Pret a Manger may have returned to profit, but its success hinges on cracking India's affluent eaters – iNews

The coffee and sandwich business is a superficially simple way to commence an entrepreneurial career.
What can be hard about buttering two slices of bread and then stuffing it with a filler of the customer’s own choosing? Just as the Earl of Sandwich famously demanded.
It’s so simple that the industry is one of the most fiercely competitive, with hundreds of companies spreading madly for a slice of the multibillion-dollar market.
Foremost among them is high street lunch retailer Pret a Manger, which welcomed a return to profitability in March after losses spurred by Covid restrictions and lockdowns across the country.
The sandwich and coffee chain suffered operating losses of £225.9m last year, according to its latest accounts filed with Companies House, thanks to a 17 per cent rise in revenues to reach £461.6m last year as workers returned to the office.
Pret’s bosses said the chain’s recovery has “continued and accelerated” in 2022, with half-year revenues more than doubling on the year, growing 230 per cent to £357.8m, helping it to return to profitability in March and becoming cash flow positive since May.
The firm’s sales grew faster outside London than they did in the capital, “reflecting the sustained growth of Pret’s regional shop estate”, it said. Two-thirds of Pret’s UK shop portfolio is outside of London’s square mile, its traditional home, with 36 per cent of locations in regional cities and towns.
Online sales were also up 37 per cent in 2021, reflecting that more shoppers are making their lunchtime selections from the comfort of their offices, at home or otherwise. Its coffee subscription service, which was launched in 2020 in a bid to brook wider retail channels, was used on average more than 667,000 times a week during 2021.
“We also grew fastest in some of the places where we only had a handful of Pret shops before,” said Pano Christou, Pret’s chief executive. “The opportunity now is for us to take that growth and apply it internationally.”
That international growth is taking the form of recently revealed tie-ups in Canada, Ireland, Spain and Portugal as part of a goal to double the size of Pret’s business within five years and expand into five new markets by the end of 2023.
The firm said the recent franchise deals means it expects to meet its international growth goal a year ahead of schedule.
There was no further news about Pret’s franchise partnership with Reliance Industries, India’s largest company, under which the sandwich seller will open up to 100 outlets across the country in the next five years, with 10 to be built by the end of this year.
Reliance Brands’ chief executive, Darshan Mehta, said he hoped to target India’s most affluent shoppers first, with the initial Indian branch of Pret earmarked for the cosmopolitan city of Mumbai.
“Unlike Starbucks, I was looking at something that is more food-led. Starbucks is a beverage-led business,” Mehta said, adding that he thought the local market had enough slack to allow for Pret to also rub shoulders with Costa Coffee and Tim Hortons, both due to launch in India this year.
Ankur Bisen, head of consumer and retail at Technopak, said closures of local cafes in India during the pandemic had created room for the likes of Pret to move in. Should it adapt its menu to local tastes, it could even take on Starbucks directly, he added.
It may, however, be an inauspicious time to launch a luxury sandwich seller in India. As in the UK, India’s consumer goods firms are grappling with spikes in inflation, which is running at more than seven per cent a year in the country. That will eat into Pret’s bottom line and mean that the venture may not be profitable for some time.
Reliance, part of fossil fuel and retail tycoon Mukesh Ambani’s vast Reliance Industries empire, should be a patient partner and is prepared to take time to grow Pret’s image. Mr Ambani is familiar with leveraging the UK’s beloved brands after buying toy retailer Hamleys in 2019 and history country club Stoke Park last year.
“Reliance wants to look at retail in all its shapes and forms. Over time, they’ve realised partnerships are the way for business formats that may be difficult or slower to crack,” said Devangshu Dutta, head of retail consultancy firm Third Eyesight.
Closer to home, Pret is still contending with the success of its high street rivals. Sausage roll merchant Greggs seemed to largely shrug off the impact of the pandemic last year, recording the first annual loss of its history in 2020 to make £1.229bn of sales in 2021, almost six per cent higher than its pre-pandemic levels.
Pret, meanwhile, was forced to call on £200m of financial support from shareholders including JAB Holding Company, a Luxembourg investment vehicle for Germany’s billionaire Reimann family, which also owns brands ranging from Dr Pepper and Krispy Kreme to perfume by Calvin Klein and Burberry.
Although it has made progress, Pret’s future hinges on some risky moves into new territories coming off without a hitch, otherwise it may continue along the trajectory it found itself on during the pandemic.
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