Supersize PV

16 May, 2008
London's Patisserie Valerie was ticking along rather nicely as a quaintly retro café chain with a top-notch reputation for patisserie and cake-making. Now it's going large, with big money backing, as Andrew Williams finds out
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When new MD Paul May talks about an "aggressive" growth strategy for Patisserie Valerie (PV), the word jars somewhat with one's perceptions of the shops. Original owner Madame Valerie was quite happy with one store thank-you-very-much, and it took over 60 years before PV opened its second store. Since 1987, the business has been quietly nurtured by the Scalzo brothers, who took the original Old Compton St shop and added eight more over 20 years. While the one remaining Scalzo in the business, Victor, carries a frame you wouldn't mess with, this ain't the kind of aggressive retail expansion form that gets the big high street players running for mummy.
Now, with private equity backing, PV has plans for 125 stores in three to five years. That would place it 11th on BB's Top 50 league table of bakery retailers. "It's not as daunting as you might think, effectively opening up two stores a month!" says Scalzo, who is adapting nicely to the new pace and appears completely unfazed by the prospect of setting up five new outlets in the next three months.But he was alone among his siblings in embracing the change. The switch in direction prompted older brother Enzo to cash in his chips and retire, while Victor's twin, Robert, exited five months after Risk Capital Partners - which owns restaurant chain Giraffe and Borders bookshops - bought a majority stake in the business. Risk's PV Holdings vehicle, which also owns Druckers Patisserie, is targeting 150-stores across the two brands "as quickly as we possibly can", says MD Paul May."We did have a growth plan before but it wasn't as ambitious as that!" chips in Victor, who concedes that brother Robert was unable to embrace the dramatic change. "We were looking to do two new stores every 18 months, but we were particularly choosy about where we wanted to be and it was very restrictive in terms of the management team - it was myself and two brothers. But we still aspire to be the best, to be a market leader and to be aspirational."Meanwhile, May is keen to stress that stripping out quality to boost profits is not in the game plan. "We're not looking to mess with that at all," he states. "We're very cautious not to change the offer - it has fantastic quality products." Instead, he's focusing on transforming PV from a "family lifestyle business", to a branded chain with systems and structures to match. In fact, one product has even been upgraded at greater cost, with a recent switch to tea brand Suki."We're passionate about this business," explains May. "It's rare that you come across a great brand - we want to build that brand and from a shareholders' perspective, we're not looking to sell."Broader expansionAfter taking over in September 2006, PV Holdings' original plans were confined to within the M25. Then Midlands patisserie Druckers was snapped up in May 2007, with an eye to integrating Druckers' central production facilities and 40 stores into PV. "Sales were quite suppressed [in Druckers] and it was an old offering, so we saw potential to enhance that business and do some store conversions [into Patisserie Valerie]," says May.Since then, three PV sites have opened, two of Druckers' stores have been converted, and "there are a hell of a lot of new sites in progress". All the new ones will be PV and not Druckers-branded, with prime high street locations rather than the typical shopping centre sites of Druckers - shopping centres being too restrictive in opening times and costs, says May. Locations will be in upmarket areas of towns with a good mix of residential, office and high street shopping.Two teams of architects are sharing work on bespoke shopfittings for each outlet and the range will be adapted to each site. "We're not a cookie cutter," says Scalzo, "and I don't want every new shop the same as the last - it's too easy, it's not challenging. Although we need a strong, branded image, the charm of our shops is that they all have a different feel about them, and that's linked to premises and store location."Initially, sites will be focused in London, though five sites have been agreed outside of the M25, with imminent plans to hit the south west. "Every city or major town in the UK has a market for one, two, three Patisserie Valeries," believes Scalzo. And while the roll-out may be aggressive, the service certainly shouldn't be: "We want comfortable, attractive rendezvous points - somewhere that you could take your girlfriend for breakfast or your granny for tea."----=== Vital statistics ===History: the chain was founded in 1926 by Belgian immigrant Madame Valerie, and acquired by the Scalzos in 1987. "We took over the original shop, and that was a great success," recalls Victor Scalzo. "We dragged that into the 20th century, introducing pain au chocolat, pain au raisin - things that were relatively new to the UK at that time. We developed the tea room menu and on the back of that opened more stores."Products: eat-in sales outweigh take-away at 55%/45%; take-away cake sales represent over 30%, with a quarter of that celebration cakes. The rest is a mix of sandwiches, pastries, ice creams, fruit salads and drinks.Typical customer: a mature, A-B demographic profilePricing: PV is planning to increase prices imminently - something Scalzo admits is a risk given the current economic climate. "Fortunately, we've always had very good margins," he says. "But we would never substitute inferior ingredients." New store uplift: two Druckers sites in Milton Keynes and Bromley have been converted to Patisserie Valerie, with 100% uplift in sales in the former, and 35% in the latterProduction: larger units will act as hubs, such as its new Spitalfields store, which supplies five shops with fresh deliveries seven days a week; Druckers' production capacity will be used for some product lines; morning goods are baked-off from frozen on siteAdd-on sales: two cake ordering websites have been introduced for PV and Druckers, for pick-up in stores. "Sales ignited almost straight after we launched it last year, and PV is now getting 15,000 hits a month," says May[http://www.patisserie-valerie.co.uk]----=== Patisserie Valerie, Bedford St, Covent Garden, London WC2E 9HE ===== The brief ==Patisserie Valerie wants to avoid identikit stores, and is working to a brief of "80% the same, 20% different". Seating and a café offer is key to the concept, with an emphasis on table service and big portions, though there's also a drive for take-away sales. Scalzo says the PV concept should separate it from the nearby competition - Paul, Apostrophe and Caffè Nero. "It's got to have a contemporary, French flavour and feel about it," he says. "There's no point just reproducing the 1930s French café look and décor - it just wouldn't work."== The execution ==Despite a low-profile, marketing-free launch, 15 gateaux were sold on the opening day alone, while the first press review appeared within three days. It has been open eight weeks now, and is already ahead of target to hit a turnover in excess of £1m. May says: "We have a five-year forecast and we've been careful with regards to how we build up to maturity and growth, but this store hit year-three maturity level in its first week!"May acts as a negotiator on property deals, while a single agent is used to do the leg work in identifying sites; Scalzo is very hands-on in the design, layout and staffing aspects. "The architects don't have carte blanche - I'm on them all the time, changing the design. And I won't let them influence the way I want the shop to operate and look," he insists.The store took seven weeks to fit at a cost of £500,000 - longer and costlier than its standard four-week turnaround, due to the site being an empty shell, requiring some construction, air-con and flooring.When completed, a store opening team works on all key areas of the operation until they're happy with standards; with the KPIs in place, the regional manager takes over running the stores, which have opening times up until 9pm Monday-Saturday, and 8pm on Sundays.



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