Pret a Manger has returned to profit after 2 years of substantial losses. It shows the business has learnt to adapt.
Almost 3 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 capitalised on the growing appeal of plant-based foods and healthy eating.
But, with 400 shops (most of which are in London) the chain found itself comprehensively kicked by Covid, closing 74 shops and making 3,771 redundancies in the UK. Emerging from lockdown Pret was acutely aware sales may not fully bounce back and that a dependency on London-based workers was a vulnerability. As Pret’s chief exec, Pano Christou, observed at the time: “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 have acted to develop their business model and address the weaknesses that the pandemic exposed. Helpfully, Pret has the foundation of a well known brand with healthy eating credentials and a menu that is familiar to many.
Pret developed a hot dinner menu to better align with home delivery growth
With the aim of diversifying availability Pret trialed concession stores in Tesco supermarkets in 2021. Reflecting strong digital to delivery growth a hot dinner menu was introduced in the same year to extend its occasion reach to evening home consumption.
To diversify its revenue model Pret stretched to branded retail products. This included breakfast granola and frozen croissants in UK supermarkets (presumably generating licensing income) and a coffee-at-home range available in Amazon. A coffee subscription service was also set up in 2020 and has now expanded to the US and France.
Alongside the return of shopper and worker footfall some of these initiatives have worked. Sales have grown fastest outside of London and more than a third of sales came from digital channels.
Reflecting renewed confidence the company recently secured investment to add another 200 UK stores. More sensitive to their vulnerabilities many of the UK shops will be run on a franchise model generating royalty revenues for Pret. This model will also be employed for international growth with a partnership established with Reliance Industries to introduce 100 stores across India.
The case for continually challenging your business model
Challenges remain for Pret as it navigates high inflation and the management of a more complex business. That said, it could soon emerge as a case study for business model adaption to increase growth and resilience. It is certainly a reminder that continual brand development must be accompanied by business model development.