Roland Horne, CEO & Founder of WatchHouse, a celebrated nine-strong specialty coffee shop and roastery based in London, speaks to 5THWAVE about the UK capital’s rapidly evolving coffee scene and what the future may hold for the industry
How have customers evolved since you founded WatchHouse in 2014?
There has been a gradual evolution to increased sophistication among our customers. People understand the product more and they have more nuance. It’s no longer a question of ‘strong’ or ‘weak’ coffee, customers are now choosing between a Colombian or an Ethiopian. That being said, there are still many people who have little knowledge or any real interest om specialty coffee. And that’s fine, we are happy to bring them along.
There has also been a movement towards wanting more than just a singular coffee shop experience. Post-pandemic consumers expect more – with quality, convenience and value becoming increasingly important. Experience-led brands are going to be the winners in the next decade. You can’t just offer great coffee or have a great personality but bad product – there needs to be a holistic experience.
Our ability to show customers that they can have a better experience with us has given us the opportunity to innovate, as has the fact that they do not necessarily have to come in-store to enjoy our products. Our subscription service, e-commerce and app which allows customers to prepay and order ahead has enabled us to bring our Modern Coffee experience to a new, digitally native audience.
Ultimately, we’re seeing a digital revolution in hospitality; Panera Bread in the US is a best-in-case example of this. Around 60% of its revenue comes through digital channels and there are a number of other really interesting digital experiences, including subscriptions and app-based loyalty schemes, that are being imported into the UK by businesses such as Pret A Manager.
Customers really crave connectivity and they’re relentless. They won’t accept an app that freezes or a store that doesn’t take Apple Pay. If you tell customers their coffee is going to be ready in four minutes, then that’s exactly what they expect. That’s great for businesses like ours where processes, systems and technology are imbued within, as it allows us to deliver a seamless experience across the entirety of our estate.
“You are going to see operators seeking to acquire competitors in spaces where the economics don’t stack up”
What is your view on the current state of London’s specialty coffee shop market?
We’ve gone through a period of consolidation, and I think that will continue. You are going to see operators seeking to acquire competitors in spaces where the economics don’t stack up. It has been interesting to watch a fundamental regearing around the cost base of running a café in central London following the pandemic.
There is also a question of authenticity, particularly in the specialty space. This isn’t coming from the major second wave operators but from more ambitious and commercially funded non-coffee operators entering the space.
Many of them are chasing the success of the Blue Bottle story; and what Blue Bottle have done in terms of consistency within the specialty segment is fantastic, but I don’t agree with those operators who are solely chasing quick financial success. Sooner or later the music will stop and the whole house of cards will come crashing down.
As the industry moves forward from this consolidation period, I think we’re going to see significant innovation, not just around specialty coffee, but around experience and we’re well placed to provide this. WatchHouse has four key pillars: premium product; passionate people, exceptional places; and motivating profit, and these enable us to deliver an innovative and truly unique Modern Coffee experience in-store and online.
What are the major challenges for UK hospitality businesses currently?
The labour shortage, Brexit, Covid, and minimum wage increases. The latter is long overdue, but still a major challenge, particularly for smaller businesses.
In terms of labour shortages, there are approximately 65 million people within the UK and if you are genuinely a best-in-class employer, I believe the most talented staff will come to you. We’ve seen this across our own business having become an accredited London Living Wage employer across our 200+ workforce. This is in addition to other moves we’ve made to become a people-first employer.
Supply chain challenges are also a huge issue for our business, and we’ve had to double our cup order to ensure we always have three million in-store in case of supply chain problems.
On the property cost side, we’ve seen a period of very conciliatory landlords during the pandemic, but that has started to harden again and we’re seeing a return to the days of unsustainable rents, which is a concern.
Of course, landlords have their own cost pressures, debts, and families to feed. But I think there is a profiteering side and landlords need to go slowly to let operators recover.
These are all in addition to the issues facing the coffee supply chain which we haven’t even touched on. In particular, recent natural disasters in South America which are having an impact. We buy a lot of our coffee from that part of the world and obviously supply could be affected.
Again, it comes back to the point that you need to pay proper prices to get a great product and in turn adequately charge for those products. I hope that the ‘race to the bottom’ we’re increasingly seeing in the specialty industry does not continue.
What’s next for WatchHouse?
Moving forward in the next three-to-five years, we want WatchHouse to expand organically. We want to make sure that we do things with an authenticity that’s true to our brand and our core values.
I’m very proud of what we do as a brand and also very protective; we don’t do wholesale coffee, for example, and we never will. This enables us to maintain and increase quality and scale with greater consistency.
We aim to open around six to eight houses a year and have been approached a number of times to do franchise deals in the UAE, the Nordics and the USA.
We’re not there yet but as a business we are very ambitious and are constantly looking to innovate and improve our offer. This leaves us well placed to explore further opportunities in the UK and eventually globally as we look to expand and bring our Modern Coffee offering to new audiences.