Tesco effect: How big firms quietly own little brands

 
Clockwise from left, smoothie, coffee, ice cream, granola, tea

There's been negative coverage over a new "family" coffee chain that is actually backed by Tesco. Why do people become vexed?

With its exposed brickwork, muted lighting and expensive decor, Harris and Hoole is the epitome of a modern, upmarket coffee shop of the kind that has colonised the UK's High Streets in recent years.

The one sound you won't hear amid the tinkle of ceramic cups and relaxed chat, is a tannoy announcement saying "clean-up in aisle seven".

Yet Harris and Hoole would not be expanding quite as rapidly as it is without the financial backing of supermarket giant Tesco.

Tesco's stake has been reported at 49%, but the coffee chain will only say it is "up to 49%". Not that you would know this from a visit to one of its 10 outlets or the company's website, where Tesco barely merits a mention.

The Guardian reported on the supermarket's stake last year and this week Mail Online featured it prominently, although many readers left comments in support of Tesco and the chain.

Uxbridge branch Harris and Hoole in Uxbridge

There's been some ill feeling on social media. One alienated customer tweeted: "Appalled to discover seemingly independent #Harris+Hoole coffee shop @N8CrouchEnd 49% owned by #Tesco. Never go again". Another questioned Tesco's record on paying tax and tweeted: "#Harris + Hoole will be added to my boycott list."

It is not hard to see why Tesco would want to get into coffee shops - they are among the few growth areas in a bleak retail landscape.

Fitting the indie template

Five doors down from Harris and Hoole in Crouch End, north London, is a Tesco. Neither makes reference to the other in store.

With its expensive light fittings, exposed brickwork and red velvet cakes, it fits the current indie cafe template to a T. The customers tote sleek laptops, sleek buggies, or both. Coffees come in artfully mismatched cups. Tea brews in retro-chic pots topped with egg-timers filled with coloured sand.

Unlike the uniformed staff at the next-door Starbucks, those behind the counter are in mufti - mainly stripy T-shirts for the women and skinny cardigans for the men. And they're friendly. Very friendly. "Love your frames!" says one to a spectacle-wearing customer.

Sipping a takeaway flat white, Michael, a civil servant, says he's a regular at the Southgate branch near his office. "There's not much competition there except Costa and Starbucks - nah."

Despite mistaking Harris and Hoole for an independent mini-chain, Michael says he's not put off by Tesco's involvement. "It's well-made coffee, good prices and the people are friendly."

And Tesco is not the first multinational to buy into a self-consciously cool, quirky and independent-sounding brand.

"Large global brands realise there is a generic dislike of super brands, so they often like to appear smaller than they are to avoid negative publicity," says Stuart Roper, a corporate reputation expert at Manchester Business School.

Ben and Jerry's ice cream (Unilever), Innocent Smoothies (Coca Cola), Green and Black's chocolate (Cadbury/Kraft) and Copella apple juice (Tropicana/Pepsi) are among the many formerly independent brands now owned by large corporations.

But what seems to have irked anti-corporate coffee lovers about Harris and Hoole is that Tesco has not bought into an existing brand, but is instead attempting to build one from scratch.

"Our main objection is that they are masquerading as a little, independent shop. They are a wolf in sheep's clothing," says Brian Hitcham, of Save Whitstable Shops. Hitcham has campaigned to stop a Harris and Hoole opening in his town.

Hitcham, an antiquarian bookseller, fears the arrival of Harris and Hoole and other chains will damage the character of the Kent seaside town and force genuine independents out of business by driving up rents.

The new coffee chain is treading carefully.

Its Australian founder, Nick Tolley, met Hitcham and other campaigners in December in an attempt to convince them he is not out to destroy their town.

"Our priority is to get the Whitstable shop right and the process may take time but we'll keep the local community informed as the project continues," he says.

Anti Harris + Hoole poster from Save Whitstable Shops campaigns Poster from Save Whitstable Shops campaign

Tesco, for its part, says it has never hidden its involvement with Harris and Hoole. It has taken a non-controlling stake in a string of businesses in recent years, from a garden centre to an online streaming service.

"Tesco invests to help build brands where we believe we can add value," says a spokesman.

This, argue entrepreneurs, is the crucial point that anti-corporate campaigners always overlook.

Banks are reluctant to lend money to start-ups unless they are already making a profit, so if you want to expand your business, getting into bed with a multinational is often the only game in town.

Teapigs, a high-end tea manufacturer, is another company that has come under fire for allegedly hiding its corporate roots.

Its website, with pictures of the office dog Harvey and tales of founders Nick and Louise's passion for "real tea", ticks all the cute and quirky boxes.

It's not easy to spot any mention of Teapigs being a subsidiary of Tetley which in turn is owned by giant Indian industrial conglomerate Tata.

There has been a predictable backlash from bloggers.

Who are Harris and Hoole?

Coffee house, 1660s

Design company SomeOne named the chain after two coffee-loving characters in Samuel Pepys' diary.

On 3 February 1664, Pepys wrote of popping into a Covent Garden coffee house of the type pictured above.

"I stopped at the great coffee-house there, where I never was before; where Dryden the poet (I knew at Cambridge), and all the wits of the town, and Harris the player, and Mr Hoole of our College. And had I had time then, or could at ether times, it will be good coming thither, for there, I perceive, is very witty and pleasant discourse."

The Foodie Gift Hunter says she felt "miffed" and "duped" by Teapigs.

"To me, you can set a business up any way you like. You can be owned by who you like. Just don't expect us not to be disappointed when you turn out to be something different to how you portray yourselves," she wrote, adding that she would no longer be purchasing their teabags.

Digital consultant Alex Balfour says his wife was similarly disappointed.

"Upset wife by telling her Teapigs is effectively Tetley spin off - ex-tetley execs, 100% owned by Tata which owns Tetley. That's marketing," he tweeted.

But self-styled "tea evangelist" Nick Kilby, who started Teapigs in 2006, thinks the criticism is unfair.

"If people were in our shoes they would probably have done the same thing. If they had actually been through what we went through they wouldn't be making these sort of comments. They are very ill-advised."

If the company had received financial backing from a bank, then it would not have come under pressure to reveal the name of the financial institution on its website, he argues.

The firm operates as a separate business, with no interference from Tetley, he says.

"That sort of criticism is never going to go away. Some people are always going to think 'big is evil' and yes it is in some cases but in many other cases it isn't. We all rely on big companies and big institutions."

Ben and Jerry of Ben and Jerry's ice cream Ben and Jerry started in a Vermont garage, and sold to Unilever in 2000

Brian Millar, director of strategy at branding agency Sense Worldwide, says corporations have had a crash course in how not to trample over the family firms they buy into.

"Multinationals are getting smarter at working with these small brands without ruining their authenticity.

Independent coffee republic of Totnes

Clonestoppers poster of anti-Costa campaign

Totnes is not exactly typical of a small British town. It has long hosted incomers attracted by its eco-friendly and New Age reputation.

In this settlement of fewer than 8,000 souls, there are 41 different places to buy a coffee.

Yet plans to open just one more coffee outlet have provoked fury. The latest addition will be a branch of Costa - the first coffee chain to breach the citadel of a community fiercely proud of its independently owned outlets.

There is something about coffee that puts it at the vanguard of protest movements. Naomi Klein's anti-corporate bible No Logo was harshly critical of Starbucks conduct in particular.

"The key is often to keep the founder in the business and not have them waltz off to the beach, while the brand they have lavished so much care on becomes just another name in a big house of brands."

Entrepreneur Harry Cragoe, who invented PJ's smoothies in 1994, knows all about this.

He sold out to Pepsico in 2005 and watched with mounting horror as the product to which he had dedicated his life was rebranded, repriced and, within 18 months, ditched altogether.

"It was mortifying," he recalls.

It had always been his intention to sell the firm - that is often the only way an entrepreneur can reap the financial rewards of their years of effort.

But if a key part of your business strategy is being "open, honest and transparent" or "ethical" then it puts you in a difficult position, he says.

He decided to walk away from the business after the Pepsico deal ("I have got nothing against multinationals. It is just wasn't something I wanted to be involved in") heading for the beaches, not of the Caribbean, but Camber Sands, where he has set-up a luxury hotel.

His main competitor, Innocent, sold a 58% stake to Coca-Cola, but the firm's founders retained day-to-day control of the business, building it into Europe's leading smoothie brand.

The UK's coffee love affair

  • Coffee shop market grew by 7.5% in 2012, with £5.8bn in turnover
  • 15,723 branded, independent and non-specialist coffee shops, such as supermarket cafes
  • One in five people now visit coffee shops on a daily basis compared with one in nine in 2009
  • They drink on average three cups of coffee shop coffee a week
  • Three biggest chains are Costa (1,552 outlets), Starbucks (757) and Caffe Nero (530)

Source: Allegra Strategies

Consumer surveys suggest people think less of a brand when they discover it is owned by a multinational - but that does not mean they stop buying it.

People love products that look and feel authentic.

Only a small percentage will take the trouble to find out whether they really are - and an even smaller number will be so outraged by what they find that they will boycott it.

"It's hard to tell how long the reputational damage lasts," says Stuart Roper.

It's very much a minority of customers that inconvenience themselves to change brands. Significantly less than 10%."

Additional reporting by Megan Lane

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  • rate this
    +4

    Comment number 440.

    I have recently boycotted TWO high street coffee chains because I have not been served by a British born person in MONTHS.
    Something is wrong with their employment policies.
    I am not against immigration ...BUT ASK... can't British youngsters use a coffee machine?
    I now frequent a couple of very good independants...One has all British staff and the other is mixed. I'm happy.

  • rate this
    -4

    Comment number 439.

    If it's a a good brew who cares.

  • rate this
    +8

    Comment number 438.

    417.just kidding
    "Should all shops be forced to post a list of shareholders/investors in a prominent position ?"
    No - but I strongly disagree with the concept of multi-nats re-branding specifically to appeal to the very market which seeks to avoid trading with them - and this in its very essence is them 'hiding'.

    Even if they pop the small print on their website, it's not fair on consumers.

  • rate this
    +2

    Comment number 437.

    Ther is a 'family'coffe firm in Bangor, North Wales that has all the hallmarks of a corporate firm, including old fashioned uniforms to make it look old. The giveaway is the lack of polite service and self service ' i don't care' culture of cheap shoddy packets of condiments and even woden sticks as stirrers instead of spoons.

  • rate this
    0

    Comment number 436.

    The Starbucks boycott was powerful while it got headlines, but short lived, as most similar actions are. All the stores I've walked past over the past few weeks seem to be busier than ever.

    How quickly people forget.

    As for Tesco - my local one has a Costa cafe. I wouldn't mind, but it's very expensive - £2.45 a cup! - and as it's a concession it won't accept my loyalty card.

  • rate this
    +4

    Comment number 435.

    Multinationals, they are a greedy lot who want their fingers in every pie at the expense of the small trader. OK, they're a bit cheaper but to be part of an artisan outlet that masquerades as an independent, until found out, tells just how much they cheat. I haven't used Tesco since visiting a Polish outlet and witnessing the huge disparity in prices there and here. Thieves, all of them.

  • rate this
    +9

    Comment number 434.

    My only problem with any of this would be that Tesco is yet another corporate with a history of finding creative ways of exporting their earnings overseas to avoid their UK tax liability.

  • rate this
    0

    Comment number 433.

    giovanna responds to opeRant conditioning with this advert. it does work. :-)

    416.giovanna spat out its false teeth again.

  • rate this
    -3

    Comment number 432.

    Who asks these small businesses owners/employees where they spend the money and whether its acceptable and local enough? Are the ingredients of those home-made (lies! shop made) goods all sourced locally or fair trade?

    If i owned a coffee shop i could just tell you what you want to hear - how are you going to check? At the end of the day, i need your custom - the money in your pocket. saintly!

  • rate this
    +5

    Comment number 431.

    Wow, the naivete of people is astounding. Do you real think in this bank and corporation ruled country (western civilization) that any business with more than a single branch could actually survive without getting into bed with big banks or big business. If you really want to stop big business domination, you need to wake up and demand fundamental change. But instead you'll go back to your coffee.

  • rate this
    +3

    Comment number 430.

    Blame the banks for the demise of 'independent' retailers. As the article states, banks are not lending to start-ups unless there is immediate profit. Hence the owners of those start-ups, who would probably prefer to remain independent, have to cosy up to the corporates so they can get their business off the gorund. Banks no longer work for the society they exist in.

  • rate this
    -3

    Comment number 429.

    The BBC loves to take time out of its day to attack businesses.

  • rate this
    +2

    Comment number 428.

    Never under estimate how few global coporations control how much of the world's business between....


    ....I forget the name of the study last year, off the top of my head, but roughly 60% of shares controlling roughly 80% of stock market revenues, are owned by approximatley 1,700 corporation....mostly financial ones.....

  • rate this
    +3

    Comment number 427.

    JezzerH
    I bet half or more of these "Tesco bashers" are the very same people who are queued in their cars trying to find a parking space in the very busy Tesco car park on a Saturday morning.
    People don't like to be associated with shopping from them but yet the do. One of my neighbours actually takes Waitrose bags to Tesco, I presume to hide fact she shops their now from neighbours...

  • rate this
    +4

    Comment number 426.

    Tesco used to have a decent, clean little cafe where I could take the children for a snack after school. Now it's been taken over by the horrendously expensive Costa chain. It's a shame that Tesco can't start its coffee-house takeover in its own stores.

  • rate this
    0

    Comment number 425.

    Only a matter of time before we have only two shops left..Tesc and, Sainsburys.

  • rate this
    +5

    Comment number 424.

    418 please don't use the stupid "end of". Especially if you're then going to write something after it!

    It's almost literally on a par with "literally" and "like"

    Thanks

  • rate this
    0

    Comment number 423.

    414.geordie lad

    why-aye, broon for me n all

  • rate this
    -1

    Comment number 422.

    Wait so... Why do I care?

  • rate this
    -1

    Comment number 421.

    402.DisgustedOfDeptford

    ...so no one can use more appealing names or language? If your name was Barnaby H Buttsniff, should your store be called exactly that? And the breakdown of investment should be on, what? the door?
    Again - Tesco are a shareholder, that is all - their investment has always been admitted.
    that the HH name is different is not as big a crime as you imagine

 

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