive an MBA from INSEAD, a Master of Arts in Law & Diplomacy from the Fletcher School of Law and Diplomacy, and later completed a PhD in US-European relations at the University of Oxford.
In his early career, Ford held positions at technology giant Hewlett Packard before joining the world of venture capital at Apax Partners.
In 1992 he co-founded hospitality and media investment firm, Paladin Associates.
Arriving in the UK, Ford was perplexed by the lack of quality coffee and café culture. Recalling lengthy searches for a decent espresso in London, he says the inspiration to create a premium café came from being a passionate consumer rather than a business person. That quest would ultimately change the course of UK café culture. “I was never really someone to socialise in pubs. Caffè Nero was about bringing continental café culture and great espresso to the UK,” he says.
A brand built to last
In 1999 Allegra began its ground-breaking research into the UK branded coffee shop segment, recording whopping outlet growth of 45%. Caffè Nero was far from the only café brand in the UK market, but its enduring influence is testament to a culture of excellence fostered among its leadership team. In an era that saw independent cafés fighting for dominance in the UK market, Caffè Nero emerged as the strongest.
Ford hand-picked Caffè Nero’s first 200 store managers, to whom he imparted his ethos of proprietorship and self-reliance. “My line to each new store manager was: ‘Your role is vital, the most important in the company. Imagine your store was opened by your parents and now they are handing it over to you. This is the same; we are handing over the keys to you. You need to look after your store because our business will not survive otherwise’.
“Many of our stores are still run by people who have been with us for 14, 15 or 16 years and the business is still managed by a number of individuals who have been here for 20 years or more. Caffè Nero was always about emphasising family and a value system of fairness, integrity, common decency, tolerance, honesty and caring about people. I believed from the beginning that people were absolutely the most important asset we had and from its inception I wanted the business to be built on the values I believed in.”
By 2000 Caffè Nero had grown to around 15 stores, with the business showing potential for expansion beyond a handful of London sites. Nevertheless, Ford was acutely aware that while passion alone could sustain a small portfolio, further growth would require rigorous commercial discipline.
“In the early days, many people believed simply putting up a coffee sign would make a business work – we never thought that. The most important thing was to be people and product-focused and build a brand that was more than just an ego-orientated hobby – the business model had to work.”
“I didn’t want to become a mass market brand, I just wanted to be a high-quality, premium independent”
Sticking firmly to this ethos, Ford ensured each store was profitable before the next was opened. In the six months to 30 November 2001 Caffè Nero built a £3.8m expansion fund on the back of a 68% increase in turnover to £11.3m compared to the previous year.
“When we got to 53 stores in 2001 – all of them profitable – we knew we had a good business model,” he says.
That year Ford floated Caffè Nero on the London Stock Exchange to facilitate a new phase in the businesses’ development. Initially raising £7.5m from the floatation, Caffè Nero went on to deliver consistently strong results and grew to over 280 outlets. Nevertheless, as investor influence to deliver growth risked distorting the brand’s founding vision, it is a chapter Ford remains ambivalent about.
“I remember telling potential investors that 80-90 stores would be enough. I didn’t want to become a mass market brand, I just wanted to be a high-quality, premium independent.”
With investor aspiration increasingly at odds with his own vision, in 2007 Ford put all the money he had back into the business and bought it back. He would ultimately become a victim of his own success – Caffè Nero’s value had increased five-fold to £220m. “One of several reasons we came off the Stock Exchange was that we wanted to march to our own tune. We wanted to grow the right and proper way instead of just aspiring to achieve quarterly earnings.”
Back in private hands, Caffè Nero embarked on a period of rapid growth and international expansion, but stuck to its guns in remaining a premium independent rather than becoming a mass market brand. In 2007, the company entered the Turkish market with a store in Istanbul, the UAE followed in 2009, Poland in 2012, Cyprus in 2013, Ireland and the US in 2014, Croatia in 2017, Oman in 2018 and Sweden in 2019.
The world’s local café
Caffè Nero goes to great lengths to ensure all its coffee, from its Classico Original Blend to its specialty single origin ranges, are served to the same standard in every territory. To ensure the highest quality coffee is served across the business’ portfolio, Ford established vertical integration whereby Caffè Nero purchases coffee directly from farmers to specialty coffee specifications. Those beans are then roasted and blended at its London-based roastery before distribution to its stores worldwide.
However, just like its founder, expanding into diverse markets compelled Caffè Nero to become a citizen of the world. This is reflected in the development of localised food propositions and store formats influenced by the cultural nuances of different national markets.
In the US, where Caffè Nero has 33 stores, food comprises up to 50% of sales and the brand has pivoted accordingly. “We make sandwiches and salads daily and bake in-store. We’ve adapted to strengthen our deli offering, which has always been the foundation of our food proposition,” says Ford.
Perhaps Caffè Nero’s most profound market adaptation has been in Poland, where in 2012 Ford took a majority stake in Polish coffee shop Green Café to create the Green Caffè Nero brand. A successful collaboration with kindred Polish café entrepreneur, Adam Ringer, Green Caffè Nero pivots toward Poland’s strong food-focused café segment through its own artisan bakery and has expanded to 68 outlets.
“In each country we intuitively accommodate localised hospitality into the store set-up. We maintain a common high-quality deli food element across breakfast, brunch, afternoon and evening dayparts, and then we move the products according to the local taste.”
In the UK, where Caffè Nero’s coffee has frequently topped Allegra consumer surveys on coffee quality, food has always been a key facet of the brand’s proposition. As far back as 2004, the business was selling some 70,000 sandwiches and paninis a week across its UK stores. However, since that time, the UK’s food and beverage landscape has evolved significantly, with coffee-focused brands facing much stiffer competition from value-focused rivals, as well as a growing chorus of food-on-the-go options.
Top left: Assembly Row store, Boston, USA. Right: Copley Place store, Boston, USA. Bottom left: Skorosze store, Warsaw, Poland | All images © Caffè Nero
Rising to this market challenge, the introduction of Nero Deli to UK menus in 2019 represented the biggest shake-up of Caffè Nero’s UK food offer since the brand’s foundation. Reflecting growing consumer appetite for freshly prepared menu items, the revamped menu features a seasonal selection of open sandwiches with Italian-sourced ingredients, salad bowls, and sweet treats with selected cafés now fitted with in-store ovens.
For Ford, the improvements represent a return to form on a founding principle to combine high-quality deli food with coffee. “In the first 10 years people regarded our food as much better than our competitors, but increasingly we were seen in the UK as unexceptional. We had to go back to our founding principles in the UK and change that.”
A lasting legacy
Asked which of Caffè Nero’s achievements he is most proud of, Ford reiterates his commitment to positively impacting people and communities, an ethos instilled in the Caffè Nero team to this day. “Going back to when the company was started, new hires were always told that the raison d’etre of their job is to make a positive difference to people’s lives,” he says. “I wanted our people to be kind and compassionate. Every interaction with individuals, whether customers or members of the public, counted. That should be our legacy; an oasis of humanity.”
This commitment is evident in Caffè Nero’s sabbatical programme, which enables long-term staff members to engage with charitable projects overseas. Managers can also direct their store’s efforts to support local charities or causes they believe in, such as UK-based Action Mental Health and Spinal Research.
Established in 2011, The Caffè Nero Foundation is tasked with a simple yet vital objective – to make a positive, lasting difference to the communities that make Caffè Nero possible. A prominent example is the Foundation’s work in Nicaragua’s La Esmeralda district, where Caffè Nero has longstanding sourcing relationships with over 70 coffee farmers. Since its inception in 2016, Caffè Nero’s project has benefitted over 21,000 Nicaraguan students, with over £60,000 raised to improve education provision and sanitation between 2017-18. Most recently, The Foundation has expanded its efforts even further by assisting in the construction of La Esmeralda’s first ever high school.
“We never lost sight of our founding mission – that is the essence of our success”
“I want Caffè Nero’s legacy to be a brand that has adhered to its value system, even as it has grown, and fundamentally changed the environments we do business in for the better,” says Ford.
With its Just Cause to deliver quality, positively impact people and foster community firmly imbued in its brand DNA, Caffè Nero has consistently demonstrated innovation, resilience and the ability to deliver its ambitious vision. It is just as well; over 23 years the business has confronted its fair share of market challenges, with Ford recounting that difficult trading can materialise at any time.
“We went through some really challenging times: 9/11, the bursting of the Dotcom bubble and the traumatic July 2005 London bombings. We went through the financial crisis in 2007 – these tragedies severely hit the UK economy and impacted our business. Now we’ve been going through Brexit, which presents a huge challenge to UK recruitment and another slowdown of the UK economy.
“Even during each of those events we grew and prospered because of our strong business model and our team’s passion and dedication for making great coffee and caring about people. We never lost sight of our founding mission – that is the essence of our success.”
As for the future, Ford is confident Caffè Nero will grow into a $1bn revenue business within a few years. Nevertheless, in a global coffee shop market increasingly influenced by multinational conglomerates, he believes emphasising Caffè Nero’s independent, local credentials has never been more important. “We are a small guy, fighting against big corporates in a big market. But I feel coffee is best served by small, local propositions which focus on quality and caring.”
With its Just Cause of quality, people and business discipline stronger than ever, there is every reason to believe the world’s largest independent café group will continue to galvanise communities and inspire individuals across the growing number of neighbourhoods it serves. And for Ford, that will be his greatest legacy.
First published in issue 3 of 5THWAVE magazine – available to read in full online here.