Wednesday 21 November 2018

The best coffee gets a good roasting every week

Company focus: Insomnia Coffee

FULL OF BEANS: Bobby Kerr and Harry O’Kelly
FULL OF BEANS: Bobby Kerr and Harry O’Kelly

Roisin Burke

Established in 1997, Insomnia Coffee Company has become an iconic Irish brand.

It's Ireland's largest independently owned coffee shop chain, growing from a single location in a Galway bookstore to an estate of 80 outlets across high streets and through partnerships which include concessions and licence agreements.

The crucial partnership with Spar/BWG Foods began in 2006 with Insomnia self-service units, and further developed with barista sites in early 2007. This was hugely successful and Spar now operates 40 Insomnia barista sites within its estate. There are also 175 self-service units in operation across the country.

In 2013 Insomnia opened its first high-street franchise store in the St Stephen's Green Shopping Centre in Dublin, and plans to open a further 10 franchised cafes in the next three years.

The company employs 200 staff across Ireland in its company-owned stores, and another 140 people in concession and franchised cafes.

Insomnia chairman Bobby Kerr notes: "Coffee is core to our business and is 100 per cent Fairtrade certified. It is roasted weekly which ensures a fresher, smoother and fuller flavoured taste which our customers love."

Chief executive Harry O'Kelly points to four key principles which guided Insomnia through the recession: quality, innovation, value, and customer service. And looking to the future, Harry says, "Insomnia will continue to focus on its core competencies as well as a growth strategy that will see it go international in 2014 and open its 100th cafe by the end of 2015."

Mairead Divilly,  International Compliance Partner, Mazars:

The coffee market in Ireland is very competitive, with many significant players. However, the strong Insomnia brand recognition, the scale of the operation and the efficiency with which the firm is managed give it an advantage.

Emerging markets are becoming more sophisticated, resulting in enormous potential for franchising. There are many benefits for Insomnia in focusing on these new markets as well as continuing to develop its brand in Ireland, including: gaining access to a large population of customers and possible new franchisees; reducing dependency on the Irish marketplace; and gaining access to new technologies.

But bear in mind cultural and language differences, complexities around licences, tax, government regulations, copyrights, patents and Intellectual Property rights and the difficulties of managing a business overseas.

Overseas expansion plans can keep you a step ahead of the competition.

Gerry Vahey, Tax Partner, Mazars:

Growing a brand, developing market share and retaining control of the market can be a difficult balance to strike, but can be achieved through franchising.

Another benefit of franchising is that – if correctly structured – franchise receipts can be considered trading receipts and then liable to tax at the 12.5 per cent corporate rate.

There may be synergies and benefits for a franchisor in purchasing brands complementary to the original undertaking. This could help to strengthen and underpin the existing brand in the consumer psyche.

From a commercial perspective, the acquisitions could also potentially reduce the corporate tax liability.

Tax allowances are available on the cost of acquisition of certain intangibles such as goodwill, brand names and domain names.

Where the assets are used for the purposes of the trade, allowances can be claimed over a 15-year period or in line with the company amortisation policy.

Dera McLoughlin, Consulting Partner, Mazars:

Insomnia has been very successful in the Irish retail coffee market. There may be an opportunity to capitalise on this success, expanding into the corporate coffee market in areas where there are no Insomnia franchise stores in operation.

By offering a fully managed corporate coffee solution, Insomnia could open up a number of potential new revenue streams including, supply and maintenance of coffee machines, supply of coffee to businesses, and lessons from baristas on how to use their coffee machines to help replicate the in-store fresh, smooth and full- flavoured taste of Insomnia coffee directly from the office.

Some considerations to bear in mind before embarking on such an initiative include the amount of additional capital investment required, the strength of competitors already in this market, future location plans for new franchises and the additional expertise and knowledge required to break into the corporate coffee market.

Simon Coyle, Business Restructuring Partner, Mazars:

There are considerable operational challenges facing the Irish coffee market in securing position and growth.

Consistency of high service standards, quality of product and competitive pricing must be to the forefront of operations if market position is to be advanced.

Consumers are both fickle and discerning and there is a need to competitively refresh product range to support the staple but high-quality beverage offering to assure loyalty.

Insomnia is already focused on providing customers with a healthy product range and even supplies gluten-free products to its consumers.

Consumers are becoming increasingly aware of obesity in Ireland and the need to maintain a healthy weight but they do not necessarily have the time or nutritional knowledge to prepare healthy, filling, low-calorie meals.

Insomnia could further focus on developing this sector to complement its existing product range.

Sunday Indo Business

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