Credit: PHilafrenzy/Wikimedia

Should Tesco give up on frothy coffee?

Harris + Hoole's founders are moving on - now Tesco must decide what to do with its coffee shop subsidiary.

by Jack Torrance
Last Updated: 12 Aug 2015

What next for the coffee bar chain bought by Philip Clarke in a bid to turn Tesco into a lifestyle brand? Founded in 2012 by the Australian Tolley family, Harris + Hoole's shops had all the trappings of an indy chain, but infuriated Guardian readers when it emerged they were 49% owned by Britain's biggest supermarket . 

Since Tesco’s finances came a cropper last year there has been speculation that it has been keen to sell the loss-making firm and yesterday it emerged that the Tolleys – Nick, Laura and Andrew – are leaving the company – so what’s going on?

The official reason the founders are jumping ship is that they’re keen to focus on their own coffee chain, and to be fair there’s nothing to indicate otherwise. ‘At the same time that Harris + Hoole has been growing, Taylor Street Baristas, the first coffee business I founded with my brother and sister, has also been going from strength to strength,’ Nick Tolley, who was the CEO, told Retail Week.

‘Amongst other things, we’ll be opening the first Taylor Street Baristas store in New York later this year, so it feels like the right time for me and my siblings to return to focusing on Taylor Street Baristas, leaving the excellent Harris + Hoole management team in charge.’

Reports claim The Tolleys and Tesco will be retaining their existing stakes in the business ‘at this point in time’, and a Tesco spokesperson said it ‘[looks] forward to the business progressing in the future,’ but questions remain about whether it will remain committed for the long haul.

Its chief exec Dave Lewis has sought to jettison many of the supermarket’s subsidiaries, including its South Korean operations and data business Dunnhumby. But he also bought out the remaining stake in posh bread makers Euphorium Bakery, suggesting he’s not totally averse to opening Tesco’s wallet.

Latest available accounts for Harris + Hoole, which has 46 stores, only go up to February 2014 so it’s hard to get a great sense of where the business is at. But in the year to that month the company made a pre-tax loss of around £12.8m on revenues of £6.6m. Those figures don’t look great and it ended up having to close six stores last August, which might make it seem like an obvious target for Lewis’s scythe.

But the business is still only three years old, and given its rapid growth you would expect a few hiccoughs and a period of haemorrhaging cash before it can return a profit. With trading figures the way they are and big debts to boot, Tesco probably wouldn’t get all that much for a sale anyway.

Harris + Hoole’s real value is in the strength of its brand (and perhaps its phenomenal breakfast sandwiches), and Tesco would be mad to throw that away. But then without the Tolleys on board, MT has to wonder if that will remain the case.

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