Pret a Manger has been a very unlucky business.
Just two years ago the fresh food and coffee chain was purchasing rival Eat with the aim of faster store expansion. Quick to expand vegan and gluten-free choices it has been able to capitalise on the growing appeal of plant-based foods and healthy eating.
With around 400 shops (most of which are in London) the chain has found itself comprehensively kicked by Covid, closing 74 shops and making 3,771 redundancies in the UK. As we now emerge from lockdown Pret is acutely aware sales may not fully bounce back and that a dependency on London-based workers adds to its vulnerability. As Pret’s chief exec, Pano Christou, observes: “social distancing will continue to change consumer habits for some time, and may permanently affect where, when and how customers choose to enjoy Pret’s food and drink.”
Transforming the business model
The Pret team, to their credit, have quickly sought to develop their business model and address weaknesses that the pandemic has exposed. These include a dependency on city worker footfall, a sharp focus on London and a menu geared to out-of-home consumption. Helpfully Pret has built a well known brand with healthy eating credentials and a menu that is familiar to many.
Pret is developing a hot dinner menu to better align with home delivery growth
With the aim of diversifying availability Pret will now trial concession stores in Tesco supermarkets, alongside plans to extend delivery only ‘dark kitchens.’ Reflecting delivery growth Pret is also experimenting with a hot dinner menu to extend its occasion reach to evening home consumption.
To diversify its revenue model Pret has also stretched to branded retail products. This includes breakfast granola and frozen croissants at Tesco (presumably generating licensing income) and a coffee-at-home range available in UK supermarkets and Amazon.
These initiatives and experiments clearly make sense and prior to Covid would have been welcome additions to the core city shop business. However, to fundamentally rebalance the business they will need to prove the case for investment to deliver scale. That investment, of course, will be easier if customers in current locations quickly return.
Don’t be unlucky
It is difficult to greatly criticise Pret. The business has a track record of growth pre-pandemic and has been unlucky with both investment timing and model. That said, there is still learning.
Pret’s experience is a reminder of the importance of self-disrupting your own business model and continually experimenting to find new sources of growth. Today’s advantages and resources may not be tomorrow’s. In this respect Starbucks is an exemplar, having energetically stretched to retail products, embraced delivery on demand and extended availability with drive-in formats.
The significance of luck (good or bad) must also not be underestimated. Those experimenting with more bets will have a greater chance of winning. With the huge benefit of hindsight, I am sure the Pret team regret not challenging their city worker dependency with more ideas and small pilots earlier.
I wish Pret a Manger a lot more good luck.