Business Irish

Thursday 17 October 2019

Insomnia's €25m coffee chain eyes move on UK

Bobby Kerr
Bobby Kerr
John Mulligan

John Mulligan

British consumers are about to wake up and smell the coffee as Irish chain Insomnia plans to open its first UK outlet early next year.

The expansion comes as retail sources said they reckon the Irish company is now worth as much as €25m - 50pc more than what it was valued at back in 2008.

Headed and co-owned by well-known businessman Bobby Kerr, Insomnia has already been testing the waters in Britain.

In the past couple of months it installed 10 self-service coffee machines in Spar shops in Britain, mimicking a service it already successfully provides in Spar stores here.

Mr Kerr - a former panellist on RTE's Dragons' Den show and a Newstalk host - said the machines in the UK had performed extremely well and more will be rolled out there.

But he said the first physical UK Insomnia store should also be open in the first quarter of 2015.

"We're looking at a few sites," he told the Sunday Independent.

But he conceded that the UK is a tough market, with heaps of competition from big rivals including Whitbread's Costa Coffee and Starbucks.

He said Insomnia's expansion to the UK is well thought-out and will happen at a measured pace. He said the Northern Ireland market is also a growth opportunity for the chain.

The UK expansion is being funded by cash flow and borrowings. Mr Kerr said he hopes the business will be debt free within about three years.

He also said that Insomnia's earnings before interest, tax, depreciation and amortisation (EBITDA) this year is likely to hit €2.5m. That will be about 20pc higher compared to 2013.

He declined to say what he thought the business might now be worth, but retail industry sources reckon a reasonable estimation would peg that valuation at around €25m.

That's well above the €16m valuation that was put on the company in 2008, when Icelandic conglomerate Penninn bought a 51pc stake in Insomnia.

Just two years later, Mr Kerr, Spar magnate John Clohisey and businessman Harry O'Kelly bought back the stake from Icelandic bank Kaupthing, which ended up owning the Penninn holding as Iceland's economy and banking system spiralled towards the abyss.

Each of the Irish businessmen now owns a third of Insomnia. They bought back the Penninn shareholding at a significant discount to the €8m that was paid for it.

Penninn had planned to extend the Insomnia brand across northern Europe, into Scandinavia and Baltic countries.

While that didn't happen, a move into the UK marks a major scaling-up of Insomnia's ambitions. Mr Kerr said the chain has "tentatively" looked at the scope for outlets in Abu Dhabi and Dubai, but he said any decision to enter those markets is still some way off.

Another Irish chain, Butlers Chocolate Cafe, has already established a foothold in both those cities through a franchise agreement. Owned by the Sorensen family, Butlers also operates through a franchise agreement in New Zealand with a former Fine Gael councillor, Peter Kelly.

Insomnia is also expanding in Ireland, said Mr Kerr.

Between now and the end of the year, an additional 13 outlets will open, amounting to an investment of more than €1m. That will see new outlets open in locations such as Galway, Cork and Dublin.

That will bring to over 100 the number of outlets in the chain here. About half the total are company-owned the remainder owned and operated by franchisees.

Sunday Indo Business

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