Pret A Manger is facing penalties for concentrating on the UK market, which represents a “disaster for domestic growth,” claims the chief executive of drinking chocolate chain Knoops.
In a LinkedIn post, William Gordon-Harris argued that “the sad fact is for UK domestic growth is that so many UK founded businesses focus their growth after launch into foreign markets because that is where the interest and the capital is”, as reported by City AM.
He pointed to Pret A Manger’s recent substantial value reduction as evidence of being penalised for “failing to focus abroad” – noting that three-quarters of the chain’s revenue remains “still derived from the UK 25 years after opening its first international store.”
Gordon-Harris also questioned why a “fast growing brand potentially employing hundreds of new staff each year would focus on the UK” following the recent US initial public offering (IPO) of Black Rock Coffee Bar.
The chief executive highlighted that “completely different valuation metrics” were applied to “a business a fraction of the size of Pret.”
On 11 September, Black Rock Coffee Bar secured $294.1m (£216.9m) through an IPO that assigned it a valuation of $956.3m.
Several days earlier, it emerged that Pret A Manger had eliminated a third of the value assigned during its 2018 purchase by European investment group JAB.
The group implemented a £553m non-cash impairment against the £912m goodwill recorded on its balance sheet from the 2018 JAB transaction that valued Pret at £1.5bn. Pret A Manger blamed the write-down on elevated costs stemming from increased national insurance contributions, alongside persistently high interest rates and an unpredictable global macroeconomic climate.
The chain also recorded a pre-tax loss of £525m last year, compared with a £61.7m loss in 2023.
During the same timeframe, Pret A Manger’s turnover rose by 10 per cent to £1.2bn.
Knoops boss hits out at ‘rich family offices becoming richer’
Gordon-Harris said: “Here at Knoops it’s disappointing to see the UK July growth numbers.
“Especially when we are seeing enormous growth in our own business. UK growth is what we need as a country more than anything else.
“Availability of capital to help good businesses grow here in the UK is key.
“Especially ones potentially emptying thousands of workplace starters and offering unparalleled career advancement.
But ensuring that any growth capital is democratised is also crucial – rich family offices becoming richer is not the optimised capital model for society.
The unfortunate reality for UK domestic growth is that many UK-founded businesses concentrate their expansion efforts post-launch into foreign markets, as that’s where the interest and capital lie. Failing to focus abroad is penalised.
Consider the recent devaluation of Pret A Manger and bear in mind that 75 per cent of its income still comes from the UK, 25 years after opening its first international store. This penalty for having a UK focus is detrimental to domestic UK growth.
Compare this with the USA IPO this week of Black Rock Coffee Bar and the entirely different valuation metrics applied to a business a fraction of the size of Pret, and ponder why a rapidly expanding brand, potentially employing hundreds of new staff each year, would concentrate on the UK.”
Growth is on the cards for Knoops
In January, City AM reported that Knoops anticipated nearly doubling its revenue by the end of its current financial year, following record-breaking Christmas trading results.
The company, headquartered in London and counting Julian Metcalfe, the co-founder of Pret a Manger and founder of Itsu, as a board member, projected a UK revenue of approximately £16m for the year ending March 2025.
This figure would stand in contrast to the £9.3m revenue it garnered in the previous 12 months.
In November 2024, Gordon-Harris detailed strategies to expand the drinking chocolate chain into a $5bn (£3.9bn) behemoth with a minimum of 3,000 stores globally.
