Despite graduating with a PhD in foreign policy from Oxford, Gerry Ford decided his future lay in sharing his preference for a cup of coffee with the world.
Gerry and the coffeemakers
At first glance, Gerry Ford may seem an unlikely type to launch a chain of Italian coffee shops, giving Starbucks a run for their money in Britain and around the world. He is neither Italian nor British and spent most of his education focusing on foreign policy, gearing towards a career as a bureaucrat.
Mr Ford, an American, grew up in Silicon Valley, California, which is more akin to spawning technology start-ups such as Apple and Hewlett-Packard than Dean and Deluca. The orchard he used to ride his bike through as a child later became the headquarters for eBay, the e-commerce giant. But Mr Ford says it is that same Silicon Valley entrepreneurial culture that drove him to start his own business and then expand Caffe Nero from one outlet in South Kensington, a posh part of London, to more than 400 outlets worldwide in less than 10 years.
"You dream about starting businesses and everybody wants to do their own thing and make a name," Mr Ford explains over an espresso at Caffe Nero in Dubai Mall. "It's hard to describe, but it was probably the most entrepreneurial place in the world, and I went to Stanford as an undergrad, which is even more entrepreneurial. You want to do something that changes the world." Dressed in a dark suit, white shirt and no tie, he is casual with a reserved manner. There are few clues that he sits at the helm of the second-fastest growing coffee brand in the world and employs 3,000 people.
Friendly, but guarded, he dodges questions about his age - early 50s - and marital status. "I'd rather not say," he says, turning the conversation back to coffee. The baristas - those who make the coffee - wear T-shirts proudly claiming that Caffe Nero makes "the best espresso this side of Milan", a quote from Tatler, a British society magazine. In 2008, the most recent public figures available, Caffe Nero had revenues of £129.3 million (Dh755.1m). Even during the peak of the economic downturn, Mr Ford's company saw sales growth, albeit modest.
"For 50 consecutive quarters from the moment it opened, there has been positive like-for-like growth," he says with pride. "Now tell me a retailer you know that can say that." But his real motivation to open Caffe Nero was personal. He had continued working in London after finishing a PhD in foreign policy at Oxford, and wanted a place in which he could relax and sip coffee with friends. He had little interest in pubs, preferring an alternative.
"When I first entered in the UK, I wondered why a cafe society didn't exist," he says. "Why wasn't it booming? There were so many international people there, it seemed odd. And I wasn't an alcohol, beer-drinking guy. I hung out with my friends in cafes. So it was a largely personal thing." When he started his career, it seemed he was heading down the technology road. In the early 1980s Mr Ford, who also has an MBA from INSEAD, worked at Hewlett-Packard, an experience which set the tone for businesses to come.
"A lot of my own practices and business cultures came from Bill Hewlett and Dave Packard, who are real role models," he says. In the late 1980s he moved to Apax Partners, a private-equity company in London, before starting his own venture capital group, Paladin Associates, in 1993. But even then it was obvious where his interests really lay. "There were a lot of guys in venture capital and private-equity investing in software and medical stuff, and I did that in my early years. But I was much better naturally at kind of the softer, consumer goods side," he says. "I think you go where there is a passion and a natural inclination."
Finally in 1996, Mr Ford went to his colleagues at Paladin with his own retail venture idea. He drew up a business plan for the yet to be named coffee chain and his colleagues liked what they saw. They agreed to fund his coffee houses while he ran it. Mr Ford aimed to recreate the cafes in Italy where he used to sip espresso, but tailor it slightly for the UK market. He wanted the shop to have premium coffee and fresh Italian deli food for breakfast and lunch, as well as desserts.
He stopped in at various coffee shops and asked them for tips. After scouring the city, he found a store name and his first location - less than a kilometre away from his own home in South Kensington. It was called Caffe Nero, but it was far from the sleek chain of coffee shops Mr Ford runs today. It was a family-run pizza and pasta restaurant and far removed from the kind of restaurant he wanted to open. But he liked the name: Caffe Nero means black coffee in Italian.
"What we were trying to get was something simple, to the point," he says. "An Italian name that suggested what we were doing. And I thought the name actually suggested more what we were trying to do than what [the current owner] was doing." The new and improved Caffe Nero began serving its first lattes in 1997 with just three employees - and Mr Ford was one of them. At the time, Britain's coffee culture had just started to emerge, he says.
"As for premium Italian, European-style coffee houses, there weren't many other things around that were good. Costa existed, Starbucks hadn't come yet and there weren't that many brands. Within three years, there were dozens." Mr Ford opened seven more outlets over the next two years. He refined and tweaked the concept along the way, such as experimenting with standing-height tables that are common in Italy. After almost 18 months of trial and error, it was the eighth version of Caffe Nero on which the chain is based today.
Those first stores broke even. Smelling success, he pushed on with an aggressive expansion drive. Caffe Nero moved outside London for the first time in 1999. And by 2000, the chain had 31 stores. In March 2001, Caffe Nero went public. Its successful listing of 18 million new ordinary shares on the London Stock Exchange, at 0.50 pence a piece, raised £9m, valuing the firm at £33.7m. The money was earmarked to accelerate expansion.
The company later acquired 29 Aroma coffee shops from the McDonald's corporation in 2002, which made Caffe Nero the largest independent coffee house brand in the UK. Mr Ford was rewarded in 2005 for his achievements when he was named UK Entrepreneur of the Year by the Financial Times. But by 2006, Mr Ford began to feel his ambitious plans were being hampered by Caffe Nero's status as a public company.
There was infighting between company shareholders over whether to take Caffe Nero international, he says. "We had a stymying of the entrepreneurial spirit. Senior management in general, and not just me, became less enamoured with the idea of running a public company. The problem was that some shareholders were fighting with the ones that were fighting against [international expansion]. And I was sitting in the middle and I couldn't win. You can't win when you have large shareholders which are actually at each other's throats. So I thought 'I don't see the point of doing this'."
Mr Ford then spearheaded the push to remove Caffe Nero from the stock exchange and return to operating as a private company. "Most people take it off the stock exchange when it has fallen in value and there is a problem. We took it out when it had delivered great shareholder value, five-and-a-half times its worth in six years to people. We said, 'we've made people money and now we want to run it in a more entrepreneurial way with people who are really aligned with the goals of the company'. In addition it was 'this isn't as fun'."
Its conversion back to a private company was finalised in 2007. Shortly after, Mr Ford went ahead with his scheme to take Caffe Nero global. It went first to Turkey in 2008, and into the UAE last year. It now has seven outlets in Dubai, Abu Dhabi and Al Ain. His cafes in the Emirates are doing well, he says, but without operating for a full year yet it is difficult to tell. "They've had a good start. The brand is building, it takes a certain amount of stores to get some momentum going. But in general, we are impressed with the progress we've made, but it is too early to actually make any statements. I couldn't tell you it was wonderful. I couldn't tell you it was horrible, but it seems to be going very well."
Mr Ford also plans to look at other countries in the region in conjunction with the company's local retail partner, Al Tayer Group. Its first targets are Qatar and Bahrain, but it will expand across the GCC in the long term, he says. Despite the economic downturn, Caffe Nero has not closed any stores and continues opening new ones, but at a slower rate. Mr Ford plans to open 35 stores, down from its average of 50, in the company's financial year that ends in May.
Other major markets Caffe Nero is eyeing include eastern Europe, China and North America. Mr Ford is still planning a major push into the UAE and the group hopes to have 50 stores across the country by 2014. He acknowledges the UAE is a crowded coffee market, with brands ranging from Caribou Coffee to Barista and Second Cup, but says he is not deterred. "The UAE is accepting of consumer brands. All you have to do is walk through Dubai Mall and see that every brand in the world is here. And the coffee culture is strong as well, and starting to spread. And there is a high degree of disposable income that is concentrated here. So we really haven't been scared."