Thursday 9 August 2012

Tesco’s ‘arm’s length’ artisan coffee shop business, an approach to 'over-branding?'

                                                                           pic: University of Cambridge
Yesterday’s announcement of Tesco’s entry into the artisan coffee shop business via a non-controlling stake in Taylor Street represents a move to ‘….help build brands where we believe we can add value; much in the same way we did with [garden centre chain] Dobbies, [video and music-streaming sites] blinkbox, and We7’.
It could also an acknowledgement that the Tesco name is ‘over-branded’, at least in the UK.

An incremental option for Tesco? 
This means that Tesco could now begin to capitalise on its ‘back-of-shop’ and supply chain expertise/muscle, leaving all ‘front-of-shop’ activities to their business partners….. "we are investing in the entrepreneurial founders of a new venture. The Tolley family will decide the business strategy….Taylor Street is a successful artisan coffee shop business with a loyal and thriving customer base…"

Why the hands-off approach?
Tesco need play no overt role in the day-to-day business, i.e. front-of-house, but the likely addition of buying muscle, distribution, instore décor/equipment, purchasing of roll-out sites, and potential use of spare space in ‘over-capacity’ stores could provide all the help a small company needs, and can receive from a ‘sleeping’ partner that also has one eye open…
In practice, everything the consumer sees will be Taylor Street/ Harris and Hoole, whilst what the consumer cannot see, will be supplied by Tesco..
A neat way for Tesco to generate incremental profits, without adding to ‘Tesco’ presence in the UK.

The supplier’s options?
From a supplier point of view, the customer gets bigger…
However, this can represent an opportunity for those who really think through and are willing to integrate with Tesco’s options for a company with a 30% share of the grocery sector, and an engine that is capable of far more…

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