Investors wake up and smell coffee's frothy profits

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The Independent Online
JOANNE RILEY never used to drink coffee. Then she landed a job as receptionist at Seattle Coffee Company's UK headquarters, and now she says she's "addicted" to her employer's gourmet brews. She's not alone.

Government figures show that when we go out we drink 36 per cent more coffee than tea. Overall, tea consumption has dropped 3.4 per cent in the last five years, while coffee drinking has gone up 1.6 per cent, according to Euromonitor. Now tea consumption is forecast to fall a further 1.6 per cent in the next five years, while coffee is set to gain 2.6 per cent.

Entrepreneurs are cashing in on the lifestyle shift from boring old tea to hip, cosmopolitan coffee by opening shops on the high street, in fashion stores and in bookshops. Seattle Coffee, the market leader, plans to sell stock to the public later this year.

"People here are becoming educated to better coffee," said Louie Salvoni, vice-president of Cafe Society, which represents coffee consumers and producers.

Seattle Coffee sold pounds 6m worth of coffee and snacks last year, up from pounds 300,000 three years ago, in a business started because Ally and Scott Svenson couldn't get their beloved native Seattle brew in London. Exasperated, they opened their own cafe in 1995.

"We had to outbid 38 people for our first site in Covent Garden," said Ms Svenson. "But within 24 hours of opening we knew the concept was working." Seattle Coffee is now the biggest operation of its kind outside the US, with 52 shops and 50 more planned by the end of the year. "We're looking at it aggressively right now. It'll be a full float; we've shortlisted a couple of advisers," Ms Svenson said.

Business is waking up to smell the coffee. Whitbread, Britain's third- biggest pub and restaurant company, snapped up Costa Coffee, an Italian- style chain, for an undisclosed sum in September 1995. In September, Arion Properties paid pounds 3m for Coffee Republic and sold it on to investors through an AIM listing. Apax Partners, the venture capitalists, backed cafe chain Aroma in May 1990 with an investment of pounds 2.5m and could seek a return on that capital. "It's no secret that a venture capitalist will seek an exit," said Aroma's company chairman Finlay Scott.

Success will be as much about winning the hearts of trend-setters as the minds of investors. "There's a feeling that there's a surge toward American culture and away from Europe," said Mr Salvoni. "The UK is the battleground between the two."

Ms Svenson says the battle is about choice - and that means US-style variety and standards.