Why we've decided to stop trading with Tesco

Why we've decided to stop trading with Tesco

As of this January we've decided to pull the Roastworks brand out of Tesco.

We'd like to take a moment to explain why, and reflect on the valuable lessons we've learnt over the last year.  

Every time we mention we're pulling out of Tesco the first thing people ask is, "Aren't they really difficult to deal with?" or "Isn't it impossible to make money with them?" and the honest answer is no, and no.   

Don't get us wrong, you need to know what game you're playing when you agree to sell to the largest retailer in the country, but Tesco have done nothing wrong here.

As for the commercials, we're kissing goodbye to 40% of our turnover with a 15% net margin. So, there definitely is money in it, and right now you're probably thinking we've lost our minds.  

So how did we get here?  

Back in 2022, the buyers at Tesco decided to create a craft coffee trial in 62 of the highest indexing coffee stores. The aim was to test the appetite for independent and speciality coffee brands in a major multiple. Along with many other amazing brands, Roastworks took part in the trial and off the back of strong performance we were offered a national listing for four of our products.

It's abundantly clear that most consumers discover speciality coffee in independent coffee shops, but we've always had a hunch that there might be another way to do this - through the grocery multiple retail space.  

In 2008 a small Scottish beer brand launched their craft beer into national distribution in Tesco. Their beer was brewed in small batches, was super hoppy, and really challenged the category, but some brave buyer at Tesco gave them a chance. No prizes for guessing we're talking about Brewdog, but their story is very relevant. 

The amazing achievement is that Brewdog managed to recruit thousands of new consumers into craft beer - not through bars or pubs - but through the Tesco shelf. We've always wondered if the same could be done in speciality coffee. This is the theory we wanted to test. So when Tesco gave us the opportunity to go national we obviously jumped on it.  

If our memory serves us correctly, back then a bottle of Punk IPA was £1.75, whereas a bottle of mainstream beer was around £1.25. So, for the customer, to trade up to craft beer didn't feel like a huge financial burden. Conversely, in speciality coffee we often expect the customer to pay up to - and beyond double - that of mainstream brands. 

We've often wondered, is price of speciality coffee the limiting factor in getting customers to trade across from mainstream brands? Would a bag of speciality coffee at £5 be the game changer?  

Turns out that theory was wrong. We were wrong. 

The simple truth is, Roastworks is not selling enough units to warrant having shelf space in the largest retailer in the UK. Don't get us wrong, we're happy with the rate of sale, consistently hitting 3 units/branch/week (UBW) on average, which is about the same as in Waitrose (which we think is pretty decent). However, to be in the running in Tesco you need to be hitting at least 4 to 5 UBW. It's important to clarify, we haven't been delisted and the buyer made it very clear to us that we had an opportunity to improve our rate of sale (RoS). However, the amount of money we'd have to pour into brand activation to improve our RoS would make no financial sense as a small, self-funded business. 

One thing we didn't consider when we were chasing this theory was the potential for the Tesco listing to negatively impact the Roastworks brand. Whilst Tesco has helped thousands of new customers discover our brand, it has put pressure on some of our existing customer relationships. Turns out, being listed in Tesco is a pretty divisive issue for some people. As a small, purpose-led brand the value of our customer relationships mattered to us more than we realised.  

Whilst we don't see this as a failure, this has shown us the path we do want to take. 

When the Tesco opportunity was first presented to us, it was simply too compelling to turn down. In hindsight we now know it's not the right opportunity - and time - for our brand, but that's a process we've had to go through.   

Onwards and upwards.  

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