Thursday 27 October 2016

The price is right - but will Avoca be changed forever?

Deal with US giant more about family harmony than business.

Graham Clifford

Published 23/08/2015 | 02:30

Deal: Avoca CEO Simon Pratt who is in exclusive talks with a 'buyer'
Deal: Avoca CEO Simon Pratt who is in exclusive talks with a 'buyer'

When successful companies decide to sell, it's usually and purely for sound financial reasons. It's just business. But Avoca - the niche Irish food and clothes outlet family firm - is totting up a different sort of balance sheet and the decision to sell, as reported this week, is as much to do with family as hard cash.

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Chief executive Simon Pratt confirmed that he was in exclusive talks with a "potential purchaser" as the iconic Irish brand looks destined to fall into foreign ownership.

It looks likely that the buyers-in-waiting are US catering giant Aramark, which is aiming to bolster its operations in Ireland.

Avoca has outlets across the island, including one in Belfast, though the stores are predominantly based in the counties of Dublin and Wicklow. It's online store sends the very best of Irish products across the globe.

Pick any Avoca - and there are 11 to choose from - and the experience is much the same: quality, healthy food and chic goods - from elegant clothes to wool throws and scented candles - all presented and packaged in warm and welcoming surroundings.

Avoca is the place to be... and a place to be seen.

The brand is hugely popular with locals and tourists alike. Just last January, Pratt said he was expecting operating profits at the company to surge by 50pc to more than €3.3m in the current financial year. It turns over about €57m annually. So why would they sell when the tills are ringing from one end of the year to the next?

Pratt says the need to offload the company is necessary for family harmony.

"It would be almost inevitable that there would be conflict, and the idea that my kids could end up not speaking to my sister's kids is just appalling," the CEO says.

Avoca was founded by Pratt's father Donald in the 1970s and initially was a quaint though ambitious enterprise. A derelict weaving mill was purchased in Avoca village, Co Wicklow, and the plan was to make design products such as clothing, woollen goods, ornaments and glass gifts. In such a scenic part of the country it was expected the passing tourist trade would be strong and the enterprise would slowly build.

And so it did. But it was the decision to focus on food that really re-shaped the business and ensured it would become an iconic Irish brand.

Avoca, which is currently owned by Donald Pratt, his wife and their four children, focused on their market and opened stores and cafes in parts of the country where they knew people would flock to, including at Mount Usher Gardens in the beautiful village of Ashford and Moll's Gap in Kerry.

But it now seems inevitable that the most Irish of chains, which prides itself on using only the best Irish produce and ingredients, is to be bought out by a multinational with its HQ in Philadelphia.

Aramark's worldwide revenues last year came to a staggering €13.402bn ($14.832bn) and in 2004 it acquired a 90pc stake in the Irish company Campbell Catering.

As one of the world's leading food-service and facilities companies, it has wide and varied business interests - from providing food and services to the Olympic Games as well as to prisons and universities.

Undoubtedly, Aramark has the resources to further boost the reach of the Avoca chain across Ireland, perhaps even export the model abroad, but understandably there are some regulars who are concerned that the new owners may tinker with the winning formula.

"Anytime we're in Dublin we always pop into the Avoca Café on Suffolk Street for lunch," explains Maura Flynn (73) from Roscrea.

"We're pensioners, so we make sure to put a few bob away and treat ourselves. What we love is that you get the best of everything and it's as much an experience as it is about the food. I'd be worried that American owners might not quite get that. Large multi-nationals make their money by running a very tight ship and if they can get a similar product cheaper, they will. I'm keeping my fingers crossed Avoca stays in Irish hands."

Avoca, of course, wouldn't be the first iconic Irish brand to be bought out for a multi-national from far-off lands. Guinness was taken over by British entity Diageo PLC in the late 1990s, Lyons tea was bought out by Anglo-Dutch grocery giant Unilever in 1996, Siúcra was purchased by German refiner Nordzucker in 2009 and, more recently, after months of negotiations on a possible IAG takeover, the Government agreed to sell its 25pc stake in iconic Aer Lingus.

While Avoca claim on their website that "we don't do shortcuts: if we're going to pursue an idea, we don't waste time, but we like to do it properly, not just for the bottom line", the concern is that new owners may be more focused on profit that quality.

Brand consultant Gillian Horan, who runs the Pudding branding Consultancy Company in Limerick, told Review that the planned sale of Avoca was a worrying, but predictable, development.

"The success of the company has been built on the fact that they don't focus solely on profit and the bottom line, but multi-national companies are all and only about the bottom line," says Horan. "Avoca's brand story is all about family, Irish living, quality and authenticity but it's hard to argue they are an iconic Irish brand if the profits end up going outside of the country."

And she also believes this will be a worrying week for the 700 staff at Avoca stores across Ireland and the chain's suppliers.

"For those who work in Avoca and for those potters, farmers, candle makers and other Irish producers, the future appears to be uncertain.

''Many will have based their own businesses on their presence in and contracts with Avoca.''

But there are many potential positives too,

"Aramark, should they buy Avoca, have the resources to market it more effectively internationally. Perhaps they may even export the store model to the States."

Avoca has come a long way from its humble origins - the artisan company has become a massive success story for the Irish foods and crafts sector but its potential sale shows once the price is right, anything is possible.

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