Tesco Doubles Down on Artisan Coffee With Harris & Hoole Buyout

  • Grocer buys remaining 51 percent stake in unprofitable chain
  • Harris & Hoole dwarfed by market leader Costa Coffee

Customers queue with their shopping carts at a Harris and Hoole coffee shop inside a Tesco store in Watford, U.K.

Photographer: Simon Dawson/Bloomberg

Tesco Plc is doubling down on double espresso.

The U.K.’s biggest grocer bought out its partner in the unprofitable Harris & Hoole coffee-shop chain, giving it full control of a business it jointly founded in 2012. Tesco took up an option to buy the 51 percent stake it didn’t already own from London coffee-shop owner Taylor St Baristas, it said in an e-mailed statement. Financial terms weren’t disclosed.

The acquisition shows that Chief Executive Officer Dave Lewis still has time for some of the non-grocery ventures developed under his predecessor Philip Clarke. Tesco last year took full control of Euphorium, a bakery with concessions in about 60 of its stores. It also owns the Giraffe restaurant chain, though has sold on-demand movies service blinkbox.

“Food services are part of Tesco’s vision for the future of its larger stores,” said Bryan Roberts, an analyst at TCC Global in London. “In Tesco Extra stores, Harris & Hoole does serve a very useful purpose.”

With 43 outlets, including some inside Tesco stores, Harris & Hoole is the U.K.’s seventh-biggest coffee-shop chain, according to research from Allegra World Coffee Portal. The company’s 1 percent share of the market is dwarfed by leader Costa Coffee, which controls 44 percent of the 3.3 billion-pound ($4.8 billion) industry.

“Harris & Hoole’s performance hasn’t been setting the world on fire,” Richard Hyman, an independent retail analyst, said by phone. “For Tesco, this deal is more about tidying up than being of great strategic value.”

In April, Chief Financial Officer Alan Stewart said Tesco didn’t intend to significantly expand Harris & Hoole until the company was “very clear as to what the offer is and what we’re going to get from it.”

After opening 22 new outlets, Harris & Hoole made a pretax loss of 25.6 million pounds in the 53 weeks ended March 1, 2015, according to documents filed with the U.K.’s Companies House.

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